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 2004.
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) Regulation 2004.
In this article, Partner Martin Klapper and Solicitor Andre Dauwalder address two important matters that arise from the Bill.
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 qualified.
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.
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