Transferring reporting obligations under the NGER Act - update

The Senate has passed the National Greenhouse and Energy Reporting Amendment Bill 2009, which enables an entity with financial control over a facility to apply for a "reporting transfer certificate" in respect of that facility. Once a reporting transfer certificate has been issued, liability for reporting under the NGER Act is transferred from the controlling corporation of the entity with operational control to the entity with financial control.

In order for a reporting transfer certificate to be issued, the following criteria must be met:

• the financial control entity must be a constitutional corporation and a company registered under Part 2A.2 of the Corporations Act 2001;
• the financial control entity must not be a member of the same corporate group as the entity with operational control;
• the controlling corporation of the operational control entity must consent to the transfer;
• the controlling corporation of the financial control entity must consent to the transfer;
• the financial control entity must have the capacity and the access to information necessary for it to comply with the reporting obligations; and
• the relevant facility must meet one of the thresholds under the NGER Act.

Under new section 22R of the NGER Act, a corporation is deemed to have "financial control" of a facility in certain circumstances, including:

• where the operational control entity operates the facility on behalf of that corporation under a contract;
• where the operational control entity operates the facility on behalf of that corporation and one or more other persons, under a contract;
• where the corporation is able to control the trading or financial relationships of the operational control entity in relation to the facility;
• where the corporation has the economic benefits (or the majority of the economic benefits) from the facility;
• where the corporation is able to direct or sell the output of the facility.

Section 22R also deals specifically with "financial control" in relation to joint ventures and partnerships.

As we noted in July, these amendments to the NGER Act are aimed at ensuring consistency between the liability transfer mechanisms under the NGER Act and the Carbon Pollution Reduction Scheme Bill 2009 (CPRS Bill).

It is important to note, however, that these amendments are intended to and will take effect regardless of whether the CPRS Bill is passed. Accordingly, corporations with financial control will be able to apply to transfer reporting obligations under the NGER Act once the NGER Amendment Act 2009 receives Royal Assent. The reporting transfer certificates will only remain in force until 30 June 2011 - when the CPRS is intended to commence.