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Fraser Institute

International investment frameworks for upstream petroleum are benchmarked each year by the Fraser Institute’s Global Petroleum Survey. The Fraser Institute is an independent Canadian public policy research and educational organisation that conducts annual surveys of the international mining and petroleum sectors to benchmark and rank the performance of sector regulatory agencies.

The survey asked respondents to score assessed 16 factors that affect investment decisions – i.e. whether the jurisdiction’s performance encourages or deters investment.  The ranking in each of these factors is then equally weighted to generate a Policy Perception Index (PPI).

The 16 investment framework factors assessed include factors controlled by the Australian Government as well as those controlled by State and Territory Governments:

  1. Fiscal terms—including licenses, lease payments, royalties, other production taxes, and gross revenue charges, but not corporate and personal income taxes, capital gains taxes, or sales taxes.
  2. Taxation in general—the tax burden including personal, corporate, payroll, and capital taxes, and the complexity of tax compliance, but excluding petroleum exploration and production licenses and fees, land lease fees, and royalties and other charges directly targeting petroleum production.
  3. Environmental regulations—stability of regulations, consistency and timeliness of regulatory process, etc.
  4. Regulatory enforcement—uncertainty regarding the administration, interpretation, stability, or enforcement of existing regulations.
  5. Cost of regulatory compliance—related to filing permit applications, participating in hearings, etc.
  6. Protected areas—uncertainty concerning what areas can be protected as wilderness or parks, marine life preserves, or archaeological sites.
  7. Trade barriers—tariff and non-tariff barriers to trade and restrictions on profit repatriation, currency restrictions, etc.
  8. Labour regulations and employment agreements—the impact of labour regulations, employment agreements, labour militancy or work disruptions, and local hiring requirements.
  9. Quality of infrastructure—includes access to roads, power availability, etc.
  10. Quality of geological database—includes quality, detail, and ease of access to geological information.
  11. Labour availability and skills—the supply and quality of labour, and the mobility that workers have to relocate.
  12. Disputed land claims—the uncertainty of unresolved claims made by aboriginals, other groups, or individuals.
  13. Political stability.
  14. Security—the physical safety of personnel and assets.
  15. Regulatory duplication and inconsistencies (includes federal/ provincial, federal/state, interdepartmental overlap, etc.)
  16. Legal system—legal processes that are fair, transparent, non-corrupt, efficiently administered, etc.

The Fraser Institute’s annual survey reflects the views of international petroleum explorers, including members of the Australian Petroleum Production & Exploration Association (APPEA) and the South Australian Chamber of Mines and Energy (SACOME). The survey ranks Federal agencies (Geoscience Australia and the Department of Industry, Innovation and Science), Australian states and the Northern Territory as well as international jurisdictions.

Over the last decade, South Australia has consistently ranked in the top 2 for the Oceania region indicating that the state is rated in most years as delivering a better policy framework compared to all other Australian jurisdictions. The Oceania region is composed of sixteen jurisdictions: 6 Australian states, the Northern Territory, offshore Australia, Timor Leste, Timor Gap Joint Petroleum Development Area, New Zealand, Brunei, Malaysia, Philippines, Papua New Guinea, and Indonesia.

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Australian Productivity Commission Reviews

The Australian Productivity Commission’s Review of Regulatory Burdens on the Upstream Petroleum (Oil and Gas) Sector (2009) concluded that ‘one-stop-shops’ are the most efficient regulatory approach when well managed without regulatory capture. Amongst recommendations, the Productivity Commission said:

“Establish lead agencies: For all relevant areas (for example, resource management, environment and heritage).…with appropriate governance, experience in South Australia suggests that such an agency can achieve an appropriate balance between enforcing legislative provisions and expediting approvals.

Under a lead agency….approval of most, if not all, aspects …would rest with one designated agency....It would maintain control of the process, and in most cases, would consult with other relevant agencies, … rather than formally refer the application to a separate agency for assessment….. Where impacts are considered to be significant, a formal referral may take place. By maintaining control of the approval process the lead agency approach is able to …. minimise time delays. …South Australia is widely seen as a model for other jurisdictions to emulate.”

In addition, in comparing relative efficiency and effectiveness of various Australian petroleum legislative frameworks, the Australian Productivity Commission report quotes:

“Industry participants’ feedback suggests that South Australia has a relatively straightforward regulatory system, which could be considered a benchmark for other jurisdictions.”

“…the South Australian Petroleum Act 2000 is simple to follow and administer.”  “It is noted that issues of regulatory capture do not appear to have emerged in South Australia. PIRSA has a clear mandate, clear regulatory responsibilities, good processes to engage with other agencies, and checks and balances that apply in high risk situations.”

In April 2016, the Australian Competition and Consumer Commission (ACCC) inquiry into Australia’s east coast gas supply concluded that government(s) should consider adopting regulatory regimes to manage the risks of individual gas supply projects on a case by case basis rather than using blanket moratoria. South Australia’s framework is recognised as efficiently and effectively deploying leading practices in this regard.

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