House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Energy and Emissions Reduction, the Honourable Angus Taylor MP)

GLOSSARY

OUTLINE

The Fuel Security (Consequential and Transitional Provisions) Bill 2021 (this Bill) will make limited but necessary amendments to existing legislation to support the minimum stockholding obligation (MSO) and fuel security services payment (FSSP) proposed to be implemented under the related Fuel Security Bill 2021 (the Main Bill).

Part 1 of Schedule 1 to this Bill will establish authority for Government agencies to share relevant fuel information with the Department to reduce the regulatory burden for regulated entities. It will also enable the Department to check the veracity and accuracy of reported data to improve the implementation, integrity and administration of the MSO and FSSP.

This will be achieved by making consequential amendments to the following laws:

•

Competition and Consumer Act 2010 (CC Act)

•

Taxation Administration Act 1953 (TA Act)

•

Fuel Quality Standards Act 2000 (FQS Act)

•

Petroleum and Other Fuels Reporting Act 2017 (POFR Act).

Part 2 of Schedule 1 to this Bill will provide for consequential amendments to be made to accommodate proposed changes to laws, likely to be made before early September 2021, which will make machinery changes to merge the Federal and Family Courts of Australia.

Schedule 2 to this Bill will establish transitional provisions required for the implementation of the MSO and FSSP measures under the Main Bill, to ensure the MSO does not take effect before 1 July 2022, and applications for the FSSP cannot be made until rules prescribing the application and assessment process have been made under the Main Bill.

FINANCIAL IMPACT STATEMENT

Nil impact.

REGULATION IMPACT STATEMENT

The combined Regulation Impact Statement for this Bill and the Main Bill has been prepared in accordance with the Australian Government Guide to Regulation and is attached to the Main Bill (reference numbers: 42904 and 20489).

CONSULTATION

While no external consultation was undertaken specifically in relation to this Bill, a targeted consultation was conducted for the Main Bill. This consultation included industry, peak bodies, and government representatives to determine suitability of the Main Bill.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Fuel Security (Consequential and Transitional Provisions) Bill 2021

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Bill

The Fuel Security (Consequential and Transitional Provisions) Bill 2021 (this Bill) will make limited but necessary amendments to existing legislation to support the minimum stockholding obligation (MSO) and fuel security services payment (FSSP) proposed to be implemented under the related Fuel Security Bill 2021 (the Main Bill).

Part 1 of Schedule 1 to this Bill will establish authority for Government agencies to share relevant fuel information with the Department to reduce the regulatory burden for regulated entities. It will also enable the Department to check the veracity and accuracy of reported data to improve the implementation, integrity and administration of the MSO and FSSP.

This will be achieved by making consequential amendments to the following laws:

•

Competition and Consumer Act 2010 (CC Act)

•

Taxation Administration Act 1953 (TA Act)

•

Fuel Quality Standards Act 2000 (FQS Act)

•

Petroleum and Other Fuels Reporting Act 2017 (POFR Act).

Part 2 of Schedule 1 to this Bill will provide for consequential amendments to be made to accommodate proposed changes to laws, likely to be made before early September 2021, which will make machinery changes to merge the Federal and Family Courts of Australia.

Schedule 2 to this Bill will establish transitional provisions required for the implementation of the MSO and FSSP measures under the Main Bill, to ensure the MSO does not take effect before 1 July 2022, and applications for the FSSP cannot be made until rules prescribing the application and assessment process have been made under the Main Bill.

Human rights implications

This Bill engages, or may engage, the following rights:

•

the rights to an adequate standard of living and to continuous improvement of living conditions - Article 11 of the International Covenant on Economic, Social and Cultural Rights (ICESCR)

•

the right to privacy - Article 17 of the International Covenant on Civil and Political Rights (ICCPR)

•

the right to freedom of expression - Article 19 of the ICCPR

•

the right to a fair trial - Article 14 of the ICCPR

The Bill will primarily regulate entities rather than individuals

As noted at paragraph 1.11 of the Parliamentary Joint Committee on Human Rights - Guide to Human Rights, published in June 2015, which is a freely available document that outlines the key human rights that form part of the Parliamentary Joint Committee on Human Rights' mandate (available at https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Human_Rights/Guidance_Notes_and_Resources):

"Under the UN human rights treaties, human rights belong to individuals and groups of individuals. The treaties do not confer rights on companies or other incorporated bodies."

This Bill will consequentially amend legislation such as the POFR Act, which would place various obligations on "regulated entities", as defined under section 5(1) of the POFR Act. This term includes corporations, other bodies corporate and trusts (predominantly where the trustees are all constitutional corporations)).

Further, as noted above, this Bill will facilitate relevant fuel information relating to entities that are proposed to be regulated under the Main Bill to be shared with the Department, to promote the proper administration and integrity of the proposed MSO and FSSP schemes. As noted in the Statement of Compatibility accompanying the Main Bill, the classes of "persons" that will be regulated under the Main Bill include:

•

"constitutional corporations" as defined under clause 5 together with paragraph 40(2)(a);

•

"regulated entities" as defined under clause 5 (e.g. constitutional corporations, other bodies corporate, trusts (predominantly where the trustees are all constitutional corporations)); and

•

"Australian controlling corporations" as defined under clause 5 together with paragraph 8(2)(a).

Given the above, the Bill is unlikely to regulate and limit the human rights of individuals.

Right to an adequate standard of living - Article 11 ICESCR

Despite the fact the Bill does not generally regulate the conduct of individuals, it nevertheless engages positively with the right to an adequate standard of living and to continuous improvement of living conditions.

Article 11 of ICESCR recognises the right of everyone to an adequate standard of living, including adequate food, clothing and housing, and to the continuous improvement of living conditions. This Bill helps to promote this human right by alleviating the risks to fuel supply currently borne by Government and consumers.

Specifically, by supporting the integrity and administration of the MSO and FSSP measures under the Main Bill, this Bill will indirectly help to ensure that domestic fuel stocks can be maintained to meet liquid fuel needs and increase Australia's resilience during any future disruptions to the supply chain. In this way, the Bill will also support fuel-dependent and critical industries as well as Australian households.

Ensuring both the ongoing commercial viability of domestic fuel refiners, and access to minimum local holdings of key transport fuels, would offer protection during extreme disruptions to fuel supply to Australia, and protect consumers from fuel price increases that would likely ensue if Australia's remaining oil refineries were to discontinue operations.

The proposed reforms are therefore likely to ensure the availability and accessibility of the energy resources that are essential to the realisation of the right to an adequate standard of living. They will also support Australia's obligation under Article 2.1 of the ICESCR to take reasonable measures within its available resources to progressively secure broader enjoyment of this right.

Right to freedom of expression - Article 19 ICCPR

This Bill also engages the right to freedom of expression in Article 19 of the ICCPR. Among other things, the Bill will consequentially amend the POFR Act, by inserting new sections 13B-13D relating to auditing of fuel information reports provided by regulated entities.

Under these new provisions, the POFR Rules may provide in relation to the auditing of compliance with section 11 of the POFR Act (i.e. mandatory reporting of fuel information to the Secretary), so far as that section concerns the giving of reports that relate to the refining of FSSP fuels or compliance with MSO obligations under the Main Bill.

Further, Ministerial rules may empower the Secretary to require that an audit be conducted, and prescribe the matters to which an audit may or must relate, the persons who may conduct the audit, and require reports of audits to be given to the Secretary. This, together with the existing secrecy provisions pertaining to "protected information" under Part 4 of the POFR Act, therefore engages the right to freedom of expression by establishing measures that may restrict the communication or publication of certain information collected in the conduct of such audits.

However, the limitations on freedom of expression that may be imposed by these measures are reasonable and proportionate, as they will ensure that audits are conducted consistently with international standards and are of sufficient quality and vigour to provide a meaningful assessment of the accuracy of data reported by entities. The veracity and accuracy of such data will be crucial to the integrity of the proposed MSO and FSSP schemes proposed to be established under the Main Bill.

Article 19(3) of the ICCPR permits restrictions on the freedom of expression as provided by law and necessary to protect the rights of others and national security or public order, and this would extend to the right to protection of sensitive commercial-in-confidence information reported by regulated entities and/or collected during the course of compliance audits.

Given the above, the restrictions are considered compatible with Article 19 of the ICCPR because they will promote the integrity of the MSO and FSSP schemes and ensure entities' commercial-in-confidence information is sufficiently protected when used by the Department to assess their compliance with the obligations under the Main Bill.

Right to privacy - Article 17 ICCPR

While noting that the consequential amendments proposed to be made by the Bill will primarily regulate the conduct of, or otherwise impact, entities that are unlikely to be individuals, out of an abundance of caution, consideration has been given to the possibility that the Bill engages the right to privacy of individuals.

As noted above, the Bill will make limited minor consequential amendments to provisions regulating the disclosure of information under the CC Act, FQS Act, POFR Act and TA Act. Such amendments will establish lawful authority for Government agencies, including the ACCC and ATO, as well as entrusted persons under the POFR Act and inspectors and other officers involved in administering the FQS Act, to share relevant fuel information (e.g. types of fuels and volumes refined in and/or imported into Australia, compliance with relevant fuel standards, etc.) with the Department (e.g. officers within the Department with responsibilities under the Main Bill). These amendments will play an important role in enabling the Department to check the veracity and accuracy of data reported by regulated entities under the POFR Act and the Main Bill, relating to fuel refining and importing activities.

While the information permitted to be shared with the Department under the amended provisions will almost solely relate to refinery operations, fuel production volumes, imports of fuel stocks and other matters relating to the business of refining and importing fuel, it is nevertheless possible some personal information about identifiable individuals may be collected under the provisions proposed to be consequentially amended.

However, any such collection of personal information - to the extent that it occurs - will be limited to what is necessary to ensure the functional operation of the legislative scheme, including its enforcement, so that the intended benefits of the proposed fuel security measures can be realised.

Further, the Bill will make consequential amendments to the definition of "protected information" (which includes personal information) under section 5 of the POFR Act to ensure that information mandatorily reported under section 11 of that Act, which also relates to entities' MSO obligations or refining of FSSP fuels, is handled appropriately and not used or disclosed for purposes unrelated to the administration of the POFR Act or the Main Bill.

Existing Part 4 (Secrecy and Disclosure) of the POFR Act will also continue to place appropriate prohibitions and limitations on the manner in which "protected information" may be used and disclosed, including the significant limitation that an entrusted person under the POFR Act may only make a record of, use or disclose protected information if the record is made, or the information is used or disclosed, in the course of exercising powers, or performing functions or duties, as an entrusted person (see sections 20 and 21 of the POFR Act). The Bill will make a minor consequential amendment to section 21 of the POFR Act to insert a note advising that the powers, functions and duties of entrusted persons are not limited to those conferred or imposed by the POFR Act. This will remove any doubt that information reported by regulated entities under the POFR Act may also be used and disclosed for the limited purpose of administering the MSO and FSSP schemes under the Main Bill.

Therefore, while the Bill may engage and limit the right to privacy, given the objects of the proposed fuel security reforms under the Main Bill, the fact that the vast majority (if not all) regulated entities will not be individuals, and the protections proposed with respect to the handling of information reported under existing POFR laws, it is clear that any such limitation will be reasonable, necessary and proportionate.

Right to a fair trial - Article 14 ICCPR

The Bill potentially also engages the right to the criminal process guarantees under Articles 14 and 15 of the ICCPR, given the substantial maximum pecuniary penalties attached to the civil penalty provisions under proposed new sections 13A, 13C and 13D of the POFR Act (i.e. 250-300 penalty units) and the fact that the purpose of such penalties is to punish and deter.

However, in a vast majority of (if not, all) cases, the entities that will be subject to the proposed civil penalty provisions are large, sophisticated multinational corporations. The measures aren't directed at individuals, and therefore, it is unlikely the Bill engages any criminal process human rights. For example, proposed new sections 13A, 13C and 13D of the POFR Act are anticipated to apply predominantly in relation to entities that are not individuals, as they will place obligations on:

•

the "persons" required to report under section 11 of the POFR Act, where such reports relate to MSO products/activities or the refining of FSSP fuels (within the meaning of the Main Bill) (see new sections 13A and 13D of the POFR Act). This will include corporate refinery operators and/or other owners of refinery stock, importers and holders of stock relevant to the MSO (all of which are anticipated to be constitutional corporations).

•

the "persons affected" by an audit of compliance with the mandatory reporting obligations under section 11 of the POFR Act (see new section 13C POFR Act). That is, "regulated entities" (see description above), Australian controlling corporations of regulated entities, entities in possession of stocks of MSO products held by a regulated entity, and other "constitutional corporations".

While it is therefore unlikely the civil penalty provisions to be inserted by the Bill engage any criminal process human rights, out of an abundance of caution, consideration has been given to whether the Bill unjustifiably limits the right of individuals under Article 14 of the ICCPR, such that the civil penalty provisions proposed to be established would be regarded as "criminal" under human rights law.

The new civil penalty obligations relate to the existing requirement of regulated entities to report fuel-related information under section 11 of the POFR Act, and will provide that a person must:

•

not report false or misleading information which relates to whether a regulated entity is complying with their MSO under the Main Bill or whether a constitutional corporation is entitled to payment of the FSSP under the Main Bill (s13A) - maximum 300 penalty units. This would also be consistent with the analogous civil penalty provision that will be established under clause 49 of the Main Bill;

•

provide reasonable facilities and assistance to an auditor conducting an audit of compliance with section 11 relating to MSO activities/products by regulated entities or the refining of FSSP fuels (s13C) - maximum 250 penalty units;

•

comply with any rules requiring a report of an audit of compliance with section 11 reporting obligations (s13D(1)) - maximum 250 penalty units; and

•

give a report of an audit to the Secretary if required by the rules (s13D(2) - maximum 250 penalty units.

Each of these proposed civil penalties provisions relate to requirements that operate in a regulatory context - that is, regulation of refinery operators and importers of fuel to ensure compliance with various reporting obligations under both the MSO and FSSP aspects of the Main Bill - and will not apply to the general public.

Further, the primary object of the civil penalty provisions is to ensure the accuracy of fuel information reported by regulated entities, which data will be relied on to administer the MSO and FSSP schemes under the Main Bill. The veracity and integrity of this information is crucial to the success of the fuel security measures under the Main Bill, and therefore is also essential to achieving the overarching objectives of improving national fuel security and assisting in preventing disruptions in fuel supplies.

In light of the above, while substantial maximum penalties may apply under the civil penalty provisions of the Bill, they are not "criminal" in nature in the context of international human rights law, given the narrow class of corporate entities subject to the provisions, the specific regulatory context in which they apply, and the need to ensure compliance with entities' MSO and FSSP obligations to promote the national fuel security policy objectives of the Bill. Therefore, to the extent that the Bill engages and limits the criminal process rights under Article 14 of the ICCPR, such limitations are reasonable, necessary and proportionate.

Conclusion

The Bill is compatible with human rights because it promotes the protection of the rights to an adequate standard of living and to continuous improvement of living conditions. While there are very few provisions of the Bill that regulate or engage the human rights of individuals, to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.

Notes on Clauses

Clause 1: Short title

1. This clause provides for the Bill, when enacted, to be cited as the Fuel Security (Consequential and Transitional Provisions) Act 2021.

Clause 2: Commencement

2. The table in this clause sets out the commencement date for when the Bill's provisions commence.

3. The effect of this clause is that:

a.

clauses 1-3 of the Bill commence upon Royal Assent;

b.

Part 1 of Schedule 1, and Schedule 2, to the Bill commence at the same time as the Main Bill commences (that is, the day after the Main Bill receives Royal Assent); and

c.

Part 2 of Schedule 1 to the Bill commences the later of:

i.

immediately after the commencement of the proposed Federal Circuit and Family Court of Australia Act 2021 (FCFCA Act); and

ii.

immediately after the commencement of the Fuel Security Act 2021.

4. However, if the Main Bill does not commence then none of the Schedules to this Bill will commence either.

Clause 3: Schedules

5. This clause provides that the Schedules to the Bill amend or repeal the legislation referred to therein in the manner set out in the Schedules.

Schedule 1 - Consequential amendments

Part 1 - Main Consequential amendments Competition and Consumer Act 2010

Item 1 - At the end of subsection 95ZPA(1)

6. This item amends section 95ZPA of the CC Act by inserting a reference to the Fuel Security Act 2021 (Fuel Security Act).

7. The intention of the proposed amendment to section 95ZPA is to enable fuel information which is otherwise protected information under the CC Act to be able to be shared by the ACCC with the Department, if the Chairperson of the ACCC is satisfied that it will enable or assist an officer of the Department to perform or exercise any function or power under the Main Bill. This would be consistent with, and extend the existing power of, the ACCC Chairperson to share information with the Department to support the POFR Act.

8. It is envisaged that information related to the ownership, operation, capacity, throughput and location of fuel storage terminals, which is collected by the ACCC, will continue to be shared with the Department. However, this information will be able to be used for - in addition to the existing purpose of producing information relevant to evaluating energy security policy under the POFR Act -validating information received by the Department for the purposes of administering the FSSP and MSO.

9. In particular, it is envisaged such data may be used to help verify volumes of FSSP fuel reported as having been refined for a period under POFR laws and, in the case of discrepancies, to help ascertain if any overpayments of the FSSP have been made requiring recovery under clauses 50 and 54 of the Main Bill.

10. It is also envisaged the data will be used to cross-check information provided for the purposes of administration, compliance and enforcement of the MSO. Information on fuel storage terminals will be useful to determine the capacity of the liquid fuel market and regulated entities.

11. The proposed consequential amendments to section 95ZPA will enable an entrusted person under the CC Act to disclose protected information under that Act to the agency responsible for administrating the Main Bill (i.e. the Department), if the information enables or assists an officer in the Department to carry out any function or power under the Main Bill.

12. The Chairperson of the ACCC, or his or her delegate under subsection 95ZPA(4) of the CC Act, may impose written conditions when disclosing protected information. For example, the Chairperson could require that the disclosed information be stored securely or not be disclosed outside of the receiving agency without the Chairperson's consent.

13. The Chairperson may delegate his or her power to authorise disclosure of protected information under this clause to another member of the Commission, an SES employee or an acting SES employee of the Commission.

Fuel Quality Standards Act 2000

Item 2 - After subparagraph 67A(b)(ii)

14. This item amends section 67A of the FQS Act by inserting a reference to the Fuel Security Act.

15. It is intended that one of the requirements to be prescribed under subclause 20(2) and paragraph 40(2)(c) of the Main Bill will be that the stocks of MSO product and refined FSSP fuel must comply with any applicable standards under the FQS Act.

16. Therefore, to properly administer the MSO and the FSSP schemes, the Department will require information about:

a.

whether any MSO product being counted towards an entity's stockholding obligation meets any fuel quality standards that may be prescribed by the rules;

b.

whether FSSP fuel refined by a refinery for a reporting period meets any applicable standards under the FQS Act; and

c.

whether a refinery has been granted, under section 13 of the FQS Act, an approval varying a fuel standard or a fuel quality information standard in a specified way.

17. The proposed consequential amendments to section 67A of the FQS Act are therefore intended to authorise inspectors and other officers involved in administering the FQS Act to use or disclose relevant information to officers of the Department with responsibilities under the Main Bill (and any rules made under that Bill for the purpose of monitoring compliance with those laws).

Petroleum and Other Fuels Reporting Act 2017

Item 3 - At the end of section 3

18. This item amends the objects of the POFR Act to include supporting the implementation of the Main Bill.

19. This amendment recognises the role the POFR Act will play in helping to collect and verify information from refinery operators and importers of fuel products to support the administration of the proposed MSO and FSSP schemes under the Main Bill.

Item 4 - Subsection 5(1)

20. This item inserts a new definition of the phrase "affected" into the definitions provision of the POFR Act, which cross-refers to proposed new subsection 13C(2) of the POFR Act (see related explanatory note at paragraphs 40-44 below).

Item 5 - Subsection 5(1) (at the end of paragraph (a) of the definition of fuel information )

21. This item amends paragraph (a) of the definition of "fuel information" under section 5 of the POFR Act by adding a reference to holding stocks of covered products that are MSO products.

22. The purpose of this item is to clarify that information related to the Main Bill could be collected in reports under paragraph 11(4)(a) of the POFR Act, by specifying that "fuel information" could relate to "holding" (as defined under the Main Bill) stocks of covered products that are MSO products (as defined under the Main Bill).

Item 6 - Subsection 5(1) (at the end of the definition of holding stock )

23. This item inserts a note below the definition of the phrase "holding stock" of a covered product in subsection 5(1) of the POFR Act, advising the reader to also have regard to new subsection 5(4) of the POFR Act that will be inserted by this Bill (see related explanatory note at paragraphs 26-29 below). This is intended to alert the reader to the meaning of "holding stock" of a covered product that is an MSO product for the purpose of the Main Bill.

Item 7 - Subsection 5(1) (paragraphs (a), (b) and (c) of the definition of protected information )

24. This item amends the definition of "protected information" in section 5 of the POFR Act to include information obtained under, or in accordance with, the Main Bill.

25. This consequential amendment ensures information collected under the POFR Act that is used to help administer the proposed MSO and FSSP schemes under the Main Bill is handled consistently with information collected under the POFR Act for other purposes. This means that the existing secrecy regime in the POFR Act will apply to information collected under the Main Bill in addition to information which is provided in reports under the POFR Act.

Item 8 - At the end of section 5

26. This item inserts new subsection 5(4) into the POFR Act, to further explain when a person is taken to be "holding stock" of a covered product that is an MSO product within the meaning of the Main Bill.

27. The new provision specifies that a person is "holding stock" if the conduct meets the requirements under clause 19 of the Main Bill. This includes, for example, holding stocks of an MSO product that are not excluded under clause 20 of the Main Bill and where:

a.

the entity exclusively owns, or is entitled to take ownership of, the stocks and no one else is the holder; or

b.

the stocks are held, reserved or quarantined for the entity and no one else is the holder; or

c.

the stocks are feedstock and are taken to be stocks of MSO product in accordance with clause 25 of the Main Bill.

28. This definition of "holding stock" of a covered product that is an MSO product will in turn apply under paragraph (d) of the definition of the phrase "covered activity" under subsection 5(1) of the POFR Act, as the context requires.

29. This structure recognises that the Main Bill may enable stock to be held in circumstances that would not constitute the holding of stock under the existing POFR Act, such as the potential for stock to be held in certain pipelines. It is likely that stocks only held because of new subsection 5(4) would be reported separately from stocks that would otherwise be held by an entity.

Item 9 - Subsection 11(4) (at the end of note 2)

30. This item amends note 2 to subsection 11(4) of the POFR Act. Specifically, it inserts advice that new section 13A of the POFR Act (proposed to be inserted under item 10 of Schedule 1 to this Bill) will establish a civil penalty for persons providing false or misleading information in relation to the Main Bill (i.e. the reporting under the POFR Act of false or misleading information relating to a person's MSO or entitlement to the FSSP). This expands on the existing note 2, advising that a person may commit an offence under the Criminal Code if they provide false or misleading information or documents in respect of their reporting obligations under section 11 of the POFR Act.

Item 10 - At the end of Part 2

New section 13A Civil penalty for false or misleading information relating to Fuel Security Act 2021

31. This item inserts a new civil penalty provision (i.e. new section 13A) into Part 2 of the POFR Act, for entities that report false or misleading information under the Act, that relates to:

a.

whether a person complies with their MSO under the Main Bill; or

b.

entitlement to payment of the FSSP under the Main Bill.

32. Specifically, the civil penalty provision will provide that a person must not include information in a report under the POFR Act that:

a.

relates to whether a person complies with the MSO; or

b.

relates to the payment of the FSSP; and

c.

is false or misleading, or omits a matter (without which the information is misleading).

33. The maximum penalty is 300 penalty units, which is consistent with the penalty amount for the analogous civil penalty proposed to be included under clause 49 of the Main Bill.

34. The inclusion of a new civil penalty provision under section 13A will also enable an infringement notice penalty to be issued under Part 5 of the Regulatory Powers Act as an alternative compliance option (per section 36 of the POFR Act).

35. This provision is important to the integrity of both the FSSP payments and MSO as fuel volumes held and refined need to be accurate. Any deliberate under or over reporting has the potential to provide significant commercial and financial advantages to a reporter and is appropriately deterred by a civil penalty. Access to information from other Commonwealth entities, audits and significant compliance and enforcement powers will help determine whether or not this provision has been breached. However, the Department's policy will be to first work with relevant entities to ensure they understand their obligations and report accurately.

New section 13B Compliance audits relating to the Fuel Security Act 2021

36. This item also inserts new section 13B into the POFR Act to establish that rules made under the POFR Act (POFR Rules) may require auditing of POFR reporting requirements to the extent such reporting relates to MSO products and activities, or the refining of FSSP fuels.

37. New subsection 13B(2) provides that such rules may prescribe specified matters including who is authorised to conduct an audit, matters that must be addressed by an audit, and a requirement that audit reports must accompany other mandatory reporting under section 11 of the POFR Act (or otherwise be given to the Secretary). It is appropriate that such complementary details regarding compliance auditing relating to the Main Bill is able to be provided in a flexible manner under Ministerial rules.

38. New subsection 13B(3) provides that certain terms (e.g. "FSSP fuels") used in subsection 13B(1) have the same meaning as in the Main Bill.

39. It is not intended that every report under the POFR Act would be audited, but periodic auditing of key reports is likely to be useful to ensure the integrity of the MSO and the FSSP payments. As those schemes develop over time, the need for audits can be reassessed to ensure they are proportionate and do not impose unnecessary costs or regulatory burden. It is likely that national greenhouse and energy auditors would be involved in such audits, similar to the audit provisions in the Main Bill. The rule making powers help ensure such audits can be targeted at information of most relevance to the schemes.

New section 13C Duty to provide reasonable facilities and assistance for audit

40. This item also inserts new section 13C, which establishes an obligation on persons who are "affected" by a compliance audit relating to the Main Bill under proposed new subsection 13B(1) to provide the audit team leader and any person assisting them with all reasonable facilities and assistance necessary for the effective conduct of the audit. This will help ensure that the effectiveness of audits is not frustrated by withholding information or non-cooperation.

41. New subsection 13C(2) defines persons who are "affected" by an audit as:

a.

the person being audited;

b.

if the audit relates to compliance with reporting obligations that relate to MSO activities and products by a regulated entity: the regulated entity; or any Australian controlling corporation of the regulated entity; or any entity in possession of stocks of an MSO product that are held by the regulated entity; or

c.

if the audit relates to compliance with reporting obligations that relate to the refining of FSSP fuels by a constitutional corporation under the Main Bill: the constitutional corporation.

42. New subsection 13C(3) provides that certain terms (e.g. "FSSP fuels") used in subsection 13C(2) have the same meaning as in the Main Bill.

43. This provision establishes a civil penalty for contravening the obligation to provide reasonable assistance for an audit and a maximum penalty of 250 penalty units will apply. This is consistent with analogous auditing provisions proposed under subclauses 33(4) and 34(3) of the Main Bill relating to MSO compliance audits. The penalty is consistent with the existing penalty for not reporting under subsection 11(2) of the POFR Act.

44. The inclusion of a new civil penalty provision under section 13C will also enable an infringement notice penalty to be issued under Part 5 of the Regulatory Powers Act as an alternative compliance option (per section 36 of the POFR Act).

New section 13D Duty to comply with requirements in relation to report of audit

45. This item also inserts new section 13D into the POFR Act. The new provision establishes two civil penalty provisions to ensure audit reports are provided where required.

46. The first civil penalty provision, established under new subsection 13D(1), obliges persons who are required to report under section 11 of the POFR Act to also comply with any rules requiring a report of an audit to accompany the report under section 11.

47. The second civil penalty provision, established under new subsection 13D(2), obliges persons who are required by the POFR Rules to give a report of an audit to the Secretary, to give the required audit report to the Secretary.

48. A maximum penalty of 250 penalty units applies for a single contravention of either subsection 13D(1) or 13D(2). Alternatively, it is intended an infringement notice penalty may be issued under Part 5 of the Regulatory Powers Act (per section 36 of the POFR Act) for an alleged contravention of either provision. The penalty is consistent with the existing penalty for not reporting under subsection 11(2) of the POFR Act.

Item 11 - Section 14 (paragraph beginning "Fuel information")

49. This item consequentially amends the second paragraph of the simplified outline for Part 3 of the POFR Act to clarify that "fuel information", within the context of that Part:

•

may relate to various specified matters including the "holding" of certain covered products, and further clarifies that in the context of Part 3 "holding" has the meaning given under the Main Bill (see clause 19 of the Main Bill);

•

in addition to including contextual information, also includes metadata describing such data. The timing of the collection of data may assist when determining compliance with the obligation day requirements under the Main Bill.

Item 12 - At the end of section 21

50. This item inserts a note under section 21 of the POFR Act, advising that the powers, functions and duties of entrusted persons are not limited to those conferred or imposed by the POFR Act.

51. The purpose of this note is to avoid any doubt that "protected information" (as defined under section 5 of the POFR Act) reported by regulated entities under the POFR Act and POFR Rules relating to:

a.

MSO activities undertaken by entities, and specific kinds and volumes of MSO products produced by those activities, will be able to be used for the purposes of:

i.

determining whether an entity is undertaking an MSO activity in relation to an MSO product during a prescribed period;

ii.

calculating when an entity's activity exceeds the threshold for a prescribed period to trigger the MSO (i.e. exceeds the volume in megalitres proposed to be prescribed by rules made under the Main Bill for the activity and product);

iii.

assessing the required quantity of MSO product to be held by a regulated entity; and

iv.

verifying reports made (or omitted to be made) regarding any of the matters required to be reported in relation to an entity's MSO under the Main Bill; and

b.

specific kinds, and volumes, of FSSP fuel refined at a committed refinery throughout a commitment period, will be able to be used for the purposes of:

i.

determining a refinery operator's quarterly eligibility for the FSSP;

ii.

determining if a refinery operator is obliged to repay any amount of the FSSP; and

iii.

verifying reports made (or omitted to be made) regarding any of the other matters required to be reported for the FSSP.

Item 13 - At the end of subsection 31(1)

52. This item amends subsection 31(1) of the POFR Act to allow an entrusted person (within the meaning of the Australian Border Force Act 2015) to disclose information to the Department for the purpose of the Main Bill (in addition to the POFR Act).

53. It is envisaged such information may be used to help verify volumes of FSSP fuel reported as having been refined for a period under POFR laws and, in the case of discrepancies, to help ascertain if any overpayments of the FSSP have been made requiring recovery under clause 54 of the Main Bill. It will also be used to facilitate verification of information reported with respect to MSO matters, by enabling cross-checking of information with import and excise data.

Item 14 - After subsection 33(1)

54. This item inserts a new subsection 33(1A) into the POFR Act to specify that the offence and civil penalty provisions of the FQS Act and under the Main Bill are "related provisions" for the purposes of monitoring compliance with the POFR Act under Part 2 of the Regulatory Powers Act. This is intended to create efficiencies in monitoring compliance with each of these Acts by enabling evidence collected in the course of monitoring compliance with the POFR Act to also be held and used for the purpose of monitoring compliance with related offences and provisions of the FQS Act and Main Bill.

Item 15 - Subsection 33(2) (heading) and Item 16 - Paragraph 33(2)(a)

55. These items make minor amendments to update subsection 33(2) of the POFR Act, consequent upon proposed item 14 above, by deleting the reference in the subheading to that provision to "Related provisions" and repealing paragraph 33(2)(a) as there will be no related provisions under subsection 33(2) and any references to "related provisions" are therefore redundant.

Item 17 - After paragraph 39(1)(c)

56. This item inserts a new paragraph (ca) into subsection 39(1) of the POFR Act, which extends the power of the Secretary to delegate their functions or powers to include delegation of any powers or functions under rules made for the purposes of subsection 13B(1) of the POFR Act (about compliance audits relating to the Main Bill).

57. It is appropriate for the Secretary to be able to delegate certain powers and functions under rules anticipated to be made under the POFR Act for the purpose of auditing compliance with reporting obligations relating to MSO activities/products of regulated entities and refining of FSSP fuels, to ensure such audits can be administered effectively and efficiently. It will not be practical for the Secretary to personally administer the entire auditing process under proposed new section 13B of the POFR Act.

58. It is envisaged the power of delegation will apply to the following powers likely to be provided under the POFR Rules:

a.

to require an audit to be conducted (see proposed new paragraph 13B(2)(a) of POFR Act);

b.

to specify the matters to which an audit is to relate (see proposed new paragraph 13B(2)(b) of POFR Act); and

c.

to accept reports of audits that are required to be given to the Secretary (see proposed new paragraph 13B(2)(e) of POFR Act).

59. The approach taken to delegations is based on the degree of discretion involved in the decisions, the nature of the decisions and the potential impacts on refinery operators and fuel importers. Given these matters, it is appropriate that the Secretary's powers and functions under rules made under proposed new section 13B of the POFR Act are limited to the SES level officers due to the significant nature of the decisions regarding whether and how to audit compliance with reporting obligations, the degree of discretion involved and the consequential impacts on the refinery operators and fuel importers.

60. Further, existing subsection 39(2) of the POFR Act makes it clear that, where a delegate is carrying out delegated powers or functions under subsection 39(1), they must comply with any directions the Secretary makes.

Taxation Administration Act 1953

Item 18 - Subsection 355-65(8) in Schedule 1 (at the end of the cell at table item 6A, column headed "and the record or disclosure ...")

61. This item amends item 6A of the table in subsection 355-65(8) in Schedule 1 to the TA Act to enable records or disclosures relating to miscellaneous matters to the Secretary of the Department for the purpose of administering the Main Bill.

62. These amendments are consistent with consequential amendments previously made to the TA Act with respect to disclosure of information to the Secretary of the Department for the purpose of administering the POFR Act. Relevantly, excise information is relevant to both the FSSP and MSO and will help with the integrity of those schemes.

Item 19 - Application of amendments

Disclosure of information etc.

63. This item clarifies that the proposed consequential amendments of the CC Act, FQS Act and TA Act that will be made by Schedule 1 to this Bill will only authorise disclosures of information (and, in the case of the FQS Act, authorisations of disclosures of information) made after the commencement of that Schedule, regardless of whether the information was obtained before or after commencement. Information before commencement could be relevant to whether thresholds for the MSO are met or to check consistency with future information.

Definition of holding stock

64. This item also provides that the amendments to the definition of "holding stock" in section 5 of the POFR Act made by Schedule 1 to this Bill will apply from 1 July 2022.

Part 2 - Consequential amendments relating to the Federal Circuit and Family Court of Australia Act 2021

Fuel Security Act 2021

Items 20 - 26

65. These items amend clauses 50(5)(b), 54(4)(b), 60(4)(e)(ii), 61(3)(e)(ii), 62(3)(b), 69(3)(b) and 70(3)(b) of the Main Bill to update references in the Main Bill to the "Federal Circuit Court of Australia" contingent upon changes to laws likely to be made in or before early September 2021 which would merge the Federal Circuit Court and the Family Court of Australia.

Schedule 2 - Transitional provisions

Item 1 - Definitions

66. This item defines the terms "Act" and "rules" for the purpose of Schedule 2 to the Bill.

Item 2 - Minimum stockholding obligation

67. This item ensures the MSO obligations under Part 2 of the Main Bill do not apply before 1 July 2022. Specifically, no obligation days (as defined under clause 5 of the Main Bill) may be prescribed before that date.

68. Item 2(2) provides that, for the purpose of triggering the MSO under clause 10 of the Main Bill, rules made under the Main Bill may prescribe a period before that Bill commences. This will give effect to the policy intent that the Secretary may refer to records about MSO activities undertaken by a regulated entity in relation to MSO products, notwithstanding that such records may predate the commencement of the Main Bill.

69. Item 2(3) ensures the obligation for regulated entities to notify the Secretary about MSO activity relating to MSO products in accordance with clause 30 of the Main Bill, will not apply until after 30 June 2022. This avoids unnecessary reporting obligations before the start of the MSO.

70. Item 2(4) provides that section 21 of the POFR Act - as it would apply to entrusted persons exercising powers, or performing functions or duties, upon the commencement of the Main Bill - authorises the making of records of, and using and disclosing, information made after the commencement of Schedule 2 to the Bill, whether or not such information was obtained before or after commencement of that Schedule. This information may be necessary for the MSO and the FSSP.

Item 3 - Fuel security services payment

71. This item ensures applications for the FSSP cannot be made until the Minister has made rules required to assess such applications. However, if any such rules are subsequently repealed, then item 3(2) of Schedule 2 to the Bill clarifies that applications for the FSSP could still be made. Importantly, the rules will contain a number of requirements for applications that need to be specified before applications can be considered.

72. Item 3(3) establishes that, for the purpose of a determination made by the Minister under clause 44 of the Main Bill, the Minister may take into account any consultation undertaken before or after commencement of the Main Bill. This recognises the extensive consultation that has already occurred with impacted refineries in developing the FSSP. It recognises a number of steps the Government has already taken to afford refinery operators' natural justice rights in relation to the determination.