Committee to oversee QLD’s land access reform ‘Action Plan’ announced

As promised after the state election in 2012, the Queensland Government has confirmed the details of the committee that will advise them on the issues identified in the Six Point Action Plan to reform the state’s land access laws.

The seven member committee will be chaired by Dr David Watson, and will provide a forum for resource and rural industry bodies to resolve issues relating to resource sector development.

Other members of the committee include Wayne Newton, President, AgForce Grain Ltd; John Cotter, chair, Queensland Gasfields Commission; Dan Galligan, CEO, Queensland Farmers’ Federation; Matt Paul, Queensland Director, Australian Petroleum Producers’ and Explorers’ Association; Bernie Hogan, Regional Manager, Queensland, Association of Mining and Exploration Companies; and Andrew Barger, Policy Director, Queensland Resources Council.

The announcement also confirmed that the committee will specifically advise on:

1. a review of heads of compensation to ensure no erosion of property rights and the expansion of Land Court jurisdiction to include matters of conduct;
2. the introduction of an alternative dispute resolution process;
3. the introduction of a requirement that any Conduct and Compensation Agreement (CCA) to be noted on land title;
4. an option for parties to “opt out” of a formal land access agreement at the election of the property owner;
5. the development of standard CCAs for mineral, coal and coal seam gas industries; and the creation of a single resource for property owners and resource companies.

Mining blog recap for 2012

2012 saw the merger between Herbert Smith and Freehills, creating one of the world’s most experienced energy and resources firms. As it draws to a close, we pause to reflect on some of the key developments in the mining industry.

This year we saw several regulatory and legislative changes take place in the mining sector:

• New South Wales, Queensland, Northern Territory, Australian Capital Territory, South Australia, Tasmania and the Commonwealth all took steps to ensure the harmonisation of safety laws via the Model Work Health and Safety Act was introduced by January 1.
• In August, Victoria declared a ban on approvals to undertake hydraulic fracturing (fraccing) as part of onshore gas exploration, and the issue of new exploration licences for coal seam gas (CSG). While Queensland took a significant step in reducing red tape by passing the Mines Legislation (Streamlining) Amendment Act 2012.
• The new Indonesian Mining Law enabled foreign investors to hold business permits for the first time, although foreign investors are now required to divest ownership in companies on an incremental scale after 5 years of production (up to 51%).
• The Commonwealth Government released, for comment, the exposure draft of the Native Title Amendment Bill 2012, which proposes substantive amendments to the Native Title Act 1993 (Cth).

In March, we reported that M&A transactions in the mining and energy sectors were buoyant, accounting for almost half of all deals in the preceding 6 months. Despite significant nervousness and negative opinions surrounding the market in recent months, Chris Richardson of Deloitte Access Economics suggested that the glass is still ‘half full’ for the resources sector at the Annual National AMPLA Conference.
In September, Queensland called for EOI in its lucrative bauxite leases, while also announcing an increase in coal royalties of up to 50 per cent per tonne. In October, Western Australia granted approval for Toro Energy to proceed with the State’s first uranium mine to be developed.
The year also saw a raft of inquiries and debates:

• Coal seam gas (CSG) was on the agenda on the east coast. Victoria released a report entitled ‘Inquiry into Greenfields mineral exploration and project development in Victoria’, in a move to understand how better to develop and regulate Victoria’s CSG potential, while New South Wales tabled an inquiry into the environmental, economic and social impacts of mining CSG.
• In October, the Productivity Commission announced a 12 month inquiry into the non-financial barriers to mineral and energy resource exploration to determine if there is unnecessary regulatory burden.

With still a month or two to go in 2012, be sure to keep an eye on our blog for further updates.

Victoria declares ban on fraccing

The Victorian Government has declared bans on:

• approvals to undertake hydraulic fracturing or “fraccing” as part of onshore gas exploration; and
• the issue of new exploration licences for coal seam gas (CSG).

This move follows the ban on fraccing by the New South Wales Government, which has been in place since July 2011.

The measures taken by the Victorian Government do not affect exploration activity approved under current CSG exploration licences that do not involve fraccing, such as surveying and drilling for core samples.

It appears that the bans are a response by the Victorian Government to the pressure exerted by regional community groups, as described in our blog entry of 13 June 2012.

According to the Victorian Government, the bans will remain in place until a national harmonised framework for CSG has been developed. The work program to deliver this framework was announced in December 2011 by Energy and Resources Ministers from across Australia, and results of that work are expected in December this year.

The Minerals Council of Australia has said the Victorian Government’s measures in relation to CSG are ‘profoundly disappointing’. In particular, it states that the decision to rely on the development of a national framework for CSG is ‘concerning’ as the framework may be delayed for years, meaning that Victoria would miss the opportunity to develop an industry that could generate jobs and significant revenue for the state.

Similarly, the Australian Petroleum Production & Exploration Association (APPEA) has said that the Victorian Government’s decision to put the bans in place ‘sends the wrong message to investors and will see the state fall further behind Australia’s rapidly growing resource-rich states’.

There is currently no CSG production in Victoria, and exploration for CSG is in an embryonic stage. Fraccing does not currently occur in Victoria.

CSG: The state of play in Victoria

In recent weeks, the approach to coal seam gas (CSG) mining in Victoria has been explored and debated both in the Victorian Parliament and out in the farming lands of the State.

Recent Developments

In moves to understand how better to develop and regulate Victoria’s CSG potential the Victorian Parliament’s Economic Development and Infrastructure Committee released a report entitled ‘Inquiry into greenfields mineral exploration and project development in Victoria’ (Report) on 22 May. The Victorian Government also recently became a signatory to the National Partnership Agreement on Coal Seam Gas and Large Coal Mining Development (Partnership Agreement) with the Commonwealth, Queensland, New South Wales and South Australia.

The Report recommends the Victorian Government establish an appropriate process to enable open consultation with stakeholders, including local communities, for issues regarding future coal seam gas exploration and development.

If adopted, increased communication between different stakeholders may lead to more balanced and informed views. The risk, however, is that increased communication may not be sufficient to stymie the conjecture and angst surrounding unconventional gas extraction, with the result being that any potential mutual benefit for farmers and miners is buried beneath the noise.

The Partnership Agreement advocates a strengthening of the science underpinning the regulation of these industries by establishing the Independent Expert Scientific Committee on CSG and Large Coal Mining (IESC). The IESC aims to address public concerns about the actual and potential impacts of CSG and coal mining activities on water resources by increasing public access to information as the IESC will make public its advice and findings from any research it oversees.

Community Murmurs

Community groups in Toongabbie, Forrest, Colac and Wonthaggi are all calling for a ban on CSG and at minimum, a full scale public inquiry.

The concerns of the community groups campaigning against CSG are echoed by Mark Wakeham, Campaign Director at Environment Victoria (EV). In his presentation to the Committee, Mark raised a number of concerns, in particular the imbalances between:

• the assumption that exploration will be beneficial for the State and the continued environmental unknowns; and 
• the levels of strategic assessment of conflicting land uses, namely mining and agriculture.

In support for those community groups calling for a ban on CSG, EV has recommended a moratorium on CSG, as adopted by the NSW Government until:

• quantified measures indicate CSG operations actually operate at a lower emission level than coal fired energy generation; and 
• the full environmental impact of hydraulic fracturing is known. 

The Environment Protection Authority (EPA) has already identified a number of environmental impacts associated with coal seam gas extraction, including impacts on groundwater and also wastewater generation. It has been argued that the EPA could take a more active role in the exploration process to aid conservation. Of course this would add to the already increasing costs and pressures on mining companies.

What happens next

There is currently no CSG production in Victoria, or any applications to begin CSG production in the State. However ExxonMobil recently showed appetite to investigate CSG potential in Victoria when it entered into a farm-in agreement with Ignite Energy Resources to evaluate the scope for commercial production of CSG in the Gippsland Basin. It remains to be seen how the impacts of the Report, the Partnership Agreement and campaigning by the growing number of community groups will play out.

NSW inquiry plugs CSG

Last week the NSW Upper House tabled its inquiry into the environmental, economic and social impacts of mining coal seam gas (CSG), highlighting that this pipeline of regulation for CSG will be a prevalent issue.

As with any future regulation law makers must consider the trade off between clearing the fog of uncertainty vis-à-vis stifling future energy supply.

The expansion of CSG is filtering down the east coast, as energy sources are no longer limited to desolate rural land.

While making 35 recommendations, the report resinates a level of uncertainty surrounding the potential impacts of the CSG industry.

The main recommendations include:

• a moratorium on production licences but not on exploration as more data needs to be gathered to assess potential impacts;
• a tightening of the Draft Code of Practice for CSG Exploration so that the suggested measures around water testing and monitoring are compulsory rather than optional;
• a ban on open storage of produced water; 
• continuation of the current ban on fraccing until more is known about the side effects of the controversial process;
• development of a model to ensure that CSG companies are held responsible for covering the full costs of remediating any environmental impacts;
• review of the Petroleum (Onshore) Act 1991 to rectify any imbalance between landholders and mining companies over land access;
• amendments to  the Petroleum (Onshore) Act 1991 to require a licence holder to enter into an access agreement with a landholder for CSG production; and 
• establishment of a position for a Petroleum Ombudsman.

It is not just gas supply that is at risk, the delay connected to any moratorium is in the fore front of CSG investors. Following the release of the report share prices of companies with NSW CSG exposure closed down.

Not only is CSG coming under increased scrutiny in NSW, in Victoria another shire has sought to ban the controversial practise.

Ultimately the recommendations are a step in the right direction, unfortunately the risk of closing the pipe on CSG remains.

For a full copy of the tabled inquiry click here.