Trailing liability for asset decommissioning in Australia - Oil, Gas & Electricity
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Australia's total asset decommissioning liability is estimated to exceed $60 billion between 2020 and 2050. This issue is particularly acute with many fossil fuel assets facing early retirement as a result of the clean energy transition. Consequently, decommissioning stranded or end-of-life assets is becoming an increasingly significant consideration for businesses across a wide range of industries.
Australia's piecemeal legislative framework for dealing with decommissioning is, in many respects, confusing and inconsistent. Presently, the framework consists of an industry-specific array of federal and state-based legislation and regulations. For example, the Offshore Electricity Infrastructure Act 2021 (Cth) regulates decommissioning of offshore wind farms and associated electricity transmission infrastructure, while the Water Act 1989 (Vic) regulates decommissioning of public and private dams.
Until recently, this legislative framework rarely extended decommissioning liability beyond the asset's current titleholder. For example, the Petroleum (Onshore) Act 1991 (NSW) holds the current titleholder of onshore petroleum assets in NSW responsible for decommissioning but does not provide any safeguards against the titleholder's insolvency or inability to decommission the asset.
The dangers of such a regulatory framework are obvious and were highlighted by the....