Australian offshore petroleum regulation after the Varanus Island explosion and the Montara blowout: Drowning in a sea of federalism?

This paper considers the state of regulation of offshore petroleum activities since the Varanus Island Gas Explosion in 2008, and the Montara blowout and oil spill in 2009. The regulatory arrangements that arose out of the 1980 Offshore Constitutional Settlement split the regulation of Australia’s maritime resources into two distinct zones – those waters seaward from the baseline to three nautical miles, which is regulated by the states and territories; and those waters seaward from three nautical miles to Australia’s maritime limit (at present 200 nautical miles), regulated by the Commonwealth. Within these constitutional arrangements, the Commonwealth and States/Northern Territory (NT) have regulated petroleum activities under prevailing petroleum legislation. However, there have been two catastrophic facility integrity failures – a gas explosion on Varanus Island and a blowout and resultant oil spill on the Montara Platform. These incidents, combined with a review of the operations of the National Offshore Petroleum Safety Authority and an analysis of regulatory burden on the offshore petroleum sector have indicated that Australia requires a regulatory framework that establishes a single agency as regulator for all petroleum activities. The Commonwealth proposed two models of regulation for such a regulator agency. Both of these models have been rejected by the Western Australian Government, which has indicated that their view is that given the local conditions and unique nature of petroleum titles in Western Australia, the Western Australian Government should be involved in the regulation of titles in Western Australia. This paper provides an alternative model to those proposed by the Commonwealth. It suggests the establishment of single regulators based on geographical division rather that governmental division. This means establishing a western basin resource regulator, responsible for regulating all of the offshore petroleum resources in the western basins of Australia, and a national regulator, who could regulate all of the eastern and central offshore petroleum producing basins.