Mining & Petroleum Law – NSW legislative changes update #1

Renewal application for exploration licences: onus to justify larger than default area shifts to applicant

On 1 March 2016 the Mining and Petroleum Legislation Amendment (Harmonisation) Act 2015 (NSW) (Harmonisation Act) commenced by proclamation (except Schedule 2(23) which commenced on 18 December 2015). The Harmonisation Act forms part of a suite of 5 Acts, the object of which is to reform the regulation of resource exploration and production in NSW.

Mining – 50% reduction of area on renewal of exploration licence

New section 114A of the Mining Act 1992 (NSW) (Mining Act) alters the power of the decision-maker in relation to renewal applications for exploration licences. Previously, the area sought to be renewed could not exceed half of the original licence area unless the decision-maker was satisfied that special circumstances existed that justified the renewal of a larger area.

Under the changes, the renewal area is set at a default size of not exceeding half the original area. The onus is put on the applicant to claim that special circumstances exist that justify granting a renewal over more than half of the original area. What amounts to special circumstances is not exhaustively described but can include consideration of any partial cancellation of the exploration licence requested by the licence holder.

Petroleum – 25% reduction of area on renewal of exploration licence

The Harmonisation Act aims to streamline administrative arrangements and bring the Mining Act and Petroleum (Onshore) Act 1991 (NSW) (Petroleum Act) into closer alignment. New section 19B of the Petroleum Act sets the default area for renewal applications not exceeding 75% of the original area granted or the previous renewal area granted. Similar to the Mining Act changes, the onus is on the applicant to claim that special circumstances exist that justify granting a renewal over an area exceeding 75%.

Why is this important?

The applicant now plays a more pivotal role in justifying the renewal of exploration licences for greater than the default area. If the applicant makes no claims of special circumstances, it is likely that the renewal will be no greater than 50% of the area for mining exploration licences and 75% for petroleum exploration licences. Particular care will need to be taken when settling renewal applications to ensure that a satisfactory and compelling description of the special circumstances is included.

Please contact William Oxby, Partner, Brisbane, +61 7 3258 6469, if you require additional information or your usual Herbert Smith Freehills contact.

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Increased capacity at port of Port Hedland

The Pilbara Port Authority announced earlier this month that it will be increasing its capacity at the port of Port Hedland by 16% over the next 3 years. This will see the port’s capacity increase from 495,000,000 tonnes to 577,000,000 tonnes per year. This has come following the port’s record throughput in 2014-15 of 446,921,901 tonnes. This increase will be allocated to the D class capacity, meaning it will be available to all applicants. The PPA has paired with OMC International, an independent maritime engineering company, to develop and implement what the PPA is calling the ‘Tidal Model.’ This model is based on OMC’s Dynamic Under Keel Clearance model which it first implemented at the port in 1996.

This model increases operational efficiencies by measuring real time swell and tide data as well as vessel’s own stability requirements to determine accurate allowances for squat and wave response. This allows increased loading of ships as well as increased throughput each day at the port. OMC’s estimations indicate that this will amount to around $1.1 billion extra revenue being generated by the port. The system is also said to facilitate improved safety and risk management procedures by allowing for increased manoeuvrability of ships in a carefully monitored way. This increase in capacity has been welcomed by companies such as Fortescue Metals Group Ltd and BHP Billiton Ltd who are both seeking to increase their capacity at the port over the next few years.
For further information, please contact Jay Leary, Partner, or your usual Herbert Smith Freehills contact.

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UNCITRAL Transparency Rules applied for the first time in investor-State arbitration

In September 2014, BSG Resources Limited initiated an international arbitration proceeding against the Republic of Guinea arising out of an alleged expropriation of its investment in the mining sector in the country.  

The multinational mining company started its operations in Guinea in 2006 and in 2013 it was granted mining licenses to explore and exploit mines at the ‎Simandou and Zogota sites. The dispute involves the alleged rescission of the company’s mining licenses due to accusations of corruption by the new Government in Guinea.

The arbitration is being administered by the International Centre for Settlement of Investment Disputes (ICSID) in Washington D.C. The case stands out for being the first publicly available ICSID case where the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration were voluntarily opted-in by the parties to the arbitration.

Click here to read more.

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Parliamentary Inquiry Report into FIFO and other long distance commuting work practices in regional Queensland released

On 9 October 2015 the Infrastructure, Planning and Natural Resources Committee released its “Parliamentary Inquiry report into FIFO and other long distance commuting work practices in regional Queensland” (Parliamentary Inquiry Report). Earlier this month, on 1 October 2015, the Government appointed FIFO Panel made its “FIFO Review Report” (Review Report) publicly available, after being provided to the Minister of State Development at the end of July 2015. Both reports form part of the Queensland Government’s FIFO Review, which aims to introduce choice for employees working at mines located near a resource town or regional community to live near their workplace.

Key recommendations

Both Reports recommend legislative reform to prescribe that a social impact assessment process be undertaken for major projects. If this recommendation is implemented it would likely involve the amendment of the State Development and Public Works Organisation Act 1971 (Qld) or the Environmental Protection Act 1994 (Qld). These pieces of legislation set out and facilitate approval processes for resource projects in Queensland.
The Review Report recommends that the Environmental Protection Act 1994 (Qld) be amended to require resource proponents to prepare appropriate workforce, procurement and accommodation plans for proposed resource activities as part of their environmental approval process. It further recommends monitoring and enforcement measures be put in place to ensure compliance with approved workforce, procurement and accommodation plans for new resource activities.
The Parliamentary Inquiry Report recommends that the government consider making changes to anti-discrimination legislation to prevent local workers in regional or mining towns being discriminated against on the basis of where they live for work. The Parliamentary Inquiry Report emphasises that workers should have a genuine choice of where they live for work. It also makes recommendations in relation to the minimum standards for the provision of substantial temporary and permanent accommodation for FIFO workers, such as room design and access to health services and recreational areas and that the standards advise against the practice of ‘motelling’ or ‘hot-bedding’..

Neither Report recommends any form of retrospective action to place limits on existing FIFO workforces. As such, current resource projects with FIFO workforces should not be impacted by changes flowing from the recommendations in the Reports.
The Parliamentary Inquiry Report recognises that some resource operations require total FIFO workforces due to their remoteness or during construction; indicating that future resource projects in remote areas with 100% FIFO workforces may still be acceptable.
Government response to these Reports is expected in early 2016. This may be followed by the introduction of new laws and regulations in regards to FIFO and non-resident workforces.

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

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Update – Innovative Resources Tenures Framework, Queensland

On 12 October 2015, Herbert Smith Freehills attended the Queensland Department of Natural Resources & Mines workshop on the Innovative Resources Tenures Framework in Brisbane.
The purpose of the workshop was to discuss the Policy Position Paper, which was released in August 2015.  Submissions in response to the Policy Position Paper close on 30 October 2015.

Key information

The five key pieces of information we took away from the session were:

  1. The new tenure framework will decrease the types of tenure available to proponents from 20 to 5, being: 
    • Information Authorities,
    • Exploration Authorities,
    • Development Authorities,
    • Production Authorities, and 
    • Infrastructure Authorities. 

    This is intended to create a less complex system which will be simpler to regulate with respect to overlapping areas.

  2. For exploration authorities, there will be no maximum area size but parties will be required to provide justification for the size of the area applied for.
  3. Default relinquishment will be 50%.  However, there will be potential for reduced or deferred relinquishment based on the performance of the proponent.
  4. Feedback received by the Department indicates that the systems for production authorities and infrastructure authorities work well and there will be minimal changes to how these are regulated.
  5. Companies will be required to review their native title agreements to ensure native title processes are not triggered under the proposed changes.

Next steps

There will be further consultation and opportunities for feedback as the reforms progress through the following stages:

  • a regulatory impact statement due to be released in early 2016,
  • the consultation Bill which will be introduced to Parliament (no timing given), and
  • the Parliamentary Committee process during the passage of the Bill.


The Department indicated that it is hopeful that the transitional arrangements for exploration authorities will be prepared in late 2015, with full implementation of the reforms to be completed by the end of 2017.

Please contact William Oxby, Partner, Brisbane, +61 7 3258 6469 or Cassandra Duffy, Solicitor +61 7 3258 6456 if you require additional information or your usual Herbert Smith Freehills contact.

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Filed under Mineral Resources, Mining, Queensland

Mining and petroleum tenure reform in Queensland

Material changes are proposed to the tenures under which minerals and petroleum are explored for in Queensland. The Department of Natural Resources and Mines recently released a policy position paper titled ‘Innovative resources tenures framework’ (Reform Policy). Consultation with the industry and interested parties is proposed for September and October 2015. Importantly, submissions on the policy position paper are due 16 October 2015.

Separately, we note the recently altered status of the Mineral and Energy Resources (Common Provisions) Act 2014 (Qld). As a consequence of the Mineral and Energy Resources (Common Provisions) (Postponement) Regulation 2015 (Qld) (Regulation), the balance of the Common Provisions Act will automatically commence on 27 September 2016 (if not commenced, amended or repealed beforehand). However, the release of the Reform Policy suggests that the Common Provisions Act will be amended or repealed before 27 September 2016.

The Reform Policy proposes to set maximum terms for exploration licences for minerals and petroleum with no renewals and a default relinquishment of 50% of the area at the prescribed time. Under transitional arrangements (to be developed further after consultation) renewals will be limited in duration, there is capacity to opt-in to the new framework and a change to ‘higher tenure’ may alter timelines and processes for projects to be developed in the short term.

We recommend that these reforms be closely monitored against a company’s matrix of tenure, having particular regard to: relinquishment; any long term retention proposals; and development horizons for projects.

Please contact William Oxby, Partner, Brisbane, +61 7 3258 6469, if you require additional information or your usual Herbert Smith Freehills contact.

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Filed under Mineral Resources, Mining, Queensland

Amendments to the Aboriginal Land Rights Act 1983 (NSW) – Project and transactional implications

The Aboriginal Land Rights Act 1983 (NSW) (Land Rights Act) has been recently amended to include a framework for reaching agreements with Aboriginal Land Councils. The new framework and capacity to reach Aboriginal Land Agreements (ALAs) is important for project development and transactional due diligence.

ALAs are formal agreements between an Aboriginal Land Council, the Crown Lands Minister and potentially any other third party (after invitation and approval by the parties). The agreement may provide for the exchange, transfer or lease of land to an Aboriginal Land Council, or an undertaking by an Aboriginal Land Council not to lodge a claim, or to withdraw a claim, in relation to specified land (see section 36AA). The parties may also choose to include any other matter in the agreement. Negotiations may commence at any time with notice in writing.

Land subject to an unresolved claim under the Land Rights Act can cause delay and uncertainty in relation to access to Crown land. Until now there has been no formal agreement process in the Land Rights Act to manage this. The new framework provides greater certainty and should therefore assist project proponents in securing access to claimed land (or land potentially subject to a claim in the future). It is possible ALAs will become more commonplace, especially considering there are some 20,000 plus undetermined claims.

Finally, and from a transactional perspective, the due diligence process can now, if warranted, include a search of the newly established register of ALAs to determine whether there is an agreement registered for any Crown land covered by a project.

Please contact William Oxby, Partner, Brisbane +61 7 3258 6469, if you require additional information or your usual Herbert Smith Freehills contact.

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Filed under Aboriginal Land Councils, Aboriginal Land Rights Act 1983, Mining

Update on transparency reporting – compliance with EU reporting requirements by extractive companies on government payments is determined to be an acceptable substitute for Canada

In an earlier post we noted that the Canadian federal government had brought new legislation into force on 1 June 2015, the Extractive Sector Transparency Measures Act, which establishes reporting requirements of payments made to governments by mining (and other extractive) companies. This followed the earlier implementation by Norway and the UK of similar reporting obligations of payments to governments.  We have previously posted updates on the UK regime for extractive companies with debt or equity securities listed in the UK and large, unlisted companies incorporated in the UK (including subsidiaries of non-UK parent companies) to produce annual reports on payments to governments for financial periods starting on or after 1 January 2015. If you would like a copy of our detailed briefings on the EU Directives and on early UK implementation, please contact Jennifer Bell or Sarah Hawes.

Draft guidance now issued for comment

The Canadian federal government has now released its draft Guidance and Technical Reporting Specifications for review and comment (comments may be provided until 22 September).  These tools have been developed in consultation with industry, civil society organisations, Aboriginal experts and provinces, and provide general information on (a) who is subject to the Act (b) which entities must report (c) what payments should be reported.

EU reporting requirements determined acceptable substitute

Section 10(1) of the Canadian Act allows the Minister of Natural Resources Canada to determine that the reporting requirements of another jurisdiction are an acceptable substitute for the reporting obligations in the Act.  As of July 31, 2015, the EU’s Accounting and Transparency Directives were determined to be an acceptable substitute, so that reports submitted to European Union and European Economic Area member-states that have implemented those 2 directives at a national level (eg the UK) may be submitted to the Canadian Minister as a substitute.  Companies seeking to use this substitution determination must comply with the reporting requirements in the EU/EEA member country, submit a substitution report to the Canadian government and follow the Canadian Act’s publication requirements.

For further information, please contact Jennifer Bell, Partner, London or Sarah Hawes, Professional Support Consultant, London.

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Filed under EU, Mining, North America, UK

Australian Income Tax bill introduced – tenement realignments and farm-ins/farm-outs

On 25 June 2015, the Australian Government introduced a tax bill (Tax and Superannuation Laws Amendment (2015 Measures No 2) Bill 2015) to Parliament dealing with tenement realignment and farm-in-farm-outs.

Broadly, upon enactment of the bill the following rules will apply (retrospectively from 14 May 2013):

  1. There will be an income tax roll-over for tenement swaps undertaken to align ownership of tenements to facilitate a joint project – this reduces the need for complicated contractual (synthetic) arrangements in many circumstances although stamp duty will still be an impediment for onshore deals; and
  2. The income tax farm-in tax rulings will be codified in the Australian tax legislation so in essence where there is a farm-in the farmor will only be subject to Australian tax on cash consideration/reimbursement of expenses and the farmee will be allowed a deduction for all expenditure it incurs/funds on exploration to earn its interest – this greatly simplifies the tax treatment of these arrangements.”  

For further information, please contact Narelle McBride, Director, Greenwoods & Herbert Smith Freehills or your usual Herbert Smith Freehills contact.

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Filed under Mining, Projects, Tax

Transparency reporting – Canadian Act now in force (following UK and Norwegian legislation last year), further EU implementation and US still to come

Last week, the Canadian federal government brought new legislation into force, which establishes reporting requirements of payments made to governments by mining (and other extractive) companies.  The Extractive Sector Transparency Measures Act applies to Canadian listed companies, as well as those companies above certain monetary / employee thresholds with assets or business located in Canada, which are involved in oil, gas or minerals. Reporting will commence in respect of financial years ending after 1 July 2016.

What are the requirements?

Like the UK and Norwegian legislation that came into force in 2014 (see here for our e-bulletin on the UK position), the key focus of the legislation is reporting of any payments to government entities that exceed $100,000, whether monetary or in kind (including taxes, royalties, fees, production entitlements, bonuses, dividends).  Those payments may be at any level of government, including from June 2017 to Aboriginal entities.

And similar to the approach by the UK government and as reflected in the EU Directives approach, the Canadian legislation contains an equivalency clause which allows for substitution of another jurisdiction’s reporting regime, to address the concern of multiple overlapping reporting obligations.  Since the Norwegian reporting requirements were the first to come into force, reporting has already commenced under those requirements (see here for Statoil’s report).

Other jurisdictions to follow?

There is expected to be further implementation of the EU Directives by European countries this year, given the deadlines later this year for transposing the EU Directives into national laws.

The relevant US SEC rules promulgated under the Dodd-Frank Act have been subject to controversy, and were overturned by the US District Court for the District of Columbia in 2013.  It appears now that revised rules may not be produced until spring of 2016.

For further information, please contact Jennifer Bell, Partner, London or your usual Herbert Smith Freehills contact.

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