WHO SHOULD READ THIS
- All resource companies and contractors operating or developing project in Australia
THINGS YOU NEED TO KNOW
- This article highlights the legislative and policy developments of the past 12 months which will significantly affect the Australian resources industry going forward, with a specific focus on the resource rich states in Australia
WHAT YOU NEED TO DO
- Start looking now at the impacts that these recent or upcoming changes in legislation could have on current or proposed projects
A range of policy reforms were introduced or proposed over the past 12 months which will significantly impact on Australia’s resources sector.
In this article we highlight the legislative and policy developments of the past 12 months which will significantly affect the Australian resources industry going forward, with a specific focus on the resource rich states in Australia.
Foreign Register of Agricultural Land – Impact on the Resources Sector
The Register of Foreign Ownership of Agricultural Land Act 2015 (Cth) took effect from 1 December 2015. Under this legislation, interests acquired by foreign persons in agricultural land after 1 February 2016 must be registered with the Australian Tax Office within 30 days of the acquisition. Any interest already held was required to be registered by 29 February 2016.
‘Foreign person’ is broadly defined to include Australian companies in which foreign investors hold a substantial interest (i.e. 20% or more for a single foreign investor together with its associates, or 40% or more in aggregate for multiple foreign investors).
The definition of ‘agricultural land’ is also very broad and covers ‘land in Australia that is used, or that could reasonably be used, for a primary production business.’ There are a number of exemptions to this definition, including exemptions relating to ‘mining operations’, however, these are limited to operations under mining and production tenements, which specifically excludes exploration and prospecting tenements. Furthermore, there is no exemption available if the land is in fact being used wholly or predominantly for a business of primary production.
Foreign Investment Review Board – Water Entitlement Register
In February 2016, the Commonwealth Government released a consultation paper to register foreign owned water access entitlements (WAE). Under the consultation paper, a WAE is defined as a perpetual or ongoing entitlement, by or under a law of a state or territory, to exclusive access to a share of the water resources of a water resource plan area. Transitional arrangements, including an initial 6 month period to register existing water entitlements, is included in the policy paper.
If this policy becomes law it will be far reaching and apply across all industries. Proponents may want to undertake an assessment of existing water entitlements in order to facilitate their future registration. The Commonwealth Government has indicated that the obligations around registration of WAE will be prescribed in further legislation to be enacted before 1 December 2016.
Tarkine decision on assessment of cumulative impacts under the EPBC Act
In Tarkine National Coalition v Minister for the Environment  FCAFC 89, the Full Federal Court confirmed that the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) has no mandatory requirement for the Minister to consider cumulative impacts from other projects outside the proponent's control. Thus, whilst the Minister will be required to take into account the consequences that a proposal will have, or is likely to have on the matters protected under the EPBC Act, the Minister will not be required to consider the circumstances which came about by other actions, including the cumulative impacts of those actions. The Court also held that the EPBC Act establishes a closed system of the matters that the Minister is to consider.
This decision provides certainty to the scope of cumulative impact assessment, and shows that such cumulative impacts must have some relationship with the project being assessed.
Indigenous Engagement for Environmental Assessments
The Commonwealth Department of Environment has published a guideline that outlines best practice strategies to engage with Indigenous groups called ‘Engage Early: Guidance for proponents on best practice Indigenous engagement for environmental assessments under the EPBC Act’ (Engage Early).
Engage Early applies to all projects requiring approval under the EPBC Act, and sets out strategies in relation to identifying affected Indigenous communities, committing to early engagement at the pre-referral stage, building trust through early and ongoing communication, setting appropriate timeframes for consultation, and demonstrating cultural awareness. The engagement required under the guideline is in addition to the usual consultation requirements under the EPBC Act and Native Title Act 1993 (Cth).
Engage Early also intends to link environmental offsets that are carried out under the EPBC Act with opportunities for Indigenous people to fulfil the offset requirements using a collaborative approach.
As a guideline, Engage Early has limited legal force, however, it does set out the expectations as they relate to Indigenous engagement and is therefore an important guide for proponents of new projects.
Proposed Reform to Queensland's Resources Tenures
As part of the ongoing Modernising Queensland’s Resources Acts program, the Queensland Government has released its policy position paper Innovative resources tenures framework about proposed resource tenure reforms (Policy).
In addition to proposing a set of common resource authorities across commodity types for each stage of the resource lifecycle, the policy includes significant changes to the current framework for the grant and administration of exploration permits. The common resource authorities identified will include information authorities, exploration authorities, resource development authorities (RDAs), production authorities and infrastructure authorities.
One of the key changes proposed under the new policy is to remove the right for permit holders to renew their exploration authorities on expiry of the term. To counterbalance this, the maximum terms that exploration authorities can be granted for will be increased. The policy also proposes that the current statutory maximum areas specified for exploration permits will be removed.
Another significant change is the proposed move away from prescriptive work program conditions and towards a work program based on detailed exploration objectives and a geological model to be used for the resource exploration authority. It is proposed that exploration authority holders would undertake annual self-assessment (including reporting) of compliance with these requirements, rather than the Department of Natural Resources and Mines (DNRM) having to assess this annually (or at tenement milestones).
Under the new framework, it is also proposed that there will be default relinquishment of 50% of the authority area at the mid-term point. If the authority holder is categorised as ‘under-performing’, the proponent may be required to relinquish more than 50%. Conversely, a proponent achieving strong performance against the stated objectives may be able to ‘negotiate’ a proportional or deferred relinquishment, avoiding the default 50%.
New maximum terms are also proposed for RDAs. Under the new framework it is proposed that retention status will be available to proponents where a resource has been identified but is not commercially viable.
DNRM is proposing that new legislation would be introduced into Parliament in the second half of 2016, following extensive consultation, including in relation to transitional arrangements.
Mineral exploration concession initiative
On 17 February 2016 the Minister for State Development and Minister for Natural Resources and Mines Dr Anthony Lynham announced that mineral explorers in Queensland are to gain a two year expenditure concession, to provide financial relief to explorers through the global mining downturn and to ensure that meaningful exploration does not cease in Queensland.
The Government will support up to 50 percent reduction over two years in relation to the expenditure committed to by an explorer under its mineral exploration permits. This means that for multiple exploration permits, the combined expenditure that the explorer would have to spend to meet exploration permit conditions for the two years would be halved.
The concession will apply to exploration for all minerals other than coal. The Government is currently investigating whether to extend the concession to the coal exploration sector.
Sustainable Ports Development Act
The Sustainable Ports Development Act 2015 (Qld) (Ports Act) was assented to on 20 November 2015, and is aimed at providing for the protection of the Great Barrier Reef World Heritage Area (GBRWHA) through the management of port-related development in and adjacent to the area. Broadly speaking, the Ports Act ensures that a priority port's land use plan is consistent with a port overlay for the master planned area.
One of the changes required by the Ports Act is that the Minister must publish a public notice and invite written submissions about a proposed master plan review. Any properly made submissions must be considered by the Minister.
When it comes to approvals relating to capital dredging, the Ports Act also requires the inclusion of a condition that any material generated by that activity must not be deposited or disposed of in a restricted area (an area within the GBRWHA but outside the Commonwealth marine park), unless the material is beneficially reused.
It should also be noted that certain provisions in the Ports Act requiring the refusal of development applications for port facilities outside a port’s existing port limits, or which include capital dredging carried out within a restricted area, do not apply to developments that are the subject of an EIS process started before the commencement of the Ports Act.
Chain of responsibility for environmental rehabilitation
On 21 April 2016, the Queensland Parliament passed the Environmental Protection (Chain of Responsibility) Amendment Act 2016 (Qld) (Act).
The Act amends the Environmental Protection Act 1994 (Qld) (EP Act) so that an environmental protection order (EPO) enforcing clean up and rehabilitation costs may be issued to a ‘related person’ of a company operating in breach of an environmental authority. ‘Related person’ is widely defined to include those determined to hold a ‘relevant connection’ – including on the basis of receiving a significant financial benefit or being in a position to influence compliance.
The Environmental Protection (Chain of Responsibility) Amendment Bill 2016 (Bill) was amended during debate in Parliament last night before it was passed as law. The primary function of the new law remains.
A key message for holding companies and other related persons is that they must take ‘all reasonable steps’ to ensure environmental compliance and that the operating entity has made adequate provision for clean up costs.
Under the Act as passed, a person is a related person of a company if:
- the person is a holding company of the company
- the person owns land on which the company carries out, or has carried out, a relevant activity other than a resource activity; or
- the person:
- is an associated entity of the company, and
- owns land on which the company carries out or has carried out a relevant activity that is a resource activity, or
- the Department of Environment and Heritage Protection (DEHP) decides the person has a relevant connection with the company.
All reasonable steps to ensure compliance
In deciding whether to issue an EPO to a ‘related person’, the DEHP may under the Act as passed consider whether the related person took all reasonable steps to ensure the operator both complied and made adequate provision for clean up costs. In doing so, DEHP should have regard to the extent of the company’s ability to influence the operator’s conduct.
We would expect in the resources space that the provision of financial assurance (FA) should be considered by DEHP to be adequate provision for clean up costs.
In short, ‘related persons’ must review their procedures and consider how they would demonstrate if needed that they took ‘all reasonable steps’.
'Significant' financial benefit
The broadest category of ‘related persons’ under the Act remains those that DEHP determines hold a ‘relevant connection’ to the company that caused the harm.
In its original form, the Bill proposed that DEHP could make such a determination where satisfied:
- the person is capable of benefiting financially, or has benefited financially, from carrying out a relevant activity of the company, or
- the person is, or has been at any time during the past two years, in a position to influence the company’s compliance with the EP Act.
As passed, the Act has upped the ante such that DEHP must be satisfied that the person has or is capable of “significantly benefiting financially”. While this provides little in the way of certainty, entities such as minority share-holders or short-term beneficiaries of environmentally harmful activities may take some comfort from the intent heralded by the change.
Also let off the hook are those who are capable of or who have significantly benefited financially, or who are in a position to influence a company’s conduct, under an agreement relating to native title or cultural heritage, under a compensation arrangement made pursuant to resources legislation or under a make good agreement pursuant to the Water Act 2000 (Qld).
The Bill initially proposed to capture all owners of land on which a company carries out or has carried out a relevant activity.
As recognised in the Agriculture and Environment Committee report, this had the potential of holding a vast range of persons accountable for a company’s obligations, or liable for a company’s financial responsibilities, where those persons may not have been in a position to influence or have control over the activities of a company.
Concerned by the Bill were persons with interest in freehold land, native title parties, third party graziers or agriculturalists.
A provision was inserted during Parliamentary debate that provides that owner of land does not include transferees of Aboriginal land or Torres Strait Islander land or native title holders.
Land owners underlying resources projects (other than related entities of the operator) have also been given a reprieve under the Act as passed.
FA as condition to grant of stay
Under the Act as passed, a decision about the amount of FA required under an environmental authority may not be stayed by a Court unless at least 75% of the disputed FA amount, as calculated by DEHP, is paid. This means that a company that disagrees with an FA decision will need to pay 75% of DEHP’s calculated amount while contesting the decision in Court.
2 year review
Interestingly, the Minister must under amendments to the Act review the operation of the new provisions within 2 years of their commencement to determine whether they remain appropriate.
As passed, the Act requires DEHP to consider any relevant statutory guidelines when deciding whether or not to issue an EPO. The development of guidelines under this provision will be key to industry’s understanding of this new environmental exposure and how best to manage it.
NEW SOUTH WALES
Significant Reforms to Resources Legislation in NSW
Wide ranging legislative reforms have recently been made to overhaul many aspects of the current mining and petroleum legislation in New South Wales. The Resources Legislation Package introduced five Acts which will effect the regulatory licensing requirements for tenements, specifically regarding grants, transfers, renewals and cancellations of tenements, the negotiation, mediation and arbitration process for access agreements, activity approval requirements, and compliance and enforcement powers and processes. These amendments to the existing regulatory framework will have implications for all current and future mining, Coal Seam Gas (CSG) and petroleum projects in NSW.
The Mining and Petroleum Legislation Amendment (Grant of Coal and Petroleum Prospecting Titles) Act 2015 (NSW) implements a new system for the allocation, granting, renewal and transfer of mining and petroleum titles in NSW. The most significant reform introduced is the process for allocating new coal and 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 Mining and Petroleum Legislation Amendment (Harmonisation) Act 2015 (NSW) primarily changes the regulatory framework governing the administration, compliance and enforcement of mining and petroleum titles.
In relation to the access arrangement negotiation and arbitration process, the Mining and Petroleum Legislation Amendment (Land Access Arbitration) Act 2015 (NSW) defines a more structured regime for negotiation access arrangements with landholders and requires the tenement holder to pay the landholders reasonable costs associated with negotiating and arbitrating the agreement.
The Protection of the Environment Operations Amendment (Enforcement of Gas and Other Petroleum Legislation) Act 2015 (NSW) makes the NSW Environment Protection Authority (EPA) the lead regulator for certain breaches of the relevant Acts relating to petroleum activities. The EPA is given 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.
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.
Government Response to the Minerals Industry Action Plan
On 6 November 2015 the NSW Government released its response to the Minerals Industry Action Plan (MIAP) delivered by the Minerals Taskforce in February 2015.
The MIAP recommended major planning reform in NSW and although the Government’s response will result in some changes, key recommendations such as removing the NSW Planning and Assessment Commission or limiting it to an advisory role were not taken up. Instead, the Government has proposed to define end-to-end assessment timeframes for mining development applications and to assign case managers to work with proponents to facilitate major project assessment and minimise delay. An inter-departmental panel has also been proposed to coordinate agency input on mining applications and develop inter-agency assessment protocols.
Whilst the MIAP recommendation to freeze the ad valorem royalty rate for 25 years was also not adopted by the Government, the Department of Resources and Energy (DRE) will conduct an internal review of the fees and levies imposed on explorers and mine production companies to identify ways of reducing administrative costs on a revenue neutral basis.
When it comes to streamlining decision making, the Government has adopted two key policy reforms recommended by MIAP - the Improved Management of Exploration Regulation which has been progressively commenced since July 2015, and the Integrated Mining Proposal which has been exhibited in stages throughout 2015. The Department of Planning and Environment has also published indicative Secretary’s Environmental Assessment Requirements that outline common assessment requirements that proposed mining operations must address in the EIS as part of a development application.
Finally, on recommendation of MIAP, the Government has also established benchmarks to measure industry performance, including halving assessment times for State Significant Development projects.
The NSW Division of Resources and Energy (DRE) has begun phasing in reforms proposed under the Improved Mining Exploration Regulations (IMER). This was a key policy reform recommended by the MIAP, which has been progressively commenced by the Government.
The IMER reforms apply to new exploration licences and renewals of existing licences occurring after 1 July 2015.
In relation to minor exploration activities, the reforms are aimed at achieving reduced processing times and more streamlined licence conditions. The previous 158 exploration licence conditions have now been reduced to a standard set of 13 conditions.
In relation to more intensive exploration activities, new codes of practice require increased community consultation and more stringent environmental impact assessment obligations.
Metgasco Limited takes NSW Government to Court over Suspension of Activities under Petroleum Drilling Licence
In May 2014, a delegate (Delegate) of the NSW Minister for Resources and Energy (Minister) relied on powers set out in the Petroleum (Onshore) Act 1991 (NSW) (Petroleum Act) to suspend, without prior notice, the activities allowed under Metgasco Limited’s (Metgasco) Petroleum Exploration License (PEL) at its Rosella site.
The Delegate’s reasons for the suspension were that Metgasco had not engaged in effective consultation or developed a community consultation plan that contained a detailed description or analysis of stakeholders. Metgasco commenced proceedings in the NSW Supreme Court, claiming the decision to suspend the licence was unauthorised by legislation and lacked procedural fairness.
The Petroleum Act requires that before cancelling or suspending operations under a PEL, the Minister must provide written notice to the PEL holder, give the PEL holder reasonable opportunity to make representations, and take any such representations into consideration. The Court, in its April 2015 decision, found that the decision to suspend Metgasco’s licence failed to comply with these requirements and was therefore invalid. The Court also found that the Minister had no capacity to make a ‘suspendable decision’, given the Act only allows for suspension in cases of non-payment of royalties, or where there has been a breach of environmental conditions. The Minister’s alternative argument that Metgasco had breached a condition of its Activity Approval by failing to engage in community consultation was also rejected by the Court.
The Court also gave consideration to the issue of what constitutes ‘effective consultation’, this being an obligation which is imposed on all PEL holders. The Court held that the NSW Government’s publication Guideline sets out the activities that a licence holder is required to undertake, but does not set out what the results of those activities must be. This may help to address concerns expressed by the gas industry that the Delegate’s decision sets a precedent that the NSW government will not allow coal seam gas exploration to go ahead if there are significant protests.
Updated Guideline and Protocol from DRE Regarding Native Title
In July 2015, DRE released an updated ‘Protocol for Evidencing Proof of Extinguishment of Native Title’ (Protocol) and Industry Guidelines. These documents will assist mining title applicants in identifying suitable and adequate documents which evidence that native title has been wholly extinguished over the land subject to the proposed mining title. The updated Protocol contains the following documentary requirements that are necessary to assist DRE in determining whether native title has been extinguished over a particular area:
- an ‘applicant’s statement’ which must specify whether or not the applicant believes native title has been extinguished over the application area (supported by legal advice where applicable)
- the inclusion of a land tenure schedule consistent with the template provided by DRE
- relevant primary documents including parish maps, Crown grants and plans, and current and historical title searches
- an identification map that shows the boundary of the application area and underlying land ownership boundaries, and
- a copy of a report prepared by the National Native Title Tribunal which discloses whether any part of the land within the application area has been previously subject to a native title claimant application or determination in the Federal Court.
Overall, the Guidelines confirm that a legal opinion or statutory declaration is insufficient to establish extinguishment of native title. Rather, strict compliance with the detailed documentary evidence required by the Protocol is necessary not only to satisfy DRE’s requirements, but also to avoid undue delay in the application process.
Guidelines for the Economic Assessment of Mining and Coal Seam Gas Proposals
In December 2015, the NSW Government released the Guidelines for the Economic Assessment of Mining and Coal Seam Gas Proposals (Guidelines). The Guidelines are intended to assist proponents to evaluate the economic, social and environmental impact of their project on the local community and the State.
Under the Guidelines, when assessing a development application for a mining or coal seam gas proposal, the consent authority must take into consideration a range of issues under the Environmental Planning and Assessment Act 1979 (NSW). The Guidelines set out the methodology for undertaking an economic assessment of a proposed project, with proponents required to complete a cost benefit analysis to assess the public interest by estimating the net present value of the project to NSW, and a local effects analysis to assess the likely economic impacts of the project on the local community.
In light of recent court challenges of coal mining projects on the basis of greenhouse gas emissions which are generated by the use of the material extracted during the project, the provisions for greenhouse gas emissions in the Guidelines are of particular interest. Whilst projects are required to account for direct and indirect emissions from the consumption of purchased electricity, heat or steam, the Guidelines do not require projects to account for emissions generated by the use of extracted material.
High Court agrees NSW Government had the power to cancel exploration
In 2014, the NSW Parliament enacted legislation which specifically cancelled exploration licences (ELs) held by NuCoal and Cascade Coal, without providing them with an opportunity to make representations about why the ELs should continue. The legislation was introduced after the Independent Commission Against Corruption found the decision to grant those ELs had been ‘tainted by serious corruption.’
The EL holders appealed to the High Court on the grounds the decision punished the companies for corrupt acts committed by government officials and individuals who were no longer involved in their operations. The High Court held the legislation was valid and no compensation was owed to either company. This case demonstrates that State parliaments may have the power to immediately cancel mining leases in limited circumstances.
Mining Legislation Amendment Bill 2015 (WA)
In April 2015, the Western Australian Government introduced the Mining Legislation Amendment Bill 2015 (WA) (WA Bill) which proposes amendments to the Mining Act 1978 (WA) and will consolidate the environmental management provisions of the Mining Act. The overarching focus of the WA Bill is to provide a risk-based and outcomes-focused approach to environmental regulation under the Mining Act.
In conjunction with the WA Bill, the Government has also released for consultation the ‘Proposed Low Impact Authorised Activities for Prospecting and Exploration under Amendments to the Mining Act 1978 (WA)’ which proposes amendments to the Mining Regulations 1981 (WA) to prescribe activities as ‘low impact activities’ by reference to the locality in which the activity occurs, the type of activity and the way in which the activity is undertaken.
The WA Bill provides that ‘low impact activities’ will be able to be undertaken within a licence area once the licensee has either given the prescribed notice or has an approved program of works. Activities which are not characterised as ‘low impact activities’ must have an approved program of works relating to the activity before it can commence.
The WA Bill also sets out the matters the Director General of Mines must consider in deciding whether or not to approve a proposed activity in a program of work or mining proposal. These matters include the effect a proposed activity may have on the environment, whether a program of work or mining proposal adequately identifies the foreseeable risk of environmental harm resulting from a proposed activity, and whether the program of work adequately identifies measures to be undertaken to avoid or minimise such risk.
Reforming Environmental Regulation initiative
In September 2015, the Western Australia Department of Mines and Petroleum (DMP) released, for public exhibition, its draft Mining Proposal Guidelines (Draft Guidelines) which are aimed at providing a risk and outcome-based regulatory framework for environmental assessment and management of mining activities.
A mining proposal is a document prepared by the proponent or tenement holder, containing detailed information on identification, evaluation and management of significant environmental impacts relevant to the proposed mining operations. Mining proposals must be prepared in accordance with the current February 2006 guidelines for Mining proposals in Western Australia. Once approved the mining proposal becomes a legally binding document which is imposed as a tenement condition.
The Draft Guidelines propose several changes to the current regime to improve the clarity of approvals and to reduce unnecessary regulatory burden. These changes include:
- moving to an ‘activity-based’ approval, rather than regulation against every section of a mining proposal document
- each mine having only one approved mining proposal at any one time
- allowing for an appropriate level of flexibility in the approval to promote innovation and continuing improvement with best practice, and
- preventing unnecessary minor amendments having to be formally proposed and assessed.