Jones Day presents a snapshot of material developments in Australian law relevant to the energy sector over the last 12 months.
Commonwealth
1. The renewable energy target for large scale generation was
reduced from 41,000 gigawatt-hour to 33,000 gigawatt-hour by 2020.
Exemptions were provided for moderate and high emissions-intensive
trade-exposed activities. Native forest biomass was included as an
eligible renewable energy source. The target for small scale
generation remained at 4,000 gigawatt-hour by 2020.
2. Australian Free Trade Agreements with Korea, Japan and China are
now operational. They provide for reduced or no tariffs on the
import into those countries from Australia of minerals and
petroleum products. Investment in Australian assets from private
entities in those countries are notifiable under foreign investment
laws only if the consideration or value of the investment is over
the threshold of $1.094 million, subject to a lower threshold of
$252 million for certain sensitive sectors such as
telecommunications and transport. See item 4 below.
3. Standing to challenge environmental approvals under federal
environmental law is proposed to be changed by the federal
government so that activist groups will not have standing unless
they are a person adversely affected by the approval granted. The
bill to achieve this change has passed the House of
Representatives. It is still to be voted on in the Senate though
some of the opposition parties oppose the bill. This proposed
change is being made due to the success of the activist groups in
challenging environmental approvals for resources projects
particularly coal projects through the courts.
4. Federal foreign investment laws changes took effect from 1
December 2015. The changes which affect energy and resources assets
in the same way they affect most other assets include:
- Acquisitions of substantial interests continue to require notification but a substantial interest has been changed from a 15 percent to a 20 percent interest;
- Civil pecuniary penalties and infringement notices for low level non-compliances have been introduced;
- Criminal penalties have been increased;
- Persons who knowingly assist in the non-compliance can also be guilty of offences—such persons may include real estate agents, migration agents, conveyancers and lawyers;
- Regulatory authorities are given increased powers of enforcement;
- Application fees will be payable for notifications with the lowest fee being $5,000.; and
- Thresholds have been changed for certain sectors such as the introduction of a $55 million threshold for direct interests in agribusiness. The standard threshold of $252 million remains for energy and resources assets where the non-government foreign person is not located in the United States, New Zealand, Japan, South Korea, Chile and China while the threshold of $1.094 million applies to private foreign persons from those countries, subject to the standard threshold applying for certain sensitive sectors.
5. Federal tax laws have been changed to allow certain greenfield
mineral explorers who incur tax losses from their exploration
activities to pass exploration credits to shareholders, which can
be applied as a refundable tax offset by shareholders. The scheme
runs for three tax years initially ending 30 June 2017 and certain
caps apply each year.
6. The offshore petroleum legislation has been amended to:
- Automatically grant or extend the coverage of titles under the legislation to ensure security of tenure for titleholders over blocks moving from State/Northern Territory coastal waters into Commonwealth jurisdiction as a result of a change to the boundary of the coastal waters of a State or Territory; and
- Provide comprehensive arrangements for the valid granting of renewals of Commonwealth titles over blocks remaining in Commonwealth waters, where part of that title has moved into State/Northern Territory waters as a result of a change to the boundary of the coastal waters of a State or Territory.
New South Wales
1. The New South Wales ("NSW") Government is
implementing its gas plan. This includes (i) allowing coal seam gas
exploration and production in certain areas of the State subject to
stringent conditions including confirmation that applicants and
licence holders have the required technical and financial resources
to fund and undertake agreed work programs, (ii) cancelling pending
licence applications, (iii) offering a limited buyback of existing
petroleum exploration licences, and (iv) excising national park and
urban residential zones from existing licences.
2. Special legislation has been passed cancelling coal exploration
licences, the grant of which was found by the NSW Independent
Commission of Corruption ("ICAC") to be the subject of
corrupt conduct by the relevant Minister and the applicants or
their directors and representatives and divesting the licence
holders of all data generated by their exploration activities,
without compensation. There was a High Court challenge to the
legislation but it was dismissed and the legislation stands. It has
been announced that some foreign shareholders of affected parties
are seeking to use investor protection agreements to which
Australia is a party to obtain compensation for
expropriation.
3. The High Court of Australia in an unrelated case held corrupt
conduct under the ICAC Act did not encompass conduct which did not
compromise the probity of public administration. This meant that
some ICAC findings referred to in 2 above were outside power.
Legislation was subsequently passed validating ICAC actions
including its corrupt conduct findings.
Victoria
The mineral resources legislation has been amended to introduce risk-based work plans for extractive industries and to give the Minister increased power in respect of eliminating or minimising risks in the course of licence holders carrying out licence activities.
Queensland
A policy position paper titled "Innovative Resources
Tenures Framework" was released by the government in August
2015. Submissions were invited on the paper.
The proposed framework involves the following.
1. A set of common resource authorities for each stage of the
resource life cycle being available, including information
authority, exploration authority, development authority, production
authority, and infrastructure authority.
2. Project status for a group of related authorities approaching
production stage being available, so that there is one plan and one
set of performance and reporting requirements for that group.
3. The exploration authority being for a maximum term without
renewals with no statutory maximum area and a 50 percent
relinquishment requirement half way through the term subject to
negotiation of the area where strong performance has been achieved.
The maximum terms contemplated are:
- Exploration authority for minerals—eight years;
- Exploration authority for coal—10 years; and
- Exploration authority for petroleum, geothermal and greenhouse gas—12 years
There would be an annual self assessment of performance subject to
a mid-term assessment by the department.
4. The development authority being for the appraisal of resources
and to determine infrastructure requirements. It can also be used
as a retention title. Proposed maximum terms without renewals
are:
- Development authority for minerals and coal—10 years; and
- Development authority for petroleum, geothermal and greenhouse gas—15 years.
Application for renewal of the term would be permitted for a
development authority only when the authority is in retention
status.
5. The information authority being for the gathering of information
in a way that does not trigger native title negotiations with a
proposed term without renewal of two years.
6. The infrastructure authority being for resources related
infrastructure activity and is intended to replace various
authorities currently granted for infrastructure such as pipeline
licences, petroleum facilities licences and mining leases for
infrastructure.
7. Transitional arrangements being made which will be based on the
following principles:
- Current granted rights under tenures will be maintained by continuance of the existing granted tenure rights;
- Tenure holders can opt into the new framework to the equivalent authority in the new tenure pathway;
- Opportunities for higher tenure may only be available under the new tenure legislation;
- In general, renewals will be limited in duration to coincide with implementation of the new laws, unless previously committed as part of the authority grant (further extensions of rights will need to be applied for under the new tenure legislation); and
- Production tenures that have rights and processes in common between the current and new tenure framework may be transitioned by the statute to the new framework.
Western Australia
1. A position paper titled "Proposed Low Impact Activity
Framework Prospecting and Exploration" was released in
December 2015.
The department is promoting a fully automated system for
authorisation to access land for low impact activities. Those
activities include activities using machinery to disturb the
surface of the land for the purpose of, or in preparation for,
prospecting or mineral exploration, exploration drilling,
constructing temporary tracks, excavation of no more than 2
hectares open at any one time (including costeaning, augering, bulk
sampling, underground exploration and excavation for investigative
purpose), temporary camp sites and storage areas. The disturbance
footprint is to be limited to five hectares.
2. Many resources projects in Western Australia are governed by a
project agreement with the State which is ratified by legislation.
If a variation to the project agreement is to be made then it needs
to be ratified by legislation. This has occurred for two projects,
the North West Shelf liquefied natural gas ("LNG")
project and the Gorgon project on Barrow Island.
For the North West Shelf LNG project, variations were required to
give effect to a new LNG export approval process and a new domestic
gas arrangement for the joint venturers, consistent with Western
Australia Government domestic gas policy.
For the Gorgon project, amendments were required to allow the State
to provide an indemnity to the joint venturers for certain common
law liability after formal closure of the Gorgon carbon dioxide
injection operations beneath Barrow Island.
South Australia
The Nuclear Fuel Cycle Royal Commission was established in March
2015. Former Governor of South Australia, Rear Admiral the
Honourable Kevin Scarce AC CSC RAN (Red) was appointed Royal
Commissioner.
The Commission is to undertake an independent and comprehensive
investigation into South Australia's participation in four
areas of activity that forms part of the nuclear fuel cycle.
Those activities relate to the potential for the expansion of
exploration and extraction of minerals, and the undertaking of
further processing of minerals and manufacture of materials
containing radioactive substances, use of nuclear fuels for
electricity generation and the storage and disposal of radioactive
and nuclear waste.
In each case the Commission will consider the feasibility and
viability as well as the risks and opportunities associated with
those activities. Inquiring into risks and opportunities requires
consideration to be given to their future impact upon the South
Australian economy, environment and community. Consideration must
also be given to the measures that might need to be taken to
facilitate and regulate those activities.
The Commission is to report its findings and recommendations by 6
May 2016.
Northern Territory
1. The Northern Territory Government established in November
2015 a new process for land access agreements between the mining,
petroleum and agriculture industries.
The new process includes:
- The establishment of a land access agreement for those exploration activities considered to create more disturbance and requires the lodgement of a Mining Management Plan or Petroleum Environment Plan;
- If agreement over conditions for land access cannot be reached within 60 days by mutual consent, the matter will be referred to an arbitration panel to be made up of high level government and industry representatives;
- The arbitration panel will arbitrate between the parties for a successful agreement within 21 days of the formation of the panel; and
- Once agreement has been reached, the Department of Mines and Energy may approve the Mining Management Plan or Petroleum Environment Plan.
2. Legislation has been passed proving for the adoption of the
National Electricity Law, a national law providing for the
operation of a national electricity market, for the purpose of
transferring the economic regulation of prescribed electricity
networks in the Northern Territory to the Australian Energy
Regulator ("ARE") and other related purposes.
The Northern Territory is adopting a three stage approach to the
implementation of the National Electricity Law in the Territory. In
the first stage, ARE will replace the Northern Territory Utilities
Commission as the economic regulator under the Northern
Territory's Electricity Networks (Third Party Access)
Act. This phase will run from 1 July 2015 until 30 June
2019.
In stage two, certain provisions of the National Electricity Law
will commence on 1 July 2016 in the Territory. This will establish
the legislative framework to allow ARE to undertake the preliminary
work to make their first network pricing determination (which is to
take effect on 1 July 2019) of the Territory's electricity
network service provider, the Power and Water Corporation.
Stage three will involve full operation of the National Electricity
Law (as it applies in the Territory) from 1 July 2019.
3. Legislation has been passed making special provisions in
connection with the North East Gas Interconnector Pipeline
Project.
The legislation creates new statutory rights to cross roads and
waterways with Ministerial approval; provides a mechanism to enable
a range of persons responsible for construction and operation of
the facilities comprising the Project to rely on the Authority
Certificates issued in connection with the Project under the
Aboriginal Sacred Sites legislation; stipulates that an easement in
gross may be created on pastoral land and exempts the land
comprising the pipeline corridor from the subdivision requirements
of the Planning Act.
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.