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HG Alert: Geothermal Energy in Queensland and Australia - 5 Oct 2009

Geothermal Energy in Queensland and Australia

Queensland’s vast geothermal energy reserves have the potential to provide a significant and climate-friendly energy source for hundreds of years. In recognition of these resources, the Queensland Government released the Geothermal Energy Bill 2009, and an accompanying consultation paper, in August 2009. The Bill is intended to supersede the current Geothermal Exploration Act 2004. The stated purpose of the Bill is to “encourage and facilitate the safe production of geothermal energy for the benefit of all Queenslanders”. This will be achieved by providing for geothermal authorities to be granted to explore for or produce geothermal energy, and creating a regulatory system for carrying out activities relating to geothermal authorities. This articleprovides an overview of the current legislative treatment of geothermal energy in the Australian States and territories, and considers the impact of the Bill on Queensland’s developing geothermal industry.

Geothermal energy in Australia

Several Australian States and territories have developed specific legislation to facilitate geothermal exploration and production. Some States have chosen to embed geothermal provisions within current legislative frameworks, while others have developed geothermal-specific laws.

Queensland
The system adopted in Queensland introduced a completely separate regime for geothermal energy. The Geothermal Exploration Act 2004 came into force on 25 March 2005 and deals only with exploration. The legislation was intended as an interim measure, pending development of a more comprehensive regime for geothermal energy production, to enable geothermal exploration to begin. Under the Act, a Geothermal Exploration Permit can only be granted from a call for tenders under section 17. A call for tenders is published in the Queensland Government Gazette. Tenders are to be made in the approved form and are to include a proposed initial work program for the period stated in the Gazette notice.

Exploration permits are subject to the mandatory conditions under Chapter 4, Part 2 of the Act and can be renewed, amended, deferred, cancelled, surrendered and transferred. In the event of conflicting interests of explorers and other tenements holders, precedence is given to the exploration tenement holder who started its activities first - that is, geothermal exploration activities can not be carried out if they adversely affect activities that have already begun.

New South Wales
New South Wales adopted a different approach to Queensland. Instead of introducing a separate geothermal-specific bill, the government incorporated geothermal provisions into the State’s existing mining legislation, the Mining Act 1992, by including ‘geothermal substances’ within the definition of ‘mineral’. An exploration licence issued under this Act gives the holder exclusive rights to explore for the minerals specified in the licence. If the exploration results prove positive, then an assessment lease may be issued to evaluate the mineral-bearing capacity and extent of the mineral deposits. Exploration companies must demonstrate their financial and technical resources to carry out the work, pay a security bond for rehabilitation, assign a two-year budget to the project and report annually on progress. They must also reach a land access agreement with the landholder, which deals with access conditions and compensation (NSW Minerals Council Ltd.

Victoria
Geothermal exploration in Victoria is governed by the Geothermal Energy Resources Act 2005 and Regulations. In this regard, Victoria has followed Queensland in adopting a geothermal-specific legislative regime. The Victorian geothermal legislation and regulations are intended to apply to high-end geothermal operations. Under the regulations, exploration permits are not required where the geothermal resource is less than 70 degrees Celsius or less than 1000m in depth. Low-end operations, on the other hand, operate under existing environmental, water and planning laws (Department of Primary Industries, Victoria). The legislation allows for the grant of exploration permits (the exclusive rights to explore in an area subject to conditions), retention leases (where resources have been discovered but are not yet (exclusive rights to produce geothermal energy). The legislation requires that consultation with landholders takes place before any exploration or extraction activity can start. This Act applies only to exploration and extraction of the resource. The actual use of geothermal energy (for example, through electricity production) is regulated through existing planning and environment laws (Department of Primary Industries, Victoria).

South Australia
Geothermal energy in South Australia is addressed under current petroleum legislation, namely the Petroleum Act 2000. This Act provides for exploration licences, retention licences, production licences, pipeline licences, preliminary and speculative survey licences and associated facilities licences. An application for an exploration licence can be lodged at any time over any area of the State that is not in a highly prospective region. Applications for highly prospective regions require the Minister to call
for tenders. The Minister may grant more than one exploration licence or production licence over the same area, provided the right to explore for a particular regulated resource for each licence differs. Certain areas are alienated from exploration
operations, such as protected areas under the National Parks and Wildlife Act 1972 (Department of Primary Industries and Resources, South Australia). An applicant must demonstrate technical and financial ability to comply with the terms and conditions of the lease and the Act. The applicant must also submit a work program, including an estimate of exploration expenditure to be incurred in each year of the licence.

Western Australia
Western Australia has followed the South Australian model and adopted geothermal provisions into current petroleum legislation. The Petroleum and Geothermal Energy Act 1967 covers all onshore areas of the State, its islands, and in certain circumstances, areas of submerged lands internal to the State. Excluded areas include ‘subsisting’ permit areas under the Petroleum (Submerged Lands) Act 1982.

The legislation provides for a full range of energy titles, including exploration permits, specific prospecting authorities, access authorities, drilling reservations, retention leases and production licences. Applicants must submit a development plan for approval, which outlines how the geothermal resources will be recovered. Further, the right to recover geothermal energy does not entitle proponents to petroleum discoveries, and vice versa. Similar provisions to those of petroleum tenements apply to geothermal titles with respect to the procedures for applying, cancelling and renewing titles, the rights and obligations of title holders, transfers or dealings in titles and transitions from exploration permits to retention or production leases.

Tasmania
The Mineral Resources Development Act 1995 governs geothermal energy exploration in Tasmania. It has adopted a system similar to New South Wales, in that geothermal substances are included within the definition of ‘mineral’. The Act provides for a number of different licences, including exploration licences, retention licences, prospecting licences and mining leases.

Northern Territory
It is proposed that geothermal energy in the Northern Territory will be regulated by the Geothermal Energy Act 2009. The Act provides for an exploration permit, retention licence and production lease. The Act has not yet come into effect, although this is imminent. This Act permits the authority holder to enter and occupy the area and to construct a road, and do other work, in order to gain access to the area by the shortest practicable route. Consent is required from owners of certain types of land before entry. An owner or occupier is also entitled to compensation from the geothermal authority holder for loss or damage in relation to the person’s interest in the land.

Geothermal Energy Bill 2009 (Qld)

The draft Geothermal Energy Bill 2009 is the next step in the development of a viable geothermal industry in Queensland. The Bill deals with both exploration and production rights, and is designed to replace the interim Geothermal Exploration Act 2004. The remainder of this paper will consider some key elements of the Bill.

Types of geothermal activities
The Bill covers both exploration and production activities. ‘Geothermal exploration’ is proposed to be defined as:
(a) exploring for and quantifying geothermal resources and reserves; and
(b) carrying out investigations and other activities associated with exploring for, or quantifying, geothermal resources and reserves.

‘Geothermal production’ is proposed to be defined as the “recovery of geothermal energy from beneath the surface of the land in which it is contained”.
It is intended that the Bill will only regulate ‘large scale’ exploration and production activities. Persons who carry out large scale production activities will be required to obtain a geothermal production lease and to satisfy the requirements of other relevant
legislation, including the Water Act 2000 and the Environmental Protection Act 1994. The classification of an activity as ‘large scale’ is proposed to be determined by the temperature and flow rate of fluid or gases extracted in the geothermal production. The actual threshold levels, however, have not yet been determined.

The Bill does not govern ‘medium scale’ or ‘scale’ activities, which include: 

  •  geothermal exploration activities being carried out with the intention of producing ‘medium scale’ or ‘small scale’ use of geothermal energy; and
  • ‘medium scale’ or ‘small scale’ geothermal energy production.

For example, medium scale production may include the use of geothermal heat for chemical production or food processing. Small scale production may include the installation or use of geothermal heat pumps.
A medium or small scale user will not be required to obtain a Geothermal Exploration Permit or a Geothermal Production Lease, and will therefore not be required to pay a royalty for production. Activities by small or medium scale users will be governed by other existing legislation, including the Integrated Planning Act 1997, Water Act 2000 and the Environmental Protection Act 1994.

Tenure hierarchy
The types of authorities that may be obtained under the Bill are a Geothermal Exploration Permit for exploration, Geothermal Production Lease for production and a Geothermal Data Acquisition Authority.

Geothermal Exploration Permit

Under the current provisions of the Geothermal Exploration Act 2004, a Geothermal Exploration Permit can only be obtained by submitting a tender for land that has been specifically released for competitive tender. The Bill proposes to abolish this requirement by introducing an individual application process, allowing explorers to apply for land that would otherwise have been unavailable.

The Bill has made a number of proposed changes to the Geothermal Exploration Act 2004 with respect to exploration activities, the most significant being: 

  •  increasing the maximum exploration permit area from 600 km2 to 3750 km2; 
  •  increasing the maximum exploration permit term from 8 years to 15 years; 
  •  introducing a requirement to relinquish 33.33% of the permit area every five years; and
  • introducing the ability to declare a potential commercial area in order to secure a discovery in the event that it cannot be brought to production quickly.

The Bill also contains transitional provisions for holders of current permits under the Act.

Geothermal Production Lease

Persons may apply for a Geothermal Production Lease either over land within the area of a current Geothermal Exploration Permit, or over land that was previously subject to a Geothermal Exploration Permit, with priority given to the former. The area of a Geothermal Production Lease can not be more than 50 blocks (or approximately 3750 km2) and may be granted for a minimum period of five years, and maximum period of 30 years. Applicants must submit a development plan outlining the activities proposed, financial and technical resources and risk management plans.

Geothermal Data Acquisition Authority

Persons may apply for a Geothermal Data Acquisition Authority on land adjoining an exploration area to gather relevant data. This would include activities such as a geo-scientific survey.

Landowner consultation
Geothermal tenure holders must comply with certain obligations with respect to accessing, and conducting activities on, private land. The obligations imposed on tenure holders in the Bill are largely based on provisions in the Petroleum and Gas (Production and Safety) Act 2004 , such as:

  • the requirement to compensate each owner and occupier of private land. Section 270 of the Bill closely emulates section 531 of the Petroleum and Gas (Production and Safety) Act 2004; 
  • the ability of the Land Court to decide compensation;
  • the requirement to provide a land owner and occupier with an ‘entry notice’ at least 10 business days before entry and a ‘further entry notice’ at least two business days before entry;
  • the right to cross other land if reasonably necessary to allow the holder to enter the geothermal area; and 
  • the requirement to include a proposal in the application about how the holder intends to consult with and keep each owner and occupier informed.

These measures are designed to balance the interests of land owners and occupiers with the rights of geothermal tenure holders to conduct activities under the permit.

Overlapping tenements

The Bill acknowledges the potential for significant overlap with other authorities and contains mechanisms to encourage overlapping tenure holders to coordinate development of the land. For example, Chapter 4 of the Bill allows for geothermal coordination arrangements to be made with either the holder of another geothermal authority, or the holder of an overlapping ‘resource’ authority. An overlapping resource authority is defined under section 20 as a non-geothermal exploration authority, a GHG lease, a mining lease or a petroleum lease.

Chapter 5 regulates circumstances where an applicant makes a geothermal lease application in the area of an overlapping resource authority. Once again, there are strong parallels with the Petroleum and Gas (Production and Safety) Act 2004. The provisions include the priority rules for an overlapping application, the ability to apply to the Minister for a ‘resource management’ decision to give preference to a particular competing resource, and additional information required to be included in an application (such as a ‘geothermal statement’ and information addressing the ‘geothermal assessment criteria’).

Water and environment
The Bill does not create any rights to take water. The holder of a Geothermal Exploration Permit or Geothermal Production Lease must obtain a water authority under the Water Act 2000 to take or interfere with water. The Bill has adopted the same approach as other mining and petroleum legislation by deferring regulation of water access and use to the Water Act 2000. Another parallel to current mining and petroleum legislation is the requirement under the Bill to obtain an environmental authority under the Environmental Protection Act 1994. Geothermal exploration activities will be considered a ‘level two environmentally relevant activity’, except where the activities are proposed to be carried out in environmentally sensitive areas, in which case it will fall under a ‘level one environmentally relevant activity’.

For more information on the Geothermal Energy Bill 2009 and its implications, please contact HopgoodGanim’s Resources and Energy specialis