Australia: Open for Business – a reform wave to hit the Australian resources sector

Energy, Infrastructure and Resources Alert
Last Updated: 18 October 2013
Article by Clive Cachia

The new Federal Government has flagged a number of reforms to kick-start the next phase of exploration, productivity and production in the mining and petroleum industries. The Government has expressed an urgent need to correct the real or perceived lack of business confidence in these industries over the last few years.

Ian Macfarlane, the new Minister for Industry (including responsibility for mining and oil and gas) commented: "We've got to make sure that every molecule of gas that can come out of the ground does so. Provided we've got the environmental approvals right, we should develop everything we can."

This reformist agenda is being supported by the New South Wales (NSW) Government in its proposed revisions to the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (NSW) (Mining SEPP) to emphasise the 'significance of the resource' in deliberations of the consenting authority for planning approvals.

In this Legal Insight, we look at the key proposed reforms by Federal and state governments, including:

  • the repeal of the carbon tax and Minerals Resource Rent Tax (MRRT) and cutting company taxes
  • the actioning of the Productivity Commission (the Commission) draft reports on the removal or easing of barriers to exploration investment and major project approvals
  • the implementation of a more stringent offshore petroleum licence policy to promote development
  • the proposed introduction of the Mineral Exploration Tax Credit
  • the proposed creation of the Industry Advisory Council
  • other industry specific initiatives
  • the proposed state reforms to the Mining SEPP.

The Carbon Tax, MRRT and Company Tax

The much publicised repeals of the carbon tax and MRRT have been proposed as one of the first agenda items of the new Government.

To repeal the carbon tax and MRRT, the Government will likely face opposition by the Labor and Greens members in the Senate, which will remain seated until July next year. This may prove to be a significant hurdle for the repeal of the carbon tax and MRRT once Parliament is recalled in the next few weeks.

In the event that there is a deadlock between the Coalition-controlled House of Representatives and the Senate, either now, or after the new Palmer United and micro-party senators begin their terms in July 2014, the Prime Minister may recommend a double dissolution of both Houses of Parliament. Whether or not the Prime Minister will have to resort to such a bold tactic, remains to be seen.

The new Government has also proposed a 1.5% cut in company tax from 1 July 2015. This cut will be welcomed by companies with annual incomes less than AUD5 million which will not be subject to the offsetting 1.5% levy to fund the proposed paid parental scheme. Many exploration companies are (unfortunately) in this bracket.

Actioning Productivity Commission Draft Reports

The Commission has recently been requested to review non-financial barriers to exploration investment (Barriers to Exploration Investment Report) and major project development assessment processes (Major Project Report).

The final Barriers to Exploration Investment Report was sent by the Commission to the Commonwealth Government on 27 September 2013 and is yet to be released. Please see our earlier Legal Insight on the draft version of this Report here.

The Commission's draft Major Project Approvals Report was released on 5 August 2013 and following further consultation will be sent to the Government in early December 2013.

The Commission has outlined five areas for improvement in the major project development and assessment process. These overlap the issues reviewed in the Barriers to Exploration Investment Report and include the following recommendations to ensure greater international competitiveness:

  • Clarify regulatory objectives: regulatory objectives should be clarified where they are vague, inconsistent or ambiguous.
  • Reduce regulatory overlap: establish a "one project, one assessment, one decision" framework for environmental approvals to reduce time and costs. The Government has already supported this move in its policy to have the States and Territories administer a single "one-stop shop" approvals process for on-shore resources developments, including approvals required under Federal legislation.
  • Improve transparency and accountability: focus on early consultation and guidance, separate policy and regulatory functions and adopt review mechanisms that promote transparency and accountability of decision makers.
  • Improve time frames: introduce 'major projects coordination offices' to proactively guide the multitude of approvals required from relevant agencies, with the view of expediting the approvals processes.
  • Reduce costs: most compliance costs are associated with fulfilling approval conditions and offsets, and the administrative costs of monitoring and enforcement. Increased emphasis on risk-based outcome-focused regulation will reduce unnecessary costs.

Stricter 'Use it or Lose it' Offshore Petroleum Licence Policy

The Industry Minister and new Government have expressed an intent to reform the current offshore petroleum retention lease policy. Retention leases provide security of title over an area which is not currently commercially viable but which may become so within 15 years.

The current legislative regime provides that if the recovery of petroleum from a retention lease area becomes commercially viable, an application to renew that retention licence must be refused. The lease holder should instead apply for a production licence. This is known as the 'use it or lose it' provision.

The Minister has identified a need to ensure that retention leases are not held to merely gain a competitive commercial advantage but are legitimately needed to secure petroleum for long term production projects. The Minister intends to review those retention leases that are set to expire in the next two or three years to determine whether to invoke the 'use it or lose it' provision if and when renewal applications are lodged.

Mineral Exploration Tax Credit

The proposed Exploration Development Incentive (the Incentive) is designed to promote investment by small exploration companies. The Incentive is to be implemented on 1 July 2014, and will allow eligible investors to deduct the expense of mining exploration against their taxable income.

The Incentive will operate as a tax credit to Australian resident shareholders for eligible greenfields exploration in Australia. The deduction will be restricted to those small exploration companies with no taxable income. Further, the Incentive is to be capped at AUD100 million over the forward estimates.

Industry Advisory Council

The Government's policy also includes the establishment of an Industry Advisory Council for the energy and resources sector. The proposed Council will be co-chaired by the Minister and an industry expert. Its purpose is to provide consultation and recommendations on proposed legislation or polices that will affect the energy and resources sector in order to promote consultation and certainty.

Industry Specific Initiatives

The Commonwealth Government has also proposed some specific initiatives within the energy and resources industry including:

  • formalising the agreement to sell uranium to India
  • reviewing the potential to develop thorium as an energy source for export
  • reviewing the potential for LNG to be a transport fuel for the Brisbane, Sydney and Melbourne transport corridors.

These and the other reforms can be expected to be included in a revised Energy White Paper to update the last version issued in 2012.


The NSW Government released a consultation draft of the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) Amendment (Resource Significance) 2013 (NSW) (Mining SEPP) earlier this year. The proposed revisions propose to amend the Mining SEPP to alter the weighting of considerations when determining a resources development proposal. The economic benefit of the proposed project, both to the relevant region and the State as a whole, is to be viewed as the principal consideration after an assessment of:

  • the size, quality and availability of the resource
  • access and the proximity of the land to existing or proposed infrastructure
  • the relationship of the resource to any existing mine
  • whether other industries or projects depend on the development of the resource.

The weight given to other factors such as land use compatibility, environmental effects, transportation and rehabilitation issues would be proportionate to that factor's importance in comparison with the economic benefits.

At this stage, the NSW Government is still reviewing submissions which have been made by the public on the draft Mining SEPP.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

K&L Gates has been awarded a 2012 EOWA Employer of Choice for Women citation acknowledging our commitment to workplace diversity.

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