The Gas Security Amendment Bill 2011 introduced
yesterday by the Minister for Employment, Skills and Mining,
Stirling Hinchliffe, will affect petroleum authority applicants
under the Petroleum and Gas (Production and Safety) Act
The Bill introduces changes to the application requirements for
petroleum authorities, and will see the implementation of a
Prospective Gas Production Land Reserve policy. It follows on from
last year's consultation paper and proposes to amend several of
Queensland's resources Acts, including the Mineral
Resources Act 1989, National Gas (Queensland) Act 2008, PG
Act and Petroleum and Gas (Production and Safety)
In this article, Partner Martin Klapper and Solicitor
Andre Dauwalder address two important matters that arise from the
Prospective Gas Production Land Reserve policy to become
law – the Australian market supply condition
The Prospective Gas Production Land Reserve policy that this
amendment Bill proposes will allow the Minister to impose
conditions on calls for tenders for Authorities to Prospect that
require that gas produced from any subsequent petroleum lease must
be supplied only to the Australian market. Called an
"Australian market supply condition," this will prevent a
petroleum lease holder from supplying gas that is produced from
land specified by the Minister under the condition other than to
the Australian market.
It also requires the holder to include a condition in any
contract or other supply arrangement that the gas must not be
re-supplied other than to the Australian market. The Australian
market supply condition will bind the petroleum lease holder as a
condition under the petroleum lease.
The gas buyer will also be bound by the Australian market supply
condition, which the petroleum lease holder must by law include in
the gas supply agreement. Further, that gas buyer must again insert
a similar condition in any further agreement to onsell that gas.
The petroleum lease holder may apply for a suspension of the
Australian market supply condition where:
market analysis indicates that, during a stated period,
sufficient gas can be produced from existing and proposed petroleum
tenures in the State to supply both the Australian market and
export demand; and
the holder has taken all reasonable steps to supply the gas
produced from the land to the Australian market, but it is not
commercially viable to do so.
This exception is designed to ensure that a petroleum lease
holder is not put at a commercial disadvantage when considering
prevailing market conditions.
New application requirements for a petroleum lease
Under the Petroleum and Gas (Production and Safety) Act as it
currently stands, the requisite degree of knowledge of reserves
must be established as a condition of grant of a petroleum lease,
but it is not necessary for the independent reserves certification
to be available or submitted at the time the petroleum lease
application is made.
Under the proposed amendments, a petroleum lease applicant must
include information in the application to demonstrate that a
commercial reserve exists, and also a plan for developing that
reserve. The application must include independent certification of
resources and reserves of petroleum in the area, to be undertaken
by an entity that is both independent and appropriately
Critically, the chief executive may refuse to receive a
petroleum lease application that does not include a compliant
development plan and evidence of certification of reserves. An
applicant will not be entitled to rely on the substantial
compliance provisions under the Petroleum and Gas (Production and
Safety) Act for an application that is refused in this manner.
These amendments are intended to address the perception that
overlapping coal tenement holders are at a disadvantage, as the
lack of reserves information in petroleum lease applications can
prevent them from accurately determining thepotential impact of the
application on their own development plans.
It is a common misconception that the grant of mining tenure, whether it be an Exploration Permit, Mineral Development Licence or Mining Lease, will entitle the holder to access all land within it in order to explore or mine.
This briefing note sets out a likely structure for the proposed privatisation of the networks and identifies key issues.
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