Major reform of Queensland resource regulation proposed

In brief

Wide-ranging reforms to the legislative regime for resource tenures in Queensland, for all commodity types, have been proposed. Partners Ben Zillmann and John Hedge and Senior Associate Giselle Kilvert consider the proposals and what they mean for the state's resource sector.

Background

In recent years, industry cost pressures, the downturn in commodity prices and difficulties in raising capital have challenged Queensland's resource industry.

The Queensland Government is keen to make the state more attractive to investors, and it recognises that there are a number of issues associated with the current resource tenure framework that make it unresponsive to the sector's needs, and prevent industry optimisation in response to competitive international environments.

The 'Innovative Resources Tenure Framework' paper

The 'Innovative Resources Tenure Framework' policy position paper (the paper) sets out the Queensland Government's revised policy regarding resource regulation. Accepting that investors are attracted to perceived low-risk destinations, the policy is designed to establish a regulatory framework that:

• provides greater certainty and consistency to investors and stakeholders, by providing security of tenure, with certainty of rights and obligations;
• is responsive to commercial and global market factors, with an emphasis on greater flexibility; and
• reduces the administrative burden for both government and industry.

The policy also aims to strike the 'right' balance between resource development, environmental sustainability and investment attraction. In doing so, the policy does not propose any changes to the following:

• environmental impact assessment and processes;
• the land access code;
• notification and objection processes; and
• native title.

All the existing safeguards and processes relating to the above are to be retained under the new policy, and the paper does not consider them.

Proposed changes

The paper proposes various changes to the legislative regime, which will be significant for explorers and developers. These are summarised below:

• Standard authority types and purpose: A set of common resource authorities (which shall apply to all commodity types) will be introduced for each stage of the resource lifecycle. These will include:
  • Resource information authorities: These will enable the gathering of information where activities do not trigger native title negotiations. These authorities may include the attributes of an existing data acquisition authority, water monitoring authority, petroleum survey licence and prospecting permit under the current regime. The maximum proposed term of an information authority is two years, with no option for renewal.
  • Resource exploration authorities: These will enable the carrying out of exploration activities of the type currently carried out under exploration permits and authorities to prospect (as described further below).
  • Resource development authority (with capacity for retention status): These will allow for appraisals to determine the quantity and quality of the relevant resource, as well as determination of infrastructure requirements for resource development. This authority will also provide for secondary purpose of retention of rights, where immediate development of the resource is not commercially viable (as with mineral development licences under the existing regime). The proposed maximum terms of development authorities vary depending on the commodity (10 years for minerals and coal; 15 years for petroleum, geothermal and greenhouse gas), with renewal only available for retention status authorities.
  • Resource production authority: Similar to existing mining and petroleum leases, these authorities will generally allow for site preparation, mine commissioning, extraction and processing of the resource commodity, waste management, decommissioning and mine closure. Supporting activities can be transportation and transmission infrastructure.
  • Resource infrastructure authority: This common infrastructure authority is intended to accommodate the resources-related infrastructure activities currently authorised by existing infrastructure licences (eg pipelines, petroleum facilities, haul roads). Authorities will be conditioned for specific purposes. No significant changes are proposed to the permits provided in the current framework.

Prerequisite tenures will no longer be required to obtain development, production or infrastructure authorities.

• Exploration authority
  • Term: The terms for resource exploration authorities will be capped. The proposed maximum term varies depending upon the relevant commodity: eight years for minerals; 10 years for coal; 12 years for petroleum, geothermal and greenhouse gas. These terms were set after analysing extensive data regarding exploration permit periods over the past 26 years. Unless the proponent specifically requests a shorter period, the default term will be the maximum term.
  • Renewability: Renewals will no longer be permitted (unless the proponent applied for less than the maximum term, in which case the proponent may extend the term by the balance of the maximum term).
  • Area: Statutory limits on the area of exploration authorities will be removed. Applicants will still need to demonstrate their ability to engage in effective exploration with appropriate financial and technical resources and within the maximum terms allowed.
  • Work plans: The requirement for prescriptive work programs will be removed. Proponents will instead need to provide a work plan that details the proposed exploration objective and geological model to be used up to the authority's mid-term. Adjustments may be made to the work program without applying for a variation of conditions.
  • Performance: During the exploration stage of the resource lifecycle, performance will be reported and measured annually on a self-assessment basis. Halfway through the term, the authority holder's performance will be measured at a 'mid-point check-in'. At that point, the authority proponent will fully outline their exploration efforts, measured against their original stated objectives (or the objectives as amended for good reason before check-in). If there have been significant changes to the work program in the first half of the term, the authority holder may need to explain why these were required and update the exploration objective and geological model. A rating of strong, acceptable or underperformance will be issued at the check-in. Underperformance may result in cancellation of the authority or imposition of a penalty or both.
  • Relinquishment: There will be a default relinquishment of 50 per cent of the authority area at the authority's mid-point. This default will apply where there has been 'acceptable' performance. Where there has been 'underperformance', the authority holder may be required to relinquish areas additional to the default rate. Where there has been 'strong' performance', the authority holder may be able to negotiate a proportional or deferred relinquishment.
  • Greenfields exploration: Incentives may be provided for greenfields exploration in the form of negotiated mid-term relinquishment obligations, to be set up-front, before grant.

A summary of the various authorities available under the proposed new regime, and their application to different stages of the resource lifecycle, are set out in the diagram below, which is extracted from the paper.

• Decommissioning: Under the new policy, criteria are to be developed for decommissioning activities. Such activities will be recognised within the overall purpose of resource authorities.
• Project administration: The new framework will enable project proponents to group and manage multiple tenements as a single 'project'. This is designed to provide greater flexibility in the administration of multiple tenures. Each project will need to have a plan and set clear objectives. While parameters are yet to be developed to determine when tenements will qualify for 'project' grouping, the paper envisages that performance and reporting requirements could be coordinated on a project-wide basis, rather than on an individual authority basis.
• Rents, fees and charges: The paper proposes to simplify the resource rental regime. Rental requirements will vary, as appropriate, depending on resource type and the progress of authorised activities within the resource development lifecycle. The system will deliver incentives to encourage exploration. Recommendations relating to cost recovery (as raised in the Queensland Competition Authority's Coal Seam Gas Review in 2014) will also be considered.
• Land release: The paper proposes that areas for development or production authorities may be released for tender. Also under investigation is the release of land on an invitation tender basis, to enable expansion of operations or to facilitate involvement of junior proponents.
• Transitional arrangements: Transitional arrangements are proposed to be developed in detail by late 2015, with significant consultation with industry stakeholders, relevant government agencies and landholder and agricultural representatives, on the basis of the following principles:
• current granted rights under tenures will be maintained by continuance of the existing tenure rights;
• tenure holders can opt into the new framework to the equivalent authority in the new tenure pathway;
• opportunities for higher tenure may only be available under the new tenure legislation;
• in general, renewals will be limited in duration to coincide with implementation of the new laws, unless previously committed as part of the authority grant (further extensions of rights will need to be applied for under the new tenure legislation); and
• production tenures that have rights and processes in common between the current and new tenure framework may be transitioned by the statute to the new framework.

Next steps

Details of the above resource authorities, and the regulatory regime surrounding their implementation, are to be developed before the policy's implementation, following broader stakeholder consultation.

The department has also called for submissions on the paper by 16 October. The department will be hosting various information sessions across Queensland in the lead-up to this date.

A Regulatory Impact Statement, which will contain further details of the criteria and mechanisms referenced in the policy, is yet to be prepared. The department intends to deliver this statement by the end of the year, with a consultation Bill to be released by mid to late 2016.

If you would like assistance preparing a submission in response to the paper, please contact any of the people below.