On 20 January 2011, a consultation paper and draft bill were released that propose significant changes to the framework for managing overlapping coal and CSG tenures under the Mineral Resources Act 1989, Petroleum and Gas (Production and Safety) Act 2004 and the Petroleum Act 1923. These changes, outlined below, will impact coal and petroleum tenement holders throughout Queensland.

Submissions on this bill, named the Mines and Petroleum Legislation Amendment Bill 2011, are due no later than 5.00pm on 25 February 2011.

Delayed production for CSG - LNG projects

The amendments will allow an ATP holder to apply for a declaration by the Minister that all or part of the area of the ATP is a 'retention declaration area'. A retention declaration (RD) is essentially a means for an ATP holder to retain access to CSG reserves for the purposes of delayed development associated with CSG-LNG projects. For an RD to be granted the Minister has to be satisfied that:

• there are proven reserves and resources in the proposed area; and
• the reserves and resources are subject to a contract for the long-term supply of CSG for processing into LNG and shipping to overseas markets.

The holder of an ATP with a RD is able to avoid the standard relinquishment conditions. However, a RD must not be more than 75 sub-blocks and cannot be granted for more than 15 years.

Critically, in the absence of applying for a RD, a proposed petroleum lease that contemplates delayed production would only be granted where there is agreement with, or consent of, the overlapping coal tenement holders. The only exception is where a ministerial preference decision allows for the grant of a PL with delayed production. These changes will give overlapping coal tenement holders significant power to veto a petroleum lease application in the event that the applicant has not applied for a RD.

As a further measure to secure tenure in the event of delayed production, the amendments allow an applicant for either a RD or petroleum lease to nominate whether the tenure will count towards meeting the standard relinquishment condition.

Production lease applications

The requirements for making a petroleum lease application will change substantially under the new regime. Key changes include the following:

1. The requirement to demonstrate knowledge of reserves will become an application requirement. This means that an applicant will need to demonstrate sufficient knowledge of reserves, and have that independently certified, at the time of making the application.
2. The department will have the power to reject an application if it does not contain the required documentation, before the application has even entered the assessment process. Applicants will need to be careful to ensure that the applications are compliant at the outset.
3. The mandatory requirement to make separate applications over exploration tenure, production tenure and 'other land' will be removed. This means that an applicant will no longer need to make multiple applications, often over very small parcels of land, and be required to prove up reserves for each individual parcel. If a single application is lodged, then the decision to grant or refuse the application would depend on the successful resolution of all overlapping tenure issues.

Preference process timeframes

The proposed new regime will insert timeframes for a preference decision to be made. In short, a minimum of 27 months may elapse from the time submissions are lodged with respect to the application until the time that a preference decision must be made. The amendments also provide two points at which a preference decision can be requested. These triggers occur six and 18 months after the date for submissions. If a preference decision is requested at either trigger point (and the required conditions are met), the following subsequent time limits apply:

1. The matter must be referred to the Land Court within three months.
2. The Minister has six months from the time the Land Court recommendation is received to make a decision.

Existing petroleum lease applications

The proposed changes to the application requirements and the new powers to reject deficient applications (identified at points 1 to 3 above) would not apply to existing applications. They would only apply to applications received after the commencement of the amendments. Existing applications, however, would be subject to the new timeframes under the preference process, even where the submission period has closed.

Exploration within the area of a production lease

The amendments require a production lease holder to provide a statement of reasons in the event that the holder does not consent to exploration activities being carried out by an overlapping exploration tenement holder. This amendment is aimed at:

• restricting the production lease holder from unreasonably withholding consent; and
• promoting negotiations between the production lease holder and the explorer.

Currently there are no restrictions on the reasons a production lease holder may use for declining consent.

The draft bill and the consultation paper are available online. Please note that submissions are due no later than 5.00pm on 25 February 2011.

For more information about the Mines and Petroleum Legislation Amendment Bill 2011, please contact HopgoodGanim's Resources and Energy team.

Martin Klapper, Partner
Tel: 07 3024 0325
m.klapper@hopgoodganim.com.au

Jonathan Fulcher, Partner
Tel: 07 3024 0414
j.fulcher@hopgoodganim.com.au

Claudia Bozonji, Senior Associate
Tel: 07 3024 0413
C.bozonji@hopgoodganim.com.au

Emily McCartney, Solicitor
Tel: 07 3024 0322
e.mccartney@hopgoodganim.com.au