Key Points:

Queensland's Common Provisions Act introduces "as of right grant" of coal and CSG production tenements.

The new Mineral and Energy Resources (Common Provisions) Act 2014 (Qld) (CP Act) was passed last week. Importantly amendments were made just prior to the passing of the Act.

Chapter 4 of the CP Act sets out a new regime for dealing with overlapping coal and coal seam gas (CSG) tenements. In this article, we'll set out in more detail the key aspects of the new regime, including the transitional arrangements for existing tenements.

Key concepts in the new regime for overlapping coal and coal seam gas tenements

The new regime is broadly consistent with the principles in the White Paper "Utilisation of Queensland's Coal and Coal Seam Gas Resources – a New Approach to Overlapping Tenure in Queensland" which contained the generally agreed industry position about reforms to the legislative framework.

Consistent with the White Paper, the key concepts of the new regime include:

  • "as of right grant" of coal and CSG production tenements;
  • coal production under a mining lease is given a "right of way" or sole right of occupancy for production activities in defined areas called initial mining areas and rolling mining areas, subject to minimum notice periods to the overlapping CSG tenement holder;
  • requirements for a mining lease applicant to issue an advance notice to the petroleum tenement holder, which must include a proposed mining commencement date for the mining lease being at least:
    • 18 months (where there is an overlapping ATP – though there are provisions allowing the ATP holder to lodge a concurrent petroleum lease application meaning that the mining commencement date is extended to 11 years as if the ATP holder was a petroleum lease holder at the time of the advance notice)
    • 11 years (where there is an overlapping petroleum lease)
  • requirements for joint development plans to be agreed with a certain flexibility to negotiate terms outside of the default position in the CP Act, subject to conditions and if certain provisions are not agreed a mandatory arbitration process will apply;
  • the mining lease holder to pay compensation to the CSG tenement holder in certain circumstances, including for lost CSG production if the mining lease holder accelerates the minimum notice periods described above;
  • "right of first refusal" of an overlapping CSG tenement holder to incidental CSG on a mining lease. The mining lease holder now has greater rights to use the incidental CSG if the CSG tenement holder refuses to accept the incidental CSG;
  • ongoing obligation for overlapping coal and CSG tenement holders to exchange relevant information; and
  • a new adverse effects test to apply to deal with the interaction between certain overlapping tenements.

Transitional arrangements for CP Act

The new regime will not apply to all coal and CSG tenements. It is important to consider the transitional provisions set out in Chapter 7 Part 4 of the CP Act, to determine which tenements and applications are governed by the new regime, and which will remain governed by the existing regime in the Mineral Resources Act 1989 (Qld) (MRA) and the Petroleum and Gas (Production and Safety Act) 2004 (PAG Act) (as applicable).

A high-level summary of the transitional provisions is below:

  1. Resource authorities (whenever granted) over existing production resource authorities
  2. Tenure status Legislative position
    EPC / mineral development licence (MDL) / mining lease (ML) (whenever granted) over a petroleum lease (PL) that was granted before the commencement of the CP Act Existing regime in MRA applies
    ATP/PL (whenever granted) over a mining lease that was granted before the commencement of the CP Act Existing regime in PAG Act applies
  1. Existing applications for coal mining leases
  2. Tenure status Legislative position
    Mining lease application made and not decided before the commencement of the CP Act over an ATP (without consent of ATP holder)

    New regime in CP Act applies (subject to some adjustments to notice periods for commencement of mining)

    If, at the commencement of the CP Act, there is a concurrent PL application over the same area, there is a process which appears to be intended to permit the PL applicant to issue a concurrent notice to the ML applicant, so that, in applying the new regime, the PL applicant will be treated as a PL holder rather than an ATP holder (although the drafting of these provisions in the CP Act does not expressly state that this provision applies to a PL applied for before the commencement of the CP Act).
    ML application made and not decided before the commencement of the CP Act over an ATP (with consent of ATP holder)

    New regime in CP Act applies (subject to ability to adjust notice periods for commencement of mining by agreement)

    If, at the commencement of the CP Act, there is a concurrent PL application over the same area, there is a process which appears to be intended to permit the PL applicant to issue a concurrent notice to the ML applicant, so that, in applying the new regime, the PL applicant will be treated as a PL holder rather than an ATP holder (although the drafting of these provisions in the CP Act does not expressly state that this provision applies to a PL applied for before the commencement of the CP Act).
    ML application made and not decided before the commencement of the CP Act over a PL (without consent of PL holder) Existing regime in the MRA applies (unless otherwise agreed by the parties)
    ML application made and not decided before the commencement of the CP Act over a PL (with consent of PL holder) Existing regime in the MRA applies (unless otherwise agreed by the parties)
  1. Existing applications for PLs
  2. Tenure status Legislative position
    PL application made and not decided before the commencement of the CP Act over an EPC/MDL (without consent of EPC/MDL holder)

    New regime in CP Act applies

    If, after the commencement of the CP Act, and before the grant of the PL, a concurrent ML application is made by the EPC/MDL holder over the same area, the mining commencement date for the ML must be 11 years from the giving of the advance notice by the ML applicant.
    PL application made and not decided before the commencement of the CP Act over an EPC/MDL (with consent of EPC/MDL holder)

    New regime in CP Act applies

    If, after the commencement of the CP Act, and before the grant of the PL, a concurrent ML application is made by the EPC/MDL holder over the same area, the mining commencement date for the ML must be 11 years from the giving of the advance notice by the ML applicant.
    PL application made and not decided before the commencement of the CP Act over a ML (without consent of ML holder) Existing regime in the PAG Act applies (unless otherwise agreed by the parties)
    PL application made and not decided before the commencement of the CP Act over a ML (with consent of ML holder) Existing regime in the PAG Act applies (unless otherwise agreed by the parties)
  1. Surat Basin Transitional Area
  2. Tenure status Legislative position

    Applies to tenements in the "Surat Basin Transitional Area" (area to be prescribed by regulation) where there is an overlap between:

    • a PL granted after the commencement of the CP Act but no later than 31 December 2016; and
    • a ML applied for after the commencement of the CP Act but before 1 July 2020

    New regime in the CP Act applies with the following amendments:

    • mining commencement date for ML must not be before 1 July 2030 (unless PL holder agrees)
    • the mining commencement date can be accelerated by ML holder (subject to notice and compensation provisions in the new regime) but cannot be accelerated to earlier than 1 July 2020 (unless PL holder agrees)

Amendments to safety regime applicable to overlapping coal and CSG tenements

The CP Act does not amend the safety regime applicable to overlapping coal and CSG tenements. Instead, amendments to the safety regime have been proposed in the Water Reform and Other Legislation Amendment Bill 2014 (Qld). This was introduced to Parliament on 11 September 2014 and Committee is due to report to Parliament on the Bill by 17 November 2014.

In summary, the Water Reform Bill proposes to (among other matters) implement consistent safety provisions for coal and CSG tenement overlaps across the relevant Acts, based on the principles in the White Paper. The new safety provisions require parties to reach agreement about, and implement, joint interaction management plans for overlapping resource authorities. If agreement cannot be reached within a specified timeframe, the parties are required to apply for arbitration of the dispute under the relevant provisions in Chapter 4 of the CP Act.

The new provisions will apply to existing and future operations on coal and CSG tenements, however for existing operations, a grace period of six months will apply prior to the new provisions taking effect.

Next steps

A number of key aspects of the new regime will be governed by the Regulations to the CP Act, which are yet to be released.

The CP Act will commence on a date to be fixed by proclamation.

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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.