Australia: New tenure framework in Queensland: A silver lining amongst the dark clouds?

The Queensland Government is working to reduce administrative burdens and modernise the regulatory framework of the resources sector to ensure that Queensland remains an attractive destination for mining investment.

To this end, the State Government has released a policy position paper titled the "Innovative resources tenures framework". The anticipated reforms to the tenure framework are a welcome step forward in addressing existing challenges to tenure management in Queensland.

Still in its early stages of development, the new tenure regime focuses heavily on the exploration phase of a project lifecycle. It aims to provide companies with more flexibility, simplify administration and reduce duplication.

KEY TAKEAWAYS

Key features of the new regime include:

• new maximum terms for exploration tenements (specific to each broad commodity type) with no option for renewal;
• outcome-based rather than prescriptive work plans which set out the proposed exploration objective and geological model to be used;
• annual self-assessment of exploration performance with a mid-term performance "check-in" with the Department;
• no requirement to apply for a variation to proposed expenditure or work program activities, but an update about significant changes should be provided at the mid-term check-in;
• default relinquishment of 50% at the mid-term point subject to "acceptable" exploration performance, with the incentive of deferred or proportional relinquishment to reward "strong" performers;
• incentives for exploration in unexplored or under-explored areas with more favourable mid-term relinquishment obligations negotiated up-front;
• no statutory maximum size for exploration authorities;
• creation of five new uniform authorities for information, exploration, development, production and infrastructure which apply to each resource type (minerals, coal, petroleum, geothermal and greenhouse gas);
• removal of compulsory prerequisite tenures to create accelerated pathways to production; and
• specific provision made for decommissioning and rehabilitation activities once production has ended.

EFFICIENCY GAINS

The proposed changes make absolute sense.

Allowing mining companies to deviate from strict work program activities to account for unexpected exploration results can only be a good thing and emphasises the importance of substantive exploration performance rather than prescriptive compliance.

Although there will be no option to renew exploration permits under the new regime, the maximum terms will be much longer than existing terms and will differ according to broad commodity type as follows:

• resource exploration authority for minerals: 8 years
• resource exploration authority for coal: 10 years
• resource exploration authority for petroleum, geothermal and greenhouse gas: 12 years

Given that almost all renewal applications are currently approved, removing the renewal option altogether and simply granting proponents a full maximum term eliminates a large and unnecessary administrative burden on government and industry.

Most explorers also scale back on exploration activities while a renewal application is being considered due to uncertainty surrounding the extension of tenure. Setting long maximum tenure terms with no option for renewal therefore enhances certainty for both companies and investors, and ensures resources continue to be allocated efficiently.

WATCH THIS SPACE

Although the policy paper contains positive initiatives for industry, the Department will need to work closely with industry stakeholders to ensure that the new framework achieves its aim to cut red tape for miners.

Issues may arise with the qualitative approach to assessing exploration performance at the mid-term check-in when the Department must determine whether an explorer has achieved "strong", "acceptable" or "unacceptable" exploration performance, in which case a proponent may be required to relinquish more or less than the standard requirement for relinquishment of 50% of the tenement.

More work is needed to develop the concept of the proposed "uniform" set of common resource authorities for all commodities. This is designed to make things easier for landholders who may be confused when faced with different tenure frameworks for different commodities. Alleviating this apparent landholder confusion will need to be balanced against the risk of generating unnecessary complexity for mining companies who currently operate within a well-established tenure framework and usually do not deal with more than one commodity type.

The transitional arrangements will also have to be very carefully drafted to avoid disadvantaging existing proponents, particularly in relation to the possible removal of the need to have a "prerequisite tenure" before commencing production. This proposal is not developed in any detail in the policy paper.

Ultimately, at a symbolic level, this paper demonstrates that the government recognises the substantial economic contribution of the resources sector to Queensland and the importance of encouraging continued investment into this sector with a regulatory regime that provides certainty to investors, flexibility to miners and promotes efficient administrative processes. However, at a technical level, the proposed new tenure framework still requires a lot of development and stakeholder input before it can be called a success.

If you wish to learn more about the proposed framework, DNRM is holding information sessions on 12 October 2015 and written submissions may be made to DNRM until 16 October 2015. The Department will also release a regulatory impact statement in early 2016 and there will be consultation on the Bill containing the proposed tenure framework amendments before its introduction into Parliament.

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.

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