Wide ranging legislative reforms have recently been made to overhaul many aspects of the current mining and petroleum legislation in New South Wales (NSW).

The Resources Legislation Package is made up of five Acts which were passed by NSW Parliament on 2 November 2015 and will see extensive changes to:

  • how and when coal mining and petroleum tenements will be allocated, granted, renewed, transferred and cancelled
  • the negotiation, mediation and arbitration process for access arrangements to enable prospecting operations to be carried out
  • the need for an ‘activity approval’ to carry out certain prospecting operations, and 
  • compliance and enforcement requirements for mining and petroleum tenements. 

The Resources Legislation Package has introduced the following:

  • recommendations made by the Independent Commission Against Corruption in relation to the process for granting new exploration licences in NSW for coal
  • the Chief Scientist & Engineer’s independent review of coal seam gas activities in NSW, and
  • Bret Walker SC’s review of the land access arbitration process. 

These amendments to the existing regulatory framework will have implications for all current and future mining, CSG and petroleum projects in NSW.

The Acts are yet to commence and will commence upon proclamation. We understand that proclamation of the Act relating to grant of coal and petroleum prospecting titles is likely to commence this year, whilst the remainder of the Acts may commence in early 2016.

Two draft Regulations, to supplement the new Acts, relating to ‘Harmonisation and Arbitration’ and ‘Operational Allocation Licences’ have also been released for limited consultation. Broadly these draft Regulations include detail relating to the:

  • categories of mining operations that will be considered to be an ‘operational allocation purpose’ for the purposes of direct allocation of exploration licences
  • a maximum land size restriction for operational allocation licences of 33% (of the ‘existing mining lease area’)
  • some additional requirements for renewal applications 
  • revised confidentiality provisions providing that exploration annual reports are to remain confidential for the life of a tenement and 5 years after a report is lodged (whichever is the later), and 
  • general procedures for the appointment and ongoing operation of the Arbitration Panel.

Furthermore, it is proposed that finalised versions of the following draft documents will also be released following commencement of the Acts, providing further certainty in relation to:

  • draft NSW Strategic Release Framework for Coal and Petroleum Exploration (Guideline), 
  • draft Resource Assessment for Potential Coal and Petroleum Exploration Release Areas Policy. 
  • draft Guidelines for Applying for a Coal Exploration Licence for Operational Purposes.

Mining and Petroleum Legislation Amendment (Grant of Coal and Petroleum Prospecting Titles) Act 2015 (NSW) (Titles Act)

The Titles Act will see a new system for the allocation, granting, renewal and transfer of mining and petroleum titles in NSW.  The major changes are:

  • the introduction of ‘controlled release areas’ which will apply to coal
  • the replacement of the current scheme for the direct allocation of exploration titles , with ‘operational allocation licences’ which will be permitted only in limited circumstances as prescribed by the Regulations (discussed further below);
  • the introduction of a competitive selection process for the granting of titles, and
  • the creation of a new advisory body to oversee the release of areas for allocation.

The most significant reform introduced through the Titles Act is the process for allocating new coal and Coal Seam Gas (CSG) titles.  The entire State of NSW has been declared a ‘controlled release area’ in respect of coal.  This means that the direct allocation of an exploration licence for coal will be limited to circumstances where the application is made by an existing holder of a exploration licence, assessment lease or mining lease for an ‘operational allocation purpose’.  The term ‘operational allocation purpose’ is to be defined in a future amendment to the Mining Regulation 2010 (NSW) (which is currently the subject of limited consultation). The draft Operational Allocation Licence Regulation prescribes the following matters as an “operational allocation purpose” in relation only to mining leases for coal held by the applicant:

  1. the purpose of extending the life of a mine;
  2. the purpose of developing a better mine design;
  3. the purpose of recovering coal resources that would otherwise be likely to be sterilised;
  4. the purpose of obtaining an exploration licence for coal:
    1. in the subsoil above or below the stratum to which an existing mining lease for coal held by the applicant relates, or
    2. in the surface above the land to which an existing mining lease for coal held by the applicant relates.

Further, under the draft Regulation if an application for an exploration licence is made for an ‘operational allocation purpose’ specified in (a)-(c) above, then the area of land to which the application relates must not exceed 33% of the surface area of the land to which the existing mining lease held by the applicant relates.

If the application of for an ‘operational allocation purpose’ specified in (d) above, then the boundary of the surface area of the land to which the an ‘adjacent area application’ relates must not exceed the boundary of the surface area of the land to which the existing mining lease for coal held by the applicant relates.

All other exploration licences must be granted following a competitive selection process.  Similarly, CSG prospecting titles must not be granted unless there has been a competitive selection process.  The competitive selection process is determined by the decision maker and ‘the process for competitive selection can be different for different areas of land and for different controlled release minerals’.  The only clear step in the process is that the decision-maker must publish a notice in the Gazette inviting applications.

The Guideline identifies that all prospecting titles will have a reserve price, which may take into account costs associated with preparing an area for competitive release, the potential size and quality of the resource, the cost of prospective mining operations, and market conditions. The Guideline identifies that the strategic release for coal and petroleum will be overseen by the Advisory Body for Strategic Release, which will consider geological, social, environmental and economic factors prior to an area being released for competitive tender.

In respect of a ‘controlled release area’ (i.e. coal), an application for a mining lease can only be made by the holder an existing title over that land and that mineral. This represents a significant change for the mining industry as it will no longer be possible to obtain a mining lease with the Minister’s consent (if an underlying title is not held). The change has been made for consistency with section 380AA of the Mining Act that requires the applicant for a development consent to be the holder of an authority that is in force in respect of coal over the land where mining for coal is proposed to be carried out, prior to an application being made.

The savings and transitional provisions provide that an application for Minister’s consent in respect of an exploration licence for coal that was made before the commencement of the new Titles Act will continue to be dealt with as though the new Act had not commenced.

Mining and Petroleum Legislation Amendment (Harmonisation) Act 2015 (NSW) (Harmonisation Act)

The Harmonisation Act primarily changes the regulatory framework governing the administration, compliance and enforcement of mining and petroleum titles.
Major changes as a result of the Harmonisation Act include:

  • an increase in the maximum term of the exploration licence to 6 years (they are currently granted for a maximum of 5 years)
  • a more defined criteria to be applied by the decision maker when deciding whether to grant, renew, transfer, suspend or cancel a title such as:
    • minimum standards relating to financial and technical capacity (‘minimum standards’ has not been defined so there is a lot of uncertainty in this regard.  It is likely that current frustrations with ever changing compliance history and financial capability requirements will be ongoing)
    • environmental performance, and 
    • work programs.
  • a requirement for prospecting title holders to obtain an ‘activity approval’ for any prospecting operations that are not exempt development under planning legislation from 1 July 2015
  • conditions on a title, including a mining lease, will in effect be able to be varied for any reason and at any time, however written notice of the variation will need to be served on the holder
  • consolidated reporting requirements on an annual basis, including confirmation that conditions of the relevant title has been complied with
  • additional requirements to be satisfied before an exploration licence for coal can be renewed over more than 50% of the licence area
  • broader investigative and enforcement powers given to the Minister and inspectors
  • introduction of a corporate penalty for provision of false or misleading information (maximum penalty of $110,00)
  • increases to penalties for contravention of conditions of an authorisation to a maximum of $1.1 million for a corporation,  and 
  • the ability to enter into enforceable undertakings where there has been an alleged breach of the Mining Act 1992 (NSW) or Petroleum Onshore Act 1991 (NSW), similar to other NSW legislation including the Protection of the Environment Operations Act 1997 (NSW).

Mining and Petroleum Legislation Amendment (Land Access Arbitration) Act 2015 (NSW) (Land Access Act)

The Land Access Act gives effect to the recommendations made by Bret Walker SC in his review of the existing access arrangement negotiation and arbitration process. The reforms will result in:

  • a more streamlined processes for carrying out seismic surveys
  • a requirement for parties to undergo mediation prior to arbitration
  • the ability for both parties to be legally represented during mediation and arbitration
  •  a requirement for the title holder to pay the landholder’s reasonable legal costs of the negotiation (leading up to mediation/arbitration) and the mediation and arbitration up to a specified fee cap, which is yet to be published. We understand that the Department has commissioned an independent review of the reasonable costs caps and has indicated that the costs cap provisions will not be ‘turned on’ until early 2016
  • an express obligation on both title holders and landholders to negotiate an access arrangement in good faith. If a landholder acts unreasonably and fails to negotiate in good faith there is a possibility that their costs will not be covered by the title holder during mediation, arbitration and Land and Environment Court proceedings
  • a structured and rigorous selection process for the appointment of members to the formal Arbitration Panel by the Minister 
  • an access code being prescribed for the purposes of the Mining Act and Petroleum Act which may include mandatory provisions and non-binding guidelines about how a title holder can carry out activities on the land. We understand that the current intention of the Department is that an access code with mandatory provisions will not apply to coal (at least in the short term), however an access code may be prescribed for petroleum,, and
  • material changes to the definition of ‘significant improvement’ under the Mining Act.

Protection of the Environment Operations Amendment (Enforcement of Gas and Other Petroleum Legislation) Act 2015 (NSW) (POEO Enforcement Act)

The POEO Enforcement Act introduces changes to Petroleum Act 1991 (NSW), Water Management Act 2000 (NSW), Water Act 1912 (NSW) and the Environment Planning and Assessment Act 1979 (NSW) making the NSW Environment Protection Authority (EPA) the lead regulator for certain breaches of the relevant Acts relating to petroleum activities.

The POEO Enforcement Act gives the EPA responsibility for investigating and instituting proceedings for offences against relevant Acts in relation to the carrying out of petroleum activities that are authorised, or required to be authorised, by certain licences, leases, developmental consents, approvals and other authorities.

Work Health and Safety (Mines and Petroleum) Legislation Amendment (Harmonisation) Act 2015 (NSW) (WHS Harmonisation Act)

The WHS Harmonisation Act will align the WHS laws for mining and petroleum operations to provide a consistent approach across both industries.

Comment

The new Acts contain some significant changes for the mining industry, particularly relating to the allocation of prospecting titles, access negotiation and arbitration procedures and the variation of mining titles. Many aspects of the Acts are intended to provide broad overarching powers to the Minister, with much of the detail to be contained in Ministerial orders, regulations, guidelines or codes.  Industry should monitor the release of these further documents closely over the coming months.