Climate Change Regulation in Australia: Opt-in Scheme for Liquid Fuels

What’s Happened?

The Clean Energy Act 2011 (Cth) contemplates the creation of an ‘Opt-in Scheme’ for liquid fuels.

Regulations for the Opt-in Scheme came into effect on 10 December 2012. The Scheme will operate from 1 July 2013 onwards.

The Scheme will allow a person to apply to the Clean Energy Regulator to be declared a designated opt-in person in relation to amounts of liquid fuels.

A person so declared is a liable entity in relation to those amounts, and takes on that liability instead of paying an equivalent carbon price under fuel tax and excise legislation.

Who needs to know?

Anyone who is a large user of liquid fuel – or who is a member of a GST group, or a participant in a GST joint venture, which is a large user of liquid fuel – should consider using the Opt-in Scheme.

Lodgement Deadline?

Applications for designation in financial year 2013-2014 need to be lodged with the Regulator on or before 31 March 2013.

Implications

Use of the Opt-in Scheme may yield cash-flow benefits. Under the Scheme, carbon liability only needs to be paid periodically: in ‘flexible charge’ financial years, by the end of the following February; and in ‘fixed charged’ financial years, 75% by the end of June and the remainder by the following February. Outside the Scheme, carbon liability is ‘inbuilt’ under the fuel tax and excise legislation.

Use of the Opt-in Scheme may also yield lower compliance costs by providing the opportunity to acquit liability using potentially lower priced emissions units (such as carbon credit units generated under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth), and eligible international emissions units).

The Scheme may be of particular benefit to the mining industry.

This article was written by John Taberner, Consultant, Sydney and Michael Voros, Special Counsel, Perth.

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 companies take note – new ASX reporting requirements to take effect at the end of the year

New ASX reporting requirements, due to come into effect in December 2013, are set to significantly change how listed mining companies report to the market. 

The new requirements oblige mining companies to report in accordance with the 2012 JORC Code, the latest edition of which was published on 20 December 2012. The changes require mining companies to report on estimated mineral resources and ore reserves by the inclusion of an annual mineral resources and ore reserves report in the annual report and to disclose production targets for major projects.

In these reports, the mining companies will need to include all material information to allow shareholders to understand the reported estimates of probable and proved ore reserves for major mining projects.

Additionally, the new listing rules also streamline the requirement for prior written consent of the competent person for annual reports.

There will be a twelve month transition period, with the new requirements to come into force on 1 December 2012. 

Mining reforms introduced into QLD parliament

The Queensland Government has introduced legislation to give effect to the introduction of competitive tendering for coal, petroleum and gas areas, and the development of the Aurukun bauxite resource on Cape York.

The Queensland government announced on 9 October 2012 that a new competitive cash bidding process would apply to companies seeking the right to explore on highly prospective coal, petroleum and gas resources tenements. This new legislation amends the Mineral Resources Act 1989 (Qld) to allow for this to occur.

Minister for Natural Resources and Mines Andrew Cripps said “this new process of allocating exploration rights will deliver a consistent approach across the resources sector and ensure all Queenslanders benefit from the timely development of the state’s most resource-rich areas.”

The changes will be significant for coal and petroleum proponents – coal miners will no longer be able to rely on the first in first served process that has governed the grants of permits thus far. The change, whilst resulting in increased revenues for government, will make it more difficult for smaller miners to compete with the deeper pockets and greater balance sheets of the larger miners.

The new legislation also allows for expressions of interest in Queensland’s lucrative bauxite leases in far north Queensland. In relation to this issue, the Minister said that “given the vast area of the Aurukun bauxite resource it is possible that following the tender process the State may select more than one proponent to develop different parts of the resource area.”

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.

Right to negotiate and other native title reform

Native Title Act reform

On 20 September 2012, the Commonwealth Government released, for comment, the exposure draft of the Native Title Amendment Bill 2012 (Bill). The Bill proposes substantive amendments to the Native Title Act 1993 (Cth) (NTA) and, if passed, may have a direct impact on proponents establishing or operating mining, energy and infrastructure projects in Australia.

The key amendments relate to:

• Right to Negotiate: the amendments codify what constitutes ‘good faith’ negotiations and extend the minimum negotiation period from 6 to 8 months; 
• Historical Extinguishment: the amendments include provisions to enable the historical extinguishment of native title in national parks and nature reserves to be disregarded in certain circumstances; and
• ILUAs: clarifying and changing some aspects of the processes for the authorisation, registration and amendment of indigenous land use agreements (ILUAs).

A summary of these proposed reforms and implications can be found by following this link to Herbert Smith Freehills website.

The Australian Resources Economy – the glass is still “half full”

This morning saw the 36th Annual National AMPLA Conference in Brisbane officially kick off with key note address from Chris Richardson of Deloitte Access Economics, providing an overall insight into the complexities of the Australian resources supply/demand economy and external influencing factors, as well as a general overview as to the significance of the resources sector to the Australian Economy.

While there has been some significant nervousness and negative opinions surrounding the market of late, the address provided a timely reminder to the industry that while a cautious approach is perhaps warranted, Australia still remains in a relatively positive position (particularly as against the US/European economies) with further growth opportunities still to come.

The key takeaway points on the market for the industry were:

• Australia is still going well, but unlikely to see the same growth from recent times as China demand slows, but we should retain “a glass half full” attitude;
•  Workforce demand vs. workers, interest rates, high aussie dollar and excess gas in the US are all having effect on the Australian resources demand;
•  The future maybe more about stability - changes to a more democratic system in China may also temporarily slow demand from China; and
• Growth in India (which is typically 15yrs behind China) will increase demand from Australia but may be unlikely to be as great as in China.