Implementing the ‘White Paper’ Framework

The legislative amendments are to give effect to the new overlapping tenure framework proposed by the coal and coal seam gas (“CSG”) industries in the June 2012 submission to the Queensland Government entitled “Maximising Utilisation of Queensland’s Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland” (“White Paper”).

The White Paper proposes a radical overhaul of the existing overlapping tenure regime to provide a direct path to the grant of production tenure and the introduction of default legislative outcomes to facilitate co-development and encourage maximum resource extraction. The default arrangements are also intended to provide development certainty for coal and CSG proponents by removing a number of the mechanisms which have stymied development under the existing regime, including rights of veto and the need for Ministerial preference decisions. Nevertheless, parties will have an overriding ability to displace the legislative defaults by agreeing to alternative arrangements tailored to the specific circumstances of the relevant overlap.

As the reforms proposed by the White Paper are highly technical, a number of joint industry and government working groups were formed to finalise aspects of the White Paper relating to safety and health, compensation, land access and dispute resolution. The further technical principles developed by these working groups were announced during a QRC hosted industry forum on 30 August 2013 at Parliament House in Brisbane (“Technical Principles”) and will also be incorporated into the legislative amendments that are currently being drafted.

Transitional Arrangements

In the letter to the QRC, the Director-General confirmed that the Government intends to implement the following transitional arrangements:

  • the new regime will apply to all existing exploration tenements and future production tenements from the date of commencement of the amending legislation (unless there are existing coordination arrangements or a petroleum lease is being converted from a Petroleum Act 1923 (Qld) tenure to a Petroleum and Gas (Production and Safety) Act 2004 (Qld) tenure, in which case the existing regime will continue to apply);
  • existing production tenements, and future applications overlapping the area of existing production tenements, will remain subject to the current regime unless parties elect to ‘opt-in’ to the new framework by negotiated agreement; and
  • production tenement applications within a defined area of the Surat Basin (refer to Schedule 5 of the White Paper) (“Grandfathered Production Applications”) will be subject to the following arrangements (which are similar to the approach for extending notice periods under the Technical Principles) when granted between the commencement date of the legislation and 31 December 2016:
  • a 15 year notice period will apply if a mining lease application is lodged over a petroleum lease in the defined area;
  • the 15 year notice period may only be truncated with the consent of the petroleum lease holder; and
  • the mining lease holder will retain the ‘right of way’, but it would be subject to the extended notice period.

Implications and Further Issues

The transitional arrangements outlined by the Director-General appear to be intended to ensure that the proposed framework has the broadest application possible.

While the arrangements are largely consistent with the industry-agreed positions set out in the White Paper, there has been a departure in respect of the Grandfathered Production Applications. The original proposal (as put forward by the CSG industry) in the White Paper was a 4 year transition period in respect of such applications, during which time any granted tenure would be preserved under the existing regime.

The arrangements in respect of Grandfathered Production Applications will have a number of implications for parties negotiating overlapping arrangements in the Surat. For example, it is unclear based on the Director-General’s letter how competing applications will be treated and what mechanisms are in place to ensure that applications are processed in a timely fashion. This uncertainty has particular gravity where the timing of grant may have a significant impact on the rights of the overlapping parties.

It is also unclear whether the reference to ‘coordination arrangements’ by the Director-General is intended to be a reference to maintaining the integrity of broader pre-existing commitments under co-development agreements (which is the position under the White Paper), or whether the transitional arrangements will be restricted only to those agreements which are approved by the Minister under the current resources legislation.

Next Steps

An information paper will be released by DNRM before the end of 2013. It is expected that this paper will provide further details on the matters outlined above prior to the Government releasing draft legislation for consultation in early 2014.