Jurisdiction - Australia
News
Australia – Determining Facility Boundaries.

10 July, 2012

 

In brief

 

  • A person may be liable under the Clean Energy Act 2011 (Cth) ("CEA") if that person has operational control of a facility with covered emissions of more than 25,000 tonnes of CO2-e each financial year (section 20 CEA ).
  • This article looks at the meaning of the term "facility" in the CEA and the National Greenhouse and Energy Reporting Act 2007 (Cth) ("NGER Act"). 

 

Definition of facility

 

The definition of a facility is in section 9 of the NGER Act. Section 9 states that a facility is an activity, or a series of activities (including ancillary activities) that:

 

  • involves the production of greenhouse gas emissions, the production of energy or the consumption of energy; and 
  • forms a single undertaking or enterprise and meets the requirements of the regulations.

 

Before 1 July 2012, the activity or activities constituting the undertaking or enterprise had to be attributable to a single industry sector. However, from 1 July 2012, this is no longer required.

 

Drawing facility boundaries

 

In order to determine the boundaries of the "facility", it is necessary to consider whether an activity, or series of activities, will form part of a single undertaking an enterprise.

 

Under the National Greenhouse and Energy Reporting Regulations 2008 (Cth) ("NGER Regulations"), there are four circumstances in which an activity, or series of activities will form part of a single undertaking or enterprise (regulation 2.15 of the NGERs Regulations provides that for paragraph 9(4)(a) of NGERs, Subdivision 2.4.2 of the NGERs Regulations will specify the circumstances in which an activity, or a series of activities, will form part of a single undertaking or enterprise for the purposes of paragraph 9(1)(a) of NGERs).

 

These are:

  • activities that occur at a single site (regulation 2.16(1) NGER Regulations); 
  • listed activities (regulation 2.17 or regulation 2.18 NGER Regulations ); 
  • transport sector activities (regulation 2.19 NGER Regulations); and
  • electricity transmission and distribution, gas supply, water, sewerage, gas transportation or telecommunications activities (regulation 2.20 NGERs Regulations).

 

However, it is ultimately a question of fact as to where the boundaries of a facility lie.

 

Single site

 

The NGERs Regulation defines "single site" to mean “a single physical area that can include a series of geographical locations in close proximity to one another”. The term "close proximity" is not defined, however, the Supplementary Guideline states that the term is to be interpreted in the context in which the question arises and that a person should give consideration to factors including other activities in the area and the location of the sites in question (ie whether the site is a rural location etc).

 

Transport activities

 

Regulation 2.19 (1) of the NGER Regulations states that in the transport sector, an activity will form part of the same single undertaking or enterprise if:

 

  • the principal activity in a series of activities is attributable to one of the following industry sectors:
    • air and space transport (ANZIC class 490);
    • postal and courier pick-up and delivery services (ANZIC class 510);
    • rail freight transport (ANZIC class 471);
    • rail passenger transport (ANZIC class 472);
    • road freight transport (ANZIC class 461);
    • road passenger transport (ANZIC class 462);
    • scenic and sightseeing transport (ANZIC class 501);
    • waste collection services(ANZIC class 291);
    • water freight transport *ANZIC class 481); 
    • water passenger transport (ANZIC class 482);
  • the activity is attributable to a single State or Territory; and
  • the activity and any ancillary activities to it are under the overall control of the same corporation.

 

Principal activity

 

Regulation 2.19 (4) of the NGERs Regulations states that the principal activity in relation to a series of activities, means the activity in a series of activities that:

 

  • results in the production of a product or service that is produced for sale; and 
  • produces the most value for the series of activities. 

 

Attributable to State or Territory

 

Pursuant to Regulation 2.19(2) of the NGERs Regulation, an activity is attributable to a single State or Territory if fuel to be consumed in carrying out the activity is purchased in the State or Territory.

 

There is no guidance as to what is meant by the term "fuel" in the NGERs Regulations. In our view, it is reasonable to suggest that "fuel" means the energy source used to operate the items that comprise the activity, and not any fuel stored or transported by the activity.

 

Therefore, the place of acquisition of fuel for the activity is critical in determining whether Regulation 2.19 will have application.

 

 

For further information, please contact:

 

Paul Newman, Partner, Ashurst

paul.newman@ashurst.com

 

Denva Poyntz, Ashurst

denva.poyntz@ashurst.com

 

Ashurst Energy & Project Finance Practice Profile in Australia

 

Homegrown Energy & Project Finance Law Firms in Australia

 

Leave a Reply

You must be logged in to post a comment.