The importance of mining and exploration licence conditions requiring community consultation by resource companies has been underscored by the cancellation of mining and petroleum leases in NSW by the Resources and Energy Minister following a concerted high profile campaign against coal-seam gas (CSG) projects.
The decision to cancel three petroleum exploration licences of Queensland company Leichhardt Resources by Resources and Energy Minister Anthony Roberts highlights the risk for resources companies in the face of a strong campaign against fossil fuel developments and an upcoming state election.
Already the NSW Government has:
- put a hold on CSG exploration and extraction in the Sydney Water Catchment Special Areas
- put a six month freeze on new petroleum exploration licence applications, which was extended by a further 12 months to September 2015, and
- announced an audit of existing petroleum exploration licences.
The power to cancel a licence, which exists under both the NSW Mining Act 1992, and the Petroleum (Onshore) Act 1991, is an extreme one and it had rarely been used. But this power is increasingly coming into sharp focus with a number of cases in which companies have been said to have breached licence requirements to undertake community consultation.
The difficulty for companies is that often the requirement to "consult" can be quite vague and it is unclear what needs to be done to satisfy that requirement.
In 2012, the NSW Government released "Guideline for Community Consultation Requirements for the Exploration of Coal and Petroleum, including Coal Seam Gas". It states that effective consultation involves:
- a detailed identification of all stakeholders
- making sure all stakeholders are informed of the proposed program of work for the licence and are notified prior to the commencement of any authorised activities;
- making sure all stakeholders are aware of any real or potential impacts;
- the purpose of the consultation being made clear – this includes what is being consulted on and what is non-negotiable;
- expected levels of participation and commitment clearly expressed to the community;
- setting up channels of communications that allow good community feedback and identification of potential issues;
- providing feedback to the community on how their input has influenced decisions; and
- maintaining a register of complaints and feedback, with details of actions taken in response.
On 26 June 2014, the Director of the Office of Coal Seam Gas (OCSG) advised gas company Metgasco confirmed the suspension of its drilling activities on an exploration licence in the Northern Rivers of New South Wales until it could demonstrate to the satisfaction of the OCSG that it had complied with its licence condition to undertake community consultation. That condition imposed the following requirements:
- the licence holder must engage with the community in relation to the planning for and conduct of prospecting operations authorised under this exploration licence, and
- the consultation must be undertaken in accordance with the Guideline for community consultation requirements for the exploration of coal and petroleum, including coal seam gas.
In her statement of reasons for the suspension, the director stated that while Metgasco may have undertaken community consultation it had not developed a community consultation plan in accordance with the Guideline. Further, Metgasco had not adequately identified relevant stakeholders and the consultation undertaken by Metgasco "had not been effective".
The reasons stated: "The Director considered that Metgasco could take a significantly more sophisticated approach to community engagement than it had done."
"Metgasco's decision to defer a broader consultation program until after the Rosella Exploration Well had been drilled was not reasonable given the escalation of opposition to the activity in the Northern Rivers area from the beginning of the year."
Given the strength of campaigns against CSG, it may be problematic for companies to show they have engaged in "effective" community consultation. Further, following the Metgasco decision it is unclear what a "sophisticated approach to community engagement" entails.
In canceling the three licences held by Leichhardt Resources on 14 October 2014, Mr Roberts cited conditions in the licences granted on 8 February 2013 to "engage with the community in relation the planning and conduct of its prospecting operations". He said the allegation of not complying with its work program obligations was also raised regarding one of the licences.
The company's licences, which cover more than 5,500 square kilometres, were extended for six years on 8 February 2013. But 18 months later the company was issued a Show Cause Notice in relation to the proposed cancellation of the licence on 7 August 2014.
It is understood the claimed breaches by Leichhardt Resources arose from alleged failures to inform various groups, such as Aboriginal Land Councils, about the company's activities despite these groups being named in the licence conditions.
Leichhardt Resources had been the subject of a strong campaign by an anti-CSG groups in the Southern Highlands, where one of the licences is located. That campaign included Nicole Kidman, Keith Urban and broadcaster Alan Jones, who have properties in the Southern Highlands.
In March, the coordinator of the Southern Highlands Coal Action Group claimed that the company had failed to respond to an invitation to attend a community forum on CSG. Further, it claimed that the company and misinformed some landholders as to its rights regarding "seismic surveying".
Under section 22 of the NSW Petroleum (Onshore) Act 1999, the Minister has broad discretion to cancel licences if:
'Minister is satisfied its holder has, at any time during the term of the title: (a) contravened or failed to fulfil any of the conditions of the title..."
Companies with resource tenements in NSW will now need to closely examine the conditions of those licences, the requirements of the Guideline for Community Consultation and any claims of non-compliance by anti-CSG groups.
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