In Queensland, an interest in a mining tenement cannot be transferred without the transfer of an equivalent interest in the relevant environmental authority. However, there is a timing and approval difference in the legislative regimes relating to the transfer of mining tenements and environmental approvals which is significant in M&A transactions.
The Mineral Resources Act 1989 (Qld) allows parties to a proposed transfer to obtain a binding indication, commonly referred to as an ‘indicative approval’, from the Minister as to whether the transfer of the tenement will be approved and the conditions upon which the approval will be granted. The indicative approval will only be valid for a certain period of time, for example three months or six months. Unfortunately, there is no parallel ‘indicative approval’ framework in the Environmental Protection Act 1994 (Qld) for the transfer of an environmental authority associated with the tenement which is to be transferred. This mismatch in procedures is significant for the parties to a sale agreement because a tenement cannot be transferred without the environmental authority.
Sale agreements will often contain a condition precedent which provides that an indicative approval for the transfer of the tenement must be obtained prior to completion. Given the absence of an indicative approval framework for environmental authorities, the application to transfer the environmental authority associated with the tenement is not generally lodged with the Department of Environment and Resource Management (DERM) until on or after the day of completion of the sale. DERM then transfers the application to transfer the environmental authority to the Environmental Protection Agency (EPA). This process clearly creates a risk for the buyer that the application to transfer the environmental authority may be rejected even though an indicative approval to transfer the tenement has been granted, the purchase price has been paid and the sale is complete.
The parties to the sale agreement may negotiate a commercial solution to deal with the risk posed by these mismatched approval processes. Possible solutions may include:
- a multi-stage completion where an initial completion occurs after the indicative approval is obtained and final completion occurs when approval to transfer the environmental authority is granted
- the buyer has the right to rescind the sale agreement if the environmental authority is not transferred, or
- the buyer simply accepts the risk.
Despite these commercial solutions it may be the case that amendments to the Environmental Protection Act 1994 (Qld) which introduce an indicative approval process for environmental authorities would create a more satisfactory outcome for all parties involved in the sale and purchase of mining tenements in Queensland.