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Diversification leases: New land tenure for Western Australia

By Catherine Wheeler / 30 January 2023

In keeping with the Western Australian State Government’s commitment to deliver net zero emissions by 2050, changes to the Land Administration Act 1997 (LAA) are set to accelerate the development of proposed renewable energy projects in the State.  One of those changes is to introduce a new form of tenure known as diversification leases.

In this article, Partner Catherine Wheeler and Solicitor Claudia Hill explain the diversification leases, how they will interact with other forms of tenure and outline the proposed benefits in creating opportunities for conservation, tourism and economic development and land management for Indigenous Australians. 

Introduced to Parliament on 23 November 2022, the Land and Public Works Legislation Amendment Bill 2022 (Bill) will amend the LAA and introduce diversification leases to allow proponents to conduct single, or multiple, land uses on Crown land, where the primary land use can coexist with other land uses. This new form of tenure will provide more opportunities for proponents to enter the renewables market through carbon farming, hydrogen, and wind and solar projects, for example.

What is a diversification lease?

A diversification lease is a new form of land tenure to be granted over large areas of Crown land. It will grant the lessee a non-exclusive leasehold tenure, which will allow certain activities to be undertaken on the land. Unlike a pastoral lease, a diversification lease can be granted for a range of land uses as agreed by the parties. The uses are proposed to be broadscale and may include multiple concurrent uses such as carbon farming, grazing livestock, agriculture, tourism, horticulture and aboriginal economic development and land management, environmental offsets for mining companies, conservation purposes, and renewable energy. 

As the tenure is non-exclusive, a diversification lease will not preclude access by other parties such as mining companies or native title holders and will not extinguish native title rights or interests. 

When can a diversification lease be granted?

The process in applying for a diversification lease will require proponents to contact the Department of Planning, Lands and Heritage to discuss the proposal and complete a Crown Land Enquiry form.

Applications for a diversification lease will be considered on a case-by-case basis by the Minister for Lands, and will need to meet certain minimum considerations, being:

  • the proponent requires a large area of Crown land;
  • the proposed use provides social, economic or environmental benefits to the State, the relevant region or locality;
  • the land is appropriate for the intended use;
  • if applicable, the grant will provide social and economic opportunities to Aboriginal peoples/communities;
  • the proponent has demonstrated the capability, capacity and experience to deliver the intended outcome.

Unlike pastoral leases, there is no requirement for the Minister to publicly offer diversification leases. The Minister would have discretion to grant a diversification lease by private treaty or through a competitive process such as a public tender. 

An option to lease may also be granted by the Minister for Lands, where specific details in respect of the project or affected land are not confirmed. The option to lease may include conditions imposed by the Minister.

The Minister for Mines and Petroleum must also approve of the proposed use, the location, and any substantial structures to be erected on the relevant land prior to the lease being granted, and referrals for comment will be made to the Department of Mines, Industry Regulation and Safety, Department of Water and Environmental Regulation, local government, and other relevant agencies before a diversification lease is granted.

What will the terms of the lease be?

Diversification leases are intended to be flexible and as such the terms of the lease will be tailored to the agreed land use. 

The term of the lease may be granted for any length of time, potentially with options to renew, as is appropriate for the permitted use.

Market rent will apply to all diversification leases and will be assessed by the Valuer General with reference to the permitted use of the relevant lease. As such, if the permitted use is changed, the rent must be reassessed accordingly. 

It is anticipated that a lessee under a diversification lease will be required by the terms of the lease to:

  • prevent or minimise the risk of fire; 
  • control declared plants, animals and pests; and
  • maintain the condition of soil and native vegetation.

How may the lessee use the land?

The permitted use may be varied with Ministerial approval, and multiple land uses may be allowed under a single diversification lease.

However, there will be some restrictions in relation to land use. A diversification lease will not be granted where the sole proposed use is for:

  • a highly intensive land use;
  • grazing authorised stock (cattle, sheep, and goats); or
  • mining purposes.

A lessee under a diversification lease will be permitted to develop and construct infrastructure including cables, as required to conduct their activities. However, the lessee must discuss the location of any substantial structures and cables with the Department of Mines, Industry Regulation and Safety at an early stage, and obtain consent prior to changing any proposed locations. 

A lessee will also be permitted to transfer or sublease a diversification lease, provided consent is obtained from the Minister for Lands. Multiple subleases could be granted, and these may be for different purposes. 

Diversification leases will be registered at Landgate and as registered legal interests they can be used as security for borrowings.

How will a diversification lease interact with other forms of tenure?

As mentioned above, a diversification lease will grant the lessee non-exclusive tenure over the affected land. The lessee will not be empowered to use the land to the exclusion of all others.

Diversification leases are intended to co-exist with mining rights, and as such, mining tenement holders will be permitted to enter onto the land to undertake mining activities as permitted under the Mining Act 1978

Native title will not be extinguished by the grant of a diversification lease.  Aboriginal persons, including native title holders and Traditional Owners, will retain their right to enter unimproved and unenclosed parts of the land to undertake activities consistent with their rights under the Native Title Act 1993. When native title has been determined to exist or may exist, future act process under the Native Title Act 1993 must be addressed. This will most likely be met by way of the negotiation of an Indigenous Land Use Agreement with the native title holders or claimants. 

The Minister for Lands may also grant others a licence to access the land under the LAA, provided that the consent of the lessee and any native title holders is obtained, and this does not adversely affect any relevant interest holders, including the lessee.

Despite the tenure being non-exclusive, some identified areas of the land may be recognised as ‘exclusive’, including areas which contain substantial structures associated with intensive use such as processing plants, solar panel arrays and tourism facilities.

Where the diversification lease is to be granted over Crown land which is already the subject of a lease under the LAA, such as a pastoral lease, the relevant portion of land must first be surrendered from the existing lease. 

Conclusion

It is intended that diversification leases will provide a simplified new form of tenure which will encourage the growth of renewables in the State, as well as creating opportunities for conservation, tourism, and economic development and land management for Aboriginal people. It remains to be seen whether and if so, to what extent the need to negotiate with mining proponents, native title parties and other existing pastoral lease holders may present an obstacle for this new type of tenure.

We will keep you updated as the Bill progresses through the Parliament of Western Australia. It is anticipated that the Bill will be passed in the first half of 2023, with changes to be enacted by the end of the year.

If you have any queries in relation to the proposed diversification leases or land tenure arrangements for your project, please contact Catherine Wheeler in our Property team, or Alison Cooper in our Resources and Energy team.
 

Key Contacts
Catherine Wheeler
Partner
Catherine is a Partner with more than 25 years’ experience in commercial practice, with a focus on property, banking and finance and local government.

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