House of Representatives

Explanatory Memorandum

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

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.