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I.  Introduction

Australia has enacted a number of changes relating to the regulation of offshore petroleum activities in recent years.  In particular, the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth)[1] (OPGGS Act) is now the primary legislation that sets out the lease, license, and permit requirements relating to petroleum exploration and recovery in offshore areas.  Regulations authorized by the OPGGS Act govern specific aspects such as environmental[2] and safety[3] matters.  Each of the six states and the Northern Territory (NT) also have legislation governing petroleum activities in coastal areas and relevant state/NT agencies play a central role in administering the regulatory regime.

In terms of the arrangements for responding to oil spills in the marine environment, the National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances[4] (the National Plan) sits alongside the regulatory regime[5] and sets out information about the roles and responsibilities of a number of different entities.[6]  The National Plan also maintains a number of contingency plans at the national and state/NT level,[7] and institutes a comprehensive training program.[8]  It is described as “a national integrated Government and industry framework enabling effective response to marine pollution incidents.”[9]

The National Plan arrangements, as well as other regulatory instruments and structures that deal with compensation and funding arrangements, are primarily focused on spills emanating from ships, although there are some specific references to offshore facilities in terms of response arrangements.  The need for more detailed guidelines and requirements relating to spills from offshore facilities is likely to be the subject of further consideration by the government.

This report utilizes information prepared by Australian government agencies in the context of inquiry processes that were established to examine the circumstances of, and response to, the major spill incident that occurred following a blowout at the Montara wellhead platform in August 2009.[10]  In particular, a Commission of Inquiry on the incident was due to make its final report by June 18, 2010.[11]  Changes to the regulatory regime for offshore petroleum activities may be made in response to the Commission’s recommendations.

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II.  Oil Spill Liability

A.  General

The general approach to oil spill liability in Australia reflects the application of the “polluter pays” principle.[12]  However, while detailed funding, compensation and cost recovery arrangements apply in the event of ship-sourced oil spills occurring in Australian waters,[13] the situation with respect to spills from offshore petroleum facilities or installations is less clear.  Unlike ships, companies that conduct offshore activities in Australia are not currently required to pay the Protection of the Sea Levy[14] or contribute to funds established under relevant International Maritime Organization conventions that have been adopted by Australia.[15]

There are therefore no statutory limits or caps on the liability of oil companies for costs associated with cleaning up and remediating the effects of an oil spill from an offshore facility.  

There are some civil and criminal liability provisions in the Commonwealth legislation, and additional offenses and penalties may apply at the state/NT level.  For example, the OPGGS contains provisions stating that a holder of a petroleum permit or production license commits an offense if they engage in conduct that breaches the requirement to “control the flow, and prevent the waste or escape, in the permit area, lease area or licence area, of petroleum or water.”[16]  However, these provisions appear to be aimed at minor events, with the penalty set at AU$11,000(approximately US$9,564.14).

In addition, a strict liability offense applies for failing to comply with an approved environment plan under the relevant regulations.[17]  It is also an offense to fail to comply with a safety case.[18]  Again, these offenses appear to be aimed at smaller scale events, with penalties set at AU$8,800 (US$7,653.25).

There may be liability to third parties for economic loss under general tort law.[19]  In the context of personal injury claims, different states have different compensation legislation that may apply, including provisions that limit the amount of damages that can be awarded.[20] 

B.  Insurance Requirements

The OPGGS Act requires the holder of a permit, lease or license related to an offshore petroleum facility to maintain adequate insurance against expenses and liabilities that may arise in connection with the activity, including “insurance against expenses of complying with directions relating to the clean‑up or other remediation of the effects of the escape of petroleum.”[21]  The Australian Maritime Safety Authority (AMSA) states that, in general:

insurance amounts of between $100 and $300 million (US) dollars are considered to be standard practice in the offshore petroleum industry (not including third party claims).  The amount of coverage for specific activities is set by the operator in consultation with the insurer and its underwriter, and is based on an expert assessment of all potential liabilities.[22]

The relevant government authority may challenge the insurance amounts if it considers them to be too low.[23] 

In addition, approvals granted under the Environmental Protection and Biodiversity Conservation Act (Cth) (EPBC Act) for offshore petroleum facilities “typically include a requirement for the OSCP [Oil Spill contingency Plan] to detail the insurance arrangements that have been made in respect of the costs associated with repairing any environmental damage.  Draft OSCPs with inadequate insurance arrangements would not be approved by the Minister or their delegate.”[24]

C.  Oil Spill Response Costs

Under the “polluter pays” principle reflected in the National Plan arrangements, operators of offshore facilities are expected to meet the full costs associated with responding to an oil spill, including any ongoing remediation work.[25]  To assist with meeting this expectation, the oil industry has established the Australian Marine Oil Spill Centre (AMOSC), which collects levies from participating companies and other subscriber companies in order to maintain a central stockpile of oil spill response equipment and to provide access expert assistance in the event of a spill.[26]  AMOSC’s activities are integrated into the National Plan.

The government may seek to recover any costs that it incurs from the polluter.  As noted above, in the case of oil spills from ships, there are legislative provisions and arrangements associated with the cost recovery and compensation that allow the government to recover its costs if the ship cannot pay in full or cannot be identified.[27]  However, “the recovery of costs in relation to an oil spill from a platform is less clear.”[28]  Specific arrangements appear to be needed on a case by case basis.  For example, in the case of the Montara incident, AMSA sought and received written confirmation from the oil company that it would be responsible for all costs in relation to the response, including by providing a fund to support ongoing response operations.[29]  

If a company failed to pay all costs associated with a spill, this would “significantly affect a company’s ability to gain further petroleum titles in Australia’s offshore areas or remove its access to its primary asset, the petroleum resource.”[30]

The issue of the National Plan not receiving any funding from the offshore oil industry will be considered in a review of the National Plan to be conducted this year.[31] In its recent report on the response to the Montara incident, AMSA also stated that:

While the National Plan stakeholders are aware of the comprehensive insurance and compensation arrangements in place with regard to oil spills from ships, there is a general lack of awareness with regard to cost recovery following incidents involving the offshore petroleum exploration and production industry.  To enhance clarity for all stakeholders a review should be undertaken regarding industry arrangements and outcomes widely circulated.[32]

D.  Actions under Environmental Legislation

As discussed below, assessments and approvals are required under the Environment Protection and Biodiversity Conservation Act 1999 (Cth)[33] (EPBC Act) in most circumstances involving offshore petroleum activities, with conditions likely to be attached to those approvals.  The EPBC Act imposes civil penalties of up to AU$1.1 million (US$871,238.96) for corporations that violate any conditions.[34]  It is also a criminal offense for a person to recklessly violate a condition, where this results in a significant impact on a protected environmental matter (which includes the Commonwealth marine environment).[35]  A corporation is subject to a fine of AU$66,000 (US$57,498.39) under this provision.

A Notice of Exemption has been issued under the EPBC Act by the relevant Minister, with the effect that any response actions taken in accordance with the National Plan are exempt from the application of the EPBC Act.  Any response action contrary to the National Plan would therefore be subject to the EPBC Act.[36]

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III.  Offshore Petroleum Regulatory Regime

A.  General

Offshore petroleum activities are subject to regulation at both the Commonwealth and state/NT levels.  The OPGGS Act reflects an intergovernmental agreement that provides for the states/NT to have jurisdiction over the first three miles of the territorial sea (referred to in the legislation as “coastal waters”), and the Commonwealth government to have jurisdiction over the waters beyond that point (referred to as “offshore areas”).[37]  The OPGGS Act establishes that the administration of the legislation is divided between a “Joint Authority” (constituted by the responsible Minister in each state/NT and the responsible Commonwealth Minister) and the “Designated Authority” (which is the responsible state/NT Minister).[38]  Legislation that essentially mirrors the OPGGS Act has been enacted in each state/NT.

The day to day administration of the legislation is conducted on the Commonwealth’s behalf by a particular state/NT agency with delegated responsibility for regulating offshore petroleum activities.[39]  In addition to these resource agencies, and others that may have responsibility for environmental and safety matters at the state/NT level, the key Commonwealth government agencies involved in the administration of the OPGGS Act and other relevant statutes are:

  • The Department of Resources, Energy and Tourism is the central agency responsible for administering all offshore petroleum legislation that falls within the portfolio of Commonwealth Minister of Resources and Energy, including the OPGGS Act.[40]  The Department provides advice to the government on this legislation and, in cooperation with the states and territories, regulates offshore petroleum activities.[41]

  • The Australian Taxation Office administers legislation relating to the Petroleum Resource Rent Tax.[42]

  • The National Offshore Petroleum Safety Authority (NOPSA) is responsible for the administration of occupational health and safety provisions in the IPGGS Act and the associated safety regulations.[43]

  • The Department for the Environment, Water, Heritage and the Arts (DEWHA) administers the EPBC Act, which sets out the Environmental Impact Assessment regime that is applicable to offshore petroleum activities.[44] 

  • The Australian Maritime Safety Authority (AMSA) has statutory authority for marine pollution matters under the Australian Maritime Safety Authority Act 1990[45] and is the managing agency of the National Plan.[46]

Broadly, the legislation reflects a performance-based system, with oil companies required to prepare various planning documents detailing particular safeguards, which are then submitted for approval by the relevant government agencies.  The agencies then conduct inspections and audits to verify that the commitments made in these plans and any additional conditions are being complied with.

The approvals needed in order for an oil company to be granted the necessary licenses and permits to conduct offshore activities include:

  • Well operations management plan
    The Petroleum (Submerged Lands) (Management of Well Operations) Regulations 2004 (Cth) require that a well operation management plan (WOMP) be submitted to the Designated Authority for approval.[47]  The WOMP must explain the design of the well and possible production activities, and show that well activities “will be carried out in accordance with good oil-field practice.”[48]
  • Pipeline management plan
    The Petroleum (Submerged Lands) (Pipelines) Regulations 2001 (Cth) requires that a pipeline management plan be approved by the Designated Authority in order for a pipeline to be constructed or operated.[49]  The regulations set out what must be included in the pipeline management plan, including design descriptions and safe operating limits.[50]
  • Safety case  
    The Offshore Petroleum and Greenhouse Gas Storage (Safety) Regulations 2009 (Cth) require that a safety case be prepared and accepted by NOPSA before an operator can undertake activities at a facility.[51]  This must include a detailed description of a comprehensive safety management system.[52]
  • Environment plan 
    The Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009 (Cth) requires that an environment plan be approved by the Designated Authority before an operator carries out an activity in a permit or license area.[53]  The environment plan establishes the legally binding environmental management conditions that an operator of an offshore petroleum activity must meet.[54]  The plan must include the matters set out in the regulations, including an Oil Spill Contingency Plan.[55] 
  • Environmental Impact Assessment
    The EPBC Act provides that a person proposing to take an action, or a government body aware of a proposal, may refer the proposal to DEWHA for environmental impact assessment.  Approval of a proposal is required if it is a “controlled action.”[56]  This essentially means that any offshore petroleum activity that has, or will have, the potential to have a significant impact on the Commonwealth marine environment must be referred to DEWHA for assessment.  DEWHA typically requires approval of an Oil Spill Contingency Plan.[57]  Specific conditions are likely to be attached to any approval.[58]

B.  Distinctions Between Deep and Shallow Water

The OPGGS Act and associated regulations do not distinguish between offshore petroleum activities in deep and shallow water.  There is, however, some discussion about the possible need to move towards greater regulation in relation to deeper waters.[59]  It is worth noting that a number of areas open for exploration in the 2010 Offshore Petroleum Exploration Release are areas of large depths.[60]

The current regulatory regime may allow for any additional or particular risks associated with offshore petroleum activities in deep water to be taken into account as part of the planning requirements and approvals process.

C.  Division of Responsibilities in Responding to Oil Spills

The division of responsibility for combating oil spills is defined in an intergovernmental agreement (IGA) within the auspices of the National Plan arrangements.[61] 

The IGA provides for two lead agencies in the event of an oil spill – one with responsibility for overseeing the response action (“Statutory Agency”) and one with operational responsibility to undertake preventive and cleanup action (“Combat Agency”).  For spills from offshore petroleum operations, the Statutory Agency is the relevant state/NT agency (i.e. the Designated Authority),[62] and the Combat Agency is the relevant oil company, with assistance from the Statutory Agency as required.[63]

A special Protocol provides for the Combat Agency role in relation to spill events from offshore petroleum operations to be transferred in two circumstances:

  • The Combat Agency may request another agency act on its behalf; or
  • The incident has exceeded or is likely to exceed the capacity of the Combat Agency to respond effectively or the response is not being conducted effectively, the Statutory Agency may assume control of the response.[64] 

For example, in the Montara incident, the oil company recognized that the response was beyond its capacity and quickly passed Combat Agency responsibility to AMSA.[65]

In the event of a spill, the Statutory Agency establishes a local response organization with representatives from relevant agencies and stakeholders.  A Marine Pollution Controller with overall responsibility for ensuring that a response is managed and coordinated appropriately is appointed.[66]  In addition to other relevant state/NT agencies and AMOSC, specialist advice and assistance may be made available by agencies such as AMSA, Emergency Management Australia, and DEWHA.  A National Response Team, consisting of sixty-three people (nine people from the relevant agencies of each state/NT) covering all key oil spill response roles, can also assist.  International assistance may also be sought. [67]

The IGA provides that the Statutory Agency is responsible for instituting any legal proceedings and for the recovery of clean up costs on behalf of all participating agencies.[68]

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Prepared by Kelly Buchanan
Foreign Law Specialist
June 2010


[4] Australian Maritime Safety Authority (AMSA), The National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances (Updated 2007) (National Plan), available at http://www.amsa.gov.au/Marine_Environment_Protection/National_plan/Nationalplan_2007_Overview.pdf.  See also, AMSA, The National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances (website), http://www.amsa.gov.au/Marine_Environment_Protection/National_plan/ (last visited June 17, 2010).  The National Plan was first established in 1973.  Summary information about the National Plan is set out in a factsheet that is available at   http://www.amsa.gov.au/Publications/ Fact_sheets/National_Plan_Fact_Sheet.pdf.  An additional factsheet explains how Australia responds to oil and chemical spills in the marine environment and is available at http://www.amsa.gov.au/Publications/ Fact_sheets/How_Australia_Responds_to_Oil_and_Chemical_spills.pdf.

[5] See Submission by the Australian Maritime Safety Authority – Commission of Inquiry into the Uncontrolled Release of Oil and Gas from the Montara Wellhead Platform in the Timor Sea (AMSA Montara Submission) 2, available at http://www.montarainquiry.gov.au/downloads/SUBM.3001. 0001.0001.pdf, stating that “the National Plan framework and operation is not prescribed in legislation.”

[6] National Plan, supra note 4, at 4.  See also Inter-Governmental Agreement on the National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances (May 2002) (Inter-Governmental Agreement), available at http://www.amsa.gov.au/Marine_Environment_Protection/ National_plan/Inter_Governmental_Agreement.asp.

[7] See AMSA, The National Plan Contingency Plans and Management, http://www.amsa. gov.au/Marine_Environment_Protection/National_plan/Contingency_Plans_and_Management/index.asp (last visited June 17, 2010).

[8] See AMSA, National Plan Training Program July 2009 – June 2010, http://www.amsa. gov.au/Marine_Environment_Protection/National_plan/Training_Program/index06.asp (last visited June 17, 2010).

[9] National Plan, supra note 4.

[10] See AMSA, Major Oil Spill – Montara Well Head Platform, http://www.amsa.gov.au/Marine_Environment_Protection/Major_Oil_Spills_in_Australia/Montara_Wellhead/index.asp (last visited June 17, 2010).

[11] Montara Commission of Inquiry, http://www.montarainquiry.gov.au/ (last visited June 17, 2010).

[12] See AMSA, Protecting Our Seas (Revised 2010), available at http://www.amsa.gov.au/ Publications/Marine_Environment_Protection/POS.pdf.

[13] The relevant statutes include the Protection of the Sea (Prevention of Pollution from Ships) Act 1983 (Cth), Protection of the Sea (Civil Liability) Act 1981 (Cth), Protection of the Sea (Oil Pollution Compensation Funds) Act 1993 (Cth), Protection of the Sea (Civil Liability for Bunker Oil Pollution Damage) Act 2008 (Cth), Protection of the Sea (Shipping Levy) Act 1981 (Cth).  These statutes are available at http://www.comlaw.gov.au/ComLaw/legislation/actcompilation1.nsf/browseview?openform
&VIEW=current&ORDER=bytitle&CATEGORY=actcompilation-Pr
.  See also Australian Maritime Safety Authority, Oil Spills from Ships – Who Pays? (January 2010), available at http://www.amsa.gov.au/Publications/Fact_ sheets/Oil_Spills_From_Ships_Fact_Sheet.pdf.

[14] This levy is payable under the Protection of the Sea (Shipping Levy) Act 1981 (Cth) s 5 and funds the operation of the National Plan.

[15] In particular, Australia has given statutory effect to the International Convention for the Establishment of an International Fund for Compensation for Oil Pollution Damage and the International Convention on Civil Liability for Oil Pollution Damage.  See Protecting Our Seas, supra  note 12, at 2.

[16] Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) s 569.

[17] Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009 (Cth) reg 7.

[18] Offshore Petroleum and Greenhouse Gas Storage (Safety) Regulations 2009 (Cth) reg 2.45.

[19] See Caltex Oil (Australia) v. Dredge “Willemstad” [1976] HCA 65, available at http://www.austlii.edu.au/au/cases/cth/HCA/1976/65.html.  In this case damages for pure economic loss were found to be available if a duty of care exists.  The case related to an oil pipeline being damaged by a dredge as a result of negligent navigating on the part of the Willemstad, resulting in closure of the pipeline and the need to use more expensive means for transporting the petroleum products during the repair work.

[20] There has been considerable emphasis on tort reform in Australia in the last decade, particularly in relation to personal injury, including a review of the law of negligence in 2002.  See The Treasury, Review of the Law of Negligence, http://revofneg.treasury.gov.au/content/home.asp (last visited June 18, 2010).  An overview of various reforms, including the caps on damages in the different states and territories, is provided in a report published by a major law firm: Minter Ellison, Tort Reform Throughout Australia (7th ed, Oct. 2007), available at http://www.minterellison.com/public/ resources/file/ebd8820c7e809c5/RG-TortLawReform_0710.pdf.

[21] Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) s 571.

[22] AMSA, Response to the Montara Wellhead Platform Incident – Report of the Incident Analysis Team (March 2010) (AMSA Montara Report) 15, available at http://www.amsa.gov.au/Marine_Environ ment_Protection/National_plan/Incident_and_Exercise_Reports/documents/Montara_IAT_Report.pdf.

[23] Id.

[24] Id.

[25] See National Plan, supra note 4, at 8.

[26] See Australian Marine Oil Spill Centre, About AMOSC, http://www.aip.com.au/amosc/about/ index.htm (last visited June 14, 2010).

[27] Oil Spills from Ships – Who Pays?, supra note 13.

[28] AMSA Montara Submission, supra note 5, at 22.  

[29] Id.

[30] AMSA Montara Report, supra note 22, at 15.

[31] AMSA Montara Submission, supra note 5, at 22.  

[32]  AMSA Montara Report, supra note 22, at x.

[34] Environment Protection and Biodiversity Conservation Act 1999 (Cth) s 142.

[35] Id. s 142A.

[37] Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) s 5.

[38] Id. ss 4, 56, 70.

[39] See Department of Resources, Energy and Tourism, Offshore Petroleum Exploration Acreage Release, Joint Authority/Designated Authority (2010), available at http://www.ret.gov.au/Documents/ par/fact/documents/Joint%20Authority.pdf.

[40] Department of Resources, Energy and Tourism, Submission to the Montara Commission of Inquiry 2, available at http://www.montarainquiry.gov.au/downloads/SUBM.3005.0001.0001.pdf.

[41] Department of Resources, Energy and Tourism, Upstream Petroleum, http://www.ret.gov.au/RESOURCES/UPSTREAM_PETROLEUM/Pages/UpstreamPetroleum.aspx (last visited June 17, 2010).

[42] Petroleum Resource Rent Tax Assessment Act 1987 (Cth) s 15, available at http://www.comlaw.gov.au/ComLaw/Legislation/ActCompilation1.nsf/current/bytitle/E80F2BC72F42B958CA257653007D0167?
OpenDocument&mostrecent=1
.  See also Australian Taxation Office, Petroleum Resource Rent Tax, http://www.ato.gov.au/businesses/pathway.asp?pc=001/003/117 (last visited June 17, 2010).

[43] Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) s 4 & pt 6.9.  See also http://www.nopsa.gov.au/.

[44] Environmental Protection and Biodiversity Conservation Act 1999 (Cth).  See also Department of the Environment, Water, Heritage and the Arts, Submission to the Commission of Inquiry Established to Report on the Uncontrolled Release of Hydrocarbons from the Montara Well Head Platform and Subsequent Events (DEWHA Montara Submission), available at http://www.montarainquiry.gov.au/ downloads/DEWHA/SUBM.3002.0001.0002.pdf.

[46] See Inter-Governmental Agreement, supra note 6, Recital C.

[47] Petroleum (Submerged Lands) (Management of Well Operations) Regulations 2004 (Cth) reg 5, available at http://www.comlaw.gov.au/ComLaw/Legislation/LegislativeInstrument1.nsf/0/C17 81DB1F08281F8CA256F70008111D0?OpenDocument.

[48] Id. reg 6(2)(b).

[50] Id. div 3.2.

[51] Offshore Petroleum and Greenhouse Gas Storage (Safety) Regulations 2009 (Cth) reg 2.44

[52] Id. reg 2.5(3).

[53] Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009 (Cth) reg 6.

[54] Id. reg 7.

[55] Id. div 2.3.

[56] Environment Protection and Biodiversity Conservation Act 1999 (Cth) s 66.  For a description of the environmental assessment and approval framework, see DEWHA Montara Submission, supra note 44, at 4-7.

[57] AMSA Montara Report, supra note 22, at 18.

[58] Environment Protection and Biodiversity Conservation Act 1999 (Cth) s 134.

[59] See Paul Cleary, Double Disasters Rouse the Regulators and May Still the Drills in Risky Deep-Sea Oil Probes, The Australian, May 22, 2010, available at http://www.theaustralian.com.au/news/ opinion/double-disasters-rouse-the-regulators-and-may-still-the-drills-in-risky-deep-sea-oil-probes/story-e6frg6zo-1225869545938.  

[60] See Department of Resources, Energy and Tourism, Offshore Petroleum Exploration Acreage Release 2010 – Release Areas and Geology, http://www.ret.gov.au/Documents/par/geology/index.html (last visited June 17, 2010).

[61] Inter-Governmental Agreement, supra note 6.  See also National Plan, supra note 4, at 4.

[62] Id. sch 1, cl. 5.

[63] Id. sch 1, cl. 6(vii).  Note that other National Plan documents state that the Combat Agency is “the relevant company with assistance from the Statutory Agency and other National Plan stakeholders as required,” National Oil Spill Contingency Plan, supra note 36, at 14, and “the relevant oil company, with assistance, as required, from the National Plan State Committee or AMSA, depending on the area of jurisdiction.”  The National Plan, supra note 4, at 5.

[64] The Protocol is attached to the National Marine Oil Spill Contingency Plan, supra note 36, at 59.

[65] AMSA Montara Submission, supra note 5, at 8.

[66] Inter-Governmental Agreement, supra note 6, sch 1, cl. 13-14.

[67] National Marine Oil Spill Contingency Plan, supra note 36, at 22-24.

[68] Inter-Governmental Agreement, supra note 6, sch 1, cl. 10.

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Last Updated: 02/28/2014