Qld: Government releases Galilee Basin Development Strategy

On 7 November 2013, the Queensland Premier, Campbell Newman, released the Galilee Basin Development Strategy (Strategy). The Strategy acknowledges the long-term economic benefits that opening up the Galilee Basin to mining would bring to Queensland and is designed to support and encourage business and industry to develop key infrastructure across the region.

The Strategy details government initiatives aimed at early development of the southern and central Galilee Basin (with priority to be given to ‘first movers’). These initiatives include:

• lowering start-up costs by offering a discounted royalty period which will gradually ramp-up to full royalty by the end of the period,
• streamlining land acquisition, planning, approvals and red tape reduction by compulsorily acquiring land for projects, delivering project approvals in a timely way and consider declaring projects ‘prescribed projects’ to overcome unreasonably delays in obtaining project approvals,
• positioning Abbot Point as the Galilee’s gateway to the world by reserving the Terminal (T2) development site for a proponent to develop coal stockpiling and handling infrastructure, and
• supporting infrastructure development and corridors by supporting the development of localised water solutions, encouraging and assisting private investment in relevant electricity transmission and prioritising the development of roads critical to opening up the Galilee Basin.

No further details have been released at this stage.

Notably, the Strategy comes less than a week after approval of GVK’s Kevin’s Corner project which is expected to be Australia’s biggest coal project. Kevin’s Corner joins the adjacent Alpha Coal project which was approved in August 2012.

In addition, Aurizon has been developing an integrated rail transport and port solution for Galilee Basin coal over the past two years.

For further information, please contact Jay Leary, Partner, Roger Allingham, Graduate or your usual Herbert Smith Freehills contact.

Victoria to raise the bar for mining exemptions

The Victorian Minister for Energy and Resources recently introduced the Mineral Resources (Sustainable Development) Amendment Bill 2013 (Vic) (the Amendment Bill) into the Victorian Parliament.

The Amendment Bill, if passed, will likely make it more difficult for land to be declared exempt from exploration and mining licences. The Minister will now be required to consider the value of mineral resources (including coal seam gas) before an exemption is granted.

Under the existing Mineral Resources (Sustainable Development) Act 1990 (Vic) (the Act), the Minister has the power to exempt any land from being subject to a licence granted under the Act (i.e., exploration licence, mining licence, prospecting licence or retention licence). Currently, when deciding whether to grant an exemption, the Minister must take into account ‘the social and economic implications of the decision’.

What will change?
The Amendment Bill would amend the Act so that the Minister would be obliged to take into account ‘the known or potential value of mineral resources on the land and the impact that the proposed exemption may have on that value’ when deciding whether to exempt land from being subject to a licence.

Why?
The amendment has been proposed following recommendations made by the Victorian Parliament’s Economic Development and Infrastructure Committee in its inquiry into greenfields mineral exploration and project development in Victoria (22 May 2013).

In particular, the Committee had recommended that the Victorian Government develops a land use policy framework to better manage competing land uses in Victoria.

Who will be impacted?
The impact of the proposed amendment is likely to make the Victorian mining legislation more conducive to the development of the mineral and extractive resources industries. In doing so, the changes will be of concern to community groups seeking to apply for mining exemptions to prevent exploration and mining (including in respect of coal seam gas) in their local areas.

The Amendment Bill also contains other proposed amendments to the Act which are aimed at reducing the administrative and regulatory burden on industry, including the introduction of statutory time frames for the processing of licence applications and the streamlining of work plan requirements.

For further information, please contact Myra Stirling, Senior Associate, Liam Hickey, Solicitor or your usual Herbert Smith Freehills contact.

NSW streamlines standard mining lease conditions

On 17 October 2013, the NSW Resources and Energy Minister Chris Hartcher announced significant amendments to the standard conditions for mining leases to reduce regulatory duplication. The amendments will result in the removal of conditions that that seek to address matters already regulated by other government departments, such as the Department of Planning. The amendments will also involve the deletion of conditions that are covered by obligations under the Mining Act and other mine safety legislation, as well as other conditions that have become outdated and redundant.

The removal of the duplications will cut the number of conditions for future standard coal mining leases in NSW from 24 to nine, and for other mining leases from 23 to eight. The NSW announcement comes a week after the Queensland government said it would streamline the approvals process for exploration permits for coal and mineral exploration.

NSW Resources and Energy Minister Chris Hartcher said the changes are part of a range of actions the Government is taking to minimise the costs of doing business in NSW and boost investment certainty. The NSW Government has already committed to new service delivery standards, reducing the times for assessing applications under the Mining Act from 1 July 2013. Target time frames for assessing all minerals applications will be cut to 45 business days (from 80 business days), while times for processing coal applications and coal renewals will be reduced to 95 business days and 55 business days respectively.

2013 Budget – Changes affecting the mining sector

The Federal Government’s 2013-2014 Budget (the Budget) contains a number of changes to existing tax rules some of which are expected to have adverse implications on the mining sector.

Changes to accelerated tax depreciation arrangements

The Federal Government announced immediate changes to Australian tax laws which impact income tax deductions available to mining companies. The changes defer deductions for the cost of acquiring mining rights (e.g. exploration permits or mining leases) and information which is first used in exploration, from an immediate deduction to a deduction spread over:

• 15 years; or
• the life of the mine, whichever is shorter.

Although full details are yet to be released, the following expenditure will continue to be immediately deductable:

• costs of acquiring mining rights and information from government authorities;
• costs incurred in generating new information or improving existing information; and
• mining rights acquired under a recognised “farm-in, farm-out’ arrangement.

The changes apply to taxpayers who start to hold the mining right or information after 14 May 2013.

These changes may significantly impact the acquisition prices of exploration assets and also have the potential to inhibit junior mining companies ability to obtain investment through the sale of prospective interests to investors on a full or partial cash basis.

Practically, there are also a number of issues surrounding the 15 year or life of mine deduction mechanisms which are yet to be clarified.

Reduction in funding for mining and energy initiatives

Funding has also been significantly reduced to the following mining and energy initiatives in the Budget with:

• $500 million withdrawn over three years from the Carbon Capture and Storage Flagships Program;
• $370 million deferred over three years from the Australian Renewable Energy Agency;
• $274 million withdrawn over two years from the Coal Sector Jobs package;
• $88 million withdrawn over two years from the National Low Emissions Coal Initiative; and
• $29 million withdrawn over two years from the Coal Mining Abatement Technology Support package.

For further details, please visit the Federal Government Budget website. 

Current trends and regulatory changes for the mining industry in QLD – a quick review

If announcements are anything to go by, the immediate future for the mining industry at a regulatory level is looking brighter. The Queensland Government has announced their intention to attempt to decrease the inefficiencies that currently exist at a compliance level in the resources sector.

Accordingly, the Queensland Government has recently enacted legislation to streamline and harmonise procedures for dealing with different types of resource interests, including exploration permits and mining leases.

The legislation reduces the initial terms of mining claims from 10 years to 5 years, and creates a new class of ‘non-assessable transfers’ (change of name, transfers of mortgages and subleases), that are not required to be assessed before being registered. The legislation also creates a new online platform, which aims to deliver information contained in mining and petroleum registers more efficiently.  

The Queensland Government has also announced its intention to minimise the red tape that exists in current legislation. The Office of Best Practice Regulation released a report in October 2012 recommending an immediate review of occupational health and safety legislation and workers’ compensation legislation that “impose red tape, increase the cost of business and reduce competition” with a view to reducing the burden of regulation by 20% over six years. 

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.

New Queensland Government with new (and refreshing) change to mining related infrastructure

Although it is still early days, the Queensland Government has displayed a radically different and refreshing approach to mining infrastructure to that of the previous Labor government.

The previous government’s approach was light handed. It left planning of ports to GOCs, and believed that coordination was best achieved by the forces of competition and commercial resolution.

While in theory the previous government’s approach has merit, in practice it meant that infrastructure delivery was delayed while miners hedged their bets by applying for capacity at every planned port. This is turn lead to delays in QR Network’s ability to determine what coal systems needed expansion.

In a relatively short period the Queensland Government has made significant changes to key mining infrastructure projects. The most significant of these changes is the re-setting of development at Abbot Point T4-T9. The government seems to have taken a view that the planned MCF was not feasible (economically or environmentally) and that 6 terminals was overkill. Both of these views were correct.

The government’s changes to T4-T9 signals a radically different approach to mining infrastructure generally. In particular, that the government will be very hands on and will act decisively with a view to bringing on development. That new approach should be applauded.

The government do however face a number of challenges:

• Understanding a very complicated coal chain, including:
• unlocking capacity through coordination; and
• developing an efficient process for development of rail expansions (where SUFA will be crucial);
• Developing a new model for development of Abbot Point T4-T9;
• Water transportation issues.

This post is written by Freehills Mining Lead Partner Jay Leary.