News - 14 May 2021

Fossil fuel industry isn’t happy after being told to clean up after itself

A new levy will force the oil and gas industry to pay for the decommissioning of Northern Endeavour, a dirty, environmentally hazardous oil platform left to rust in the Timor Sea. The estimated $1 billion clean-up is just the tip of the iceberg as more oil and gas infrastructure reaches its use by date. 

Illuminated oil platform (not the Northern Endeavour)
Illuminated oil platform illustrative purposes only (not the Northern Endeavour)

What a mess! The clean-up bill to decommission the Northern Endeavour platform and fix up the oil fields it was drawing from in the Timor Sea could cost up to $1 billion. Thankfully,  it’s something the Government isn’t willing to ask taxpayers to pay for, a solution suggested by (unsurprisingly) the oil and gas industry’s peak body Australian Petroleum Production and Exploration Association (APPEA). 

The Government’s recent Budget included a levy on the oil and gas industry to pay for the decommissioning of Northern Endeavour, once the property of Woodside Petroleum. And the industry isn’t happy, with APPEA arguing that the taxpayer should foot the bill through unspent petroleum resource rent tax credits. It has also not ruled out Woodside being asked to pay up, but Woodside has flatly denied any ongoing responsibility, saying it “sold the asset in a “commercial, arm’s length transaction … in compliance with the law”, as reported in The Guardian.  

Woodside sold the ageing rig and its Laminaria and Corallina oil fields to Northern Oil and Gas Group (NOGA) in 2016 for an undisclosed price that was so low that it didn’t even need to make it public. Just three years later, the industry regulator NOPSEMA found Northern Endeavour to be rusting away, potentially leading to a “major accident event causing multiple fatalities and environmental damage”. The Government had no choice but to seize the asset and shut it down.  

NOGA went bust in 2020, leaving the Government with a big, dangerous mess. 

 Fearing environmental catastrophe if the rig broke up and fell into the sea, the Wilderness Society supported the Government intervening to make the situation safe, but we made clear that either Woodside should pay for the cleanup themselves or if not them, then the rest of the industry should foot the bill with a levy. Ironically, APPEA lobbied against regulations that would have prevented the whole situation and now be the oil and gas industry footing the bill. 

“We supported [a taxpayer levy] on the proviso that industry would have to fully reimburse the taxpayer. The idea expounded by APPEA, that taxpayers should clean up the industry’s messes like this one is abhorrent,” says Jess Lerch, National Corporate Campaigner.

“Frankly, APPEA has brought this on itself and its members by not properly dealing with such a clear and entirely foreseeable problem earlier. Basic sensible regulation would have prevented this debacle, and without the unbound rent-seeking this was never going to happen until disaster struck. Indeed, APPEA itself provided submissions to the Government back in 2018 arguing against the precise regulatory measures needed to prevent just this situation.”  

And the Northern Endeavour debacle is just the tip of the iceberg. APPEA’s own Australia Oil and Gas Industry Outlook Report 2020 projected the cost blow-out of retiring oil and gas infrastructure over the next 30 years to come in at… wait for it… $60 billion. “APPEA itself provided submissions to the government back in 2018 arguing against the precise regulatory measures needed to prevent just this situation,” says Jess Lerch. “Those have long been the known costs of doing fossil fuel business in our waters and to be raising this as a ‘public’ issue now is pretty galling.”

“APPEA can’t seem to decide whether the oil and gas industry is a charity in desperate need of yet another government handout or the backbone of the economy with the nonsensical 'gas-fired recovery'.” 

There won’t be a gas-fired recovery. But we know there is at least a $60 billion oil and gas created liability. And we hope that the industry won’t be able to get out of cleaning up their mess. Our oceans don’t need their pollution and the Australian public shouldn’t have to pick up their tab.