Governance of Oil and Gas Resources in the Australian Federation

Abstract

The Australian Constitution makes no mention of oil and gas, and for sixty years these resources played no part in the evolution of the Australian federation. However, the discovery in the mid-1960s of valuable deposits of oil and gas in Bass Strait, several kilometers off the coast of the state of Victoria, had a lasting impact on both the Australian economy and the federal system of government. The initial response from governments, federal and state, was revealing. Cooperation was chosen above conflict. By and large, that approach has prevailed. As a consequence, forty years later and despite many changes, both levels of government, federal and state, are actively engaged in the management of oil and gas and share in the revenues derived from these resources. Australian management and fiscal regimes for petroleum resources are therefore complex, if not convoluted. Federal and state governments play two parts in these regimes, as resource proprietors and regulators. For the most part, however, they have eschewed direct participation, electing instead to engage private enterprise to undertake upstream operations pursuant to statutory licensing arrangements administered by those governments. Petroleum revenues, while by no means insignificant, have never been large enough to dominate public policy. Among governments, there has been recognition that revenue sharing is an essential ingredient of the cooperative approach.