Australia: NSW CSG no-go zones and strategic agricultural land expanded - but more detail needed

Clayton Utz Insights

Key Points:

There is a real need for transitional arrangements to clarify what happens when CSG exclusion zones expand close to current projects.

The New South Wales Government has significantly expanded the coal seam gas (CSG) exclusion zones and strategic agricultural land areas which were established late last year, affecting millions of hectares of land across the State, but these changes raise the question of what should happen if land near pre-existing or pre-planned CSG projects is rezoned and triggers the exclusion provisions.

These changes, which were made via amendments to State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP), affect mining and CSG exploration and development in New South Wales in the following ways:

  • approximately 95 percent of New South Wales dwellings covered by existing petroleum exploration licences are now off limits for CSG activities;
  • additional land designated for future residential growth, "rural village" land, a 2km buffer zone around that land, and critical industry cluster (CIC) land (which currently covers equine and viticulture industries), is also off-limits for CSG activities; and
  • mining and CSG proposals in more areas of land across NSW (if not prohibited by the CSG reforms), will need to go through the gateway planning process before seeking planning approval.

How did we get here?

The basic framework for CSG exclusion zones was established in October last year when the New South Wales Government:

  • introduced the long-expected gateway assessment process for mining and CSG proposals on designated prime agricultural land (known as biophysical strategic agricultural land or BSAL) and CIC land, by way of a major amendment to the Mining SEPP;
  • introduced a prohibition on CSG activity in some existing residential zones and future residential growth areas, including a 2km buffer around those areas, in the same amendment to the Mining SEPP; and
  • released, for public comment, a proposal to expand the CSG exclusion zones and strategic agricultural land areas. The recent changes follow that public consultation.

The expanded CSG exclusion zones

CSG activities will now be prohibited in:

  • land within a residential zone;
  • designated "village areas", which are not zoned residential but are considered to have rural village characteristics (there are currently seven of these areas);
  • future residential growth areas, including a 2km buffer around those areas. These areas are identified by reference to planning instruments (including local environment plans) and Government endorsed planning strategies, and currently include land in 55 local government areas;
  • CIC areas, which are specified areas occupied by designated significant agricultural industries (currently equine and viticulture); and
  • a 2km buffer zone around each of these areas except for the CIC areas.

Pipelines associated with CSG development are also banned within the exclusion zones, but are permitted within the 2km buffer zones, if the relevant approvals are obtained.

The expanded areas of strategic agricultural land

The areas of land which will be subject to the gateway assessment process for mining and CSG proposals now cover about 2.8 million hectares across New South Wales.

The gateway process applies to strategic agricultural land, which is BSAL or CIC land.

In October 2013, maps were completed for about 1.74 million hectares of BSAL in the Upper Hunter and New England North West regions, and more than 250,000 hectares of CIC land in the Upper Hunter region, and proposals to designate additional land as BSAL and CIC land were placed on public exhibition.

Following a public consultation process, the NSW Government finalised mapping for an additional 1 million hectares of BSAL across New South Wales, and added about 20,000 hectares of CIC land.

Impact and potential developments

These developments come at a critical time in New South Wales, where miners are facing increased pressure through commodity pricing and other economic factors, and stakeholders are forecasting a gas shortage in New South Wales (and increasing gas prices as a result). By way of example, gas companies have recently requested the NSW Independent Pricing and Regulatory Tribunal approve gas price increases of up to 20 percent for 2014-15.

Expansion of the CSG no-go zones has the potential to curtail what is currently a fairly modest-scale industry in NSW.

For mining projects, and those CSG projects which proceed, implementation of the gateway system is still in its early days, and the processes and timeframes are yet to be settled. Expansion of the areas to which the gateway system applies will draw a greater number of resources projects into the system, and makes bedding down an efficient and effective gateway process even more important.

In addition, there is always the prospect that the CGS no-go zones and the areas of strategic agricultural land will expand again. It's worth remembering that the buffer is triggered by the zoning status of nearby land, which in turn is often managed by local government and does not need an Act of Parliament. The transitional provisions in the Mining SEPP do not deal specifically with this situation. As a result there is a concern that, if additional areas of land in NSW are identified for residential growth, that may adversely affect current operations or expansion prospects for a pre-existing CSG project which would then be within, or too close to, a residential zone.

There is a real need for clear and comprehensive transitional arrangements, to ensure investment in projects now will not be affected by future expansion of these areas.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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