Explanatory Memorandum
(Circulated by authority of the Minister for Resources and Energy, Senator the Hon Warwick Parer)GENERAL OUTLINE
1. The Petroleum Excise (Prices) Act 1987 provides the Minister for Resources and Energy with the obligation to determine the volume weighted average of realised (VOLWARE) prices for crude oil produced and sold from each of the excisable oil producing regions. These prices are used as the basis for crude oil excise. This amendment provides for the simplification of the administration of the price determinations.
2. The Act currently requires the determination of three prices for each excisable oil producing region, each month: a reference price for the month ahead; an interim VOLWARE price for the month immediately previous; and a final VOLWARE price within 6 months when all transaction information is finalised. Each oil producing region, onshore or in the North West Shelf project area, which has cumulative production of 30 million barrels becomes excisable. The rate of excise applied depends on the annual production level, for example, annual production below 500 megalitres (3,146,000 barrels) per year attracts a zero rate of excise for 'new' oil. Excise is collected three times each month and a 'credit terms compensation' factor is applied in the VOLWARE price calculation to compensate the producers for the payment of excise before commercial payment is received.
3. This amendment Bill, is presented as a package with the Excise Tariff Amendment Bill (No. 2) 1997, which deals with the collection of excise. Together they will provide for changes in the excise collection schedule and simplify the administrative arrangements for processing of transaction data from the crude oil producers by:
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- changing the excise collection schedule from thrice monthly to monthly through amendments to the Excise Tariff Act 1921; and
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- removing the need to determine a reference price for the month ahead;
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- removing the requirement to determine VOLWARE prices for oil producing regions which have exceeded the excise free threshold but do not produce oil at a rate which attracts an excise liability.
4. The changes to the excise calculation and collection regime will lead to administrative savings for both government and industry and have been developed after consultation with the Australian Petroleum Producers and Explorers Association (APPEA).
FINANCIAL IMPACT STATEMENT
5. The changes to excise collection will be revenue neutral as the interest foregone by the Commonwealth in moving from thrice monthly to a monthly regime will be offset by amending the Petroleum Excise (Prices) regulations, in response to the passage of the Amendment Bill, to change the formula by which 'credit terms compensation' is calculated, leading to no compensation if the proceeds of sale are received within 30 days, i.e. before excise is due to be paid. During transition there will be a once-off disruption in the excise collection flow.
Notes on Clauses
Clause 1: Short Title
6. Provides for the Act to be cited as the Petroleum Excise (Prices) Amendment Act 1997.
Clause 2: Commencement
7. This clause provides that the Act comes into operation on the first day of the next financial year to minimise administrative complexity.
Clause 3: Schedule
8. This clause 'activates' the items in the Schedule to amend or repeal the existing provisions of the Petroleum Excise (Prices) Act 1987.
SCHEDULE 1
AMENDMENT OF THE PETROLEUM EXCISE (PRICES) ACT 1987
Item 1: Subsection 4(1) (definition of reference price)
9. This item repeals the definition of reference price, as the initial value of crude oil for excise valuation, because the excise payment schedule is being changed from three times each month to once per month and a reference price for the month ahead will no longer be required.
Item 2: Subsection 4(1)
10. This item defines 'limited production area' as a production area which has been declared as such by the Minister, as a result of crude oil production from the area falling below the level at which excise would be expected to be payable.
Item 3: Subsection 4(1)
11. This item defines 'production area' in terms of the Excise Tariff Act 1921, this encompasses areas which produce crude oil from both onshore and offshore, which are not subject to either a petroleum resources rent tax or a resource rent royalty agreement.
Item 4: Subsection 4(1) (at the end of paragraphs (aa) and (a) of the definition of reviewable decision)
12. This item ensures that each of the reviewable decisions made by the Minister or the Minister' delegate is a reviewable decision individually and may be appealed to the decision maker and that application may be made to the Administrative Appeals Tribunal for review.
Item 5: Subsection 4(1) (after paragraph (aa) of the definition of reviewable decision)
13. This item includes the Minister's determination or revocation of a 'limited production area' to be included as reviewable decisions as above.
Item 6: Section 5
14. This item repeals Section 5 of the Act and so removes the obligation of the Minister to determine reference prices for all oil producing regions. The value of crude oil for excise purposes will be based on an interim VOLWARE price calculated from the producers' best information as to the price at which the oil is to be actually sold and there will be no need for a reference price.
Item 7: After subsection 6(1)
15. This item defines the conditions under which the Minister may determine, or revoke the determination of, a 'limited production area'. When the production from an oil producing region falls below 80(1/41 of the level at which excise becomes liable and other evidence suggests that higher production is unlikely, the Minister may determine an oil producing area to be a 'limited production region' and hence only minimal information will be required from the oil producer and VOLW ARE prices will not have to be determined.
16. If at some stage in the future production from the oil producing area increases so as to be liable to excise then the Minister is able to revoke the 'limited production area' status and the provision of information by the producers and determination of VOLWARE prices will recommence.
Item 8: After subsection 7(2)
17. This item enables the determination of an interim VOLWARE price in the event that insufficient information has been received from the oil producer, this is a safeguard in the event that there is a disruption to the passage of information from the producers.
Item 9: After subsection 7(3)
18. This item provides for the cessation of need for VOLWARE price determinations when there has been a determination of 'limited production area' for all sources of excisable crude oil within a producing region.
Item 10: Paragraph 8(a)
19. This item changes a reference to the Comptroller of Customs to CEO of the Australian Customs Service.
Item 11: Saving
20. This item makes saving provision for decisions made under the Act before the effect of these amendments commence.