End of financial year wrap
We are very pleased to bring you our first resources and energy sector news from HopgoodGanim Lawyers. The Hunt & Humphry team have settled in and the whole firm is enjoying having them on board. Please enjoy the first edition and feel free to forward it onto your colleagues and have them subscribe as well.
It has been an interesting and challenging financial year for the mining, resources and energy industries. Against the economic headwinds of lower prices and capital being difficulty to find, the pace of regulatory change and the “curve balls” thrown by the courts has remained fairly constant. Despite this, we are pleased to see green shoots sprouting in the sector and have seen an uptick in recent activity.
Set out below is our end of financial year wrap of the year’s most significant legal and regulatory developments in the mining, resources and energy industries.
The 2016/2017 financial year saw an increased focus by ASIC and the ASX on forward looking statements. On 12 October 2016, ASIC rereleased Info 214 providing guidance for forward looking statements in the mining and resources industry. Info 214 requires companies to demonstrate a reasonable basis for making any forward looking statements as to production targets, forecasts, financial information or income based valuations. The practical consequence of the release of Info 214 is an increased focused by the ASX and ASIC on forward looking statements in announcements made by resources companies.
The ASX stepped down from its hard line set out in its initial consultation paper of May 2016 aimed at improving the quality of its Listings and in December 2016 implemented significant changes to the admission requirements which were considered by market participants to be a softer approach than first proposed. While increasing NTA and market capitalisation requirements the changes also resulted in a win for those at the smaller end of town. Read about them here.
On 24 August 2016 the above question was finally answered when the Federal Court handed down its decision in Griffith v Northern Territory of Australia (3)  FCA900 (see our previous articles on 8 September 2016 and 24 April 2017). The ultimate result of the case was that the Northern Territory was ordered to pay $3.3 million in compensation for the loss or impairment of non-exclusive native title rights and interests in the town of Timber Creek.
The judgement in the appeal to this decision was handed down yesterday. The full Federal Court agreed with his Honour the judge at first instance (Justice Mansfield) as to the "intuitive" approach adopted by his Honour. However, instead of valuing native title economically at 80% of freehold the full Federal Court substituted 65%. A more fulsome alert will be issued early next week.
There is a tendency in various jurisdictions in Australia for authorities to undertake prosecutions under the general criminal law for matters that are traditionally considered work health and safety issues. Whether this trend towards alternative pathways for holding individuals liable for serious safety breaches remains to be seen.
Whilst it was beneficial to have a determination of the value of native title for the purposes of compensation, uncertainty abounded in the native title industry as a result of the decision of the Federal Court on 2 February 2017 in McGlade v Registrar National Native Title Tribunal  FCA FC10. This matter relating to the south west settlement in Western Australia overturned the generally accepted practice for registering indigenous land use agreements (ILUAs) with the result that the National Native Title Tribunal suspended the registration of potentially affected ILUAs. Given the significant ramifications of the decision, the Federal Government introduced amendments to the Native Title Act to address that decision. After numerous delays and postponements the amendments to the Native Title Act were passed on 15 June 2017.
In addition, Rares J handed down judgement in Yindjibarndi case yesterday. His Honour found that the Yindjibarndi people held exclusive native title over the area the subject of the claim. This area includes the FMG Solomon iron ore mine. The rights allow them to exclude strangers from the claim area. There have been significant disputes between FMG and part of the Yindjibarndi claim group. This decision may make things difficult for FMG in respect to its development and production at the mine site. For instance the conduct of cultural heritage work could be delayed because of the disputes. The decision gives the Yindjibarndi people some significant leverage in relation to the mine's development. The State of Western Australia through its Minister Ben Wyatt has congratulated the Yindjibarndi people for persevering in their long struggle to obtain exclusive native title rights.
The second half of the year seemed to be dominated by the issue of energy security resulting from the blackout of South Australia on 28 September 2016 and rising east coast energy prices, said to result from increasing exports principally from new LNG export projects in Queensland.
Whilst it seemed that every man and his dog had an opinion as to the cause of the blackout, it appeared that nobody had any solutions. However, after much public (and sometimes acrimonious) debate the Federal Government has implemented a number of measures to attempt to address the situation. The first of those was to commission Dr Alan Finkel to undertake a review of the national electricity market. Dr Finkel presented the final report of the review to the Council of the Australian Government’s leaders meeting on 9 June 2017, which our team wrote an article about. The second measure, which has only recently been announced, sets an historic agreement between the State Government and Tesla to build the world’s largest lithium ion battery, in a move to secure power for South Australia.
A further, and arguably more controversial step taken by the Federal government was the introduction of controls on the export of LNG. LNG export controls will be triggered if the Resources Minister is concerned that there may be a shortfall in the domestic gas market. Whether these controls will be triggered and what action LNG exporters may take to challenge the regulations is yet to be seen.
If things weren’t difficult enough in the junior oil and gas sector, the new WA Labour government has announced its intention to implement a State-wide moratorium on ‘fracking’ while it conducts a second parliamentary enquiry in the space of 5 years. We are carefully watching this space for developments and providing real-time advice to affected clients.
Also in Queensland, the Government introduced the Environmental Protection (Underground Water Management) and Other Legislation Amendment Bill 2016 which provided for a new approvals process for mining projects related to impacts on water resources. After consideration of the bill by the Queensland parliament’s agriculture and environment committee, Queensland passed the bill and the new process become part of the Queensland mining approvals process.
We are also seeing a surge in activity in the Australian market for large-scale renewable projects, with record high investment in the sector and financial incentives for establishing and expanding renewable energy projects under the Federal Government’s Renewable Energy Target scheme.
The Western Australian town of Merredin is set to become the latest renewable energy hotspot, with the HopgoodGanim team being involved in the planned largest solar project in WA (a 120MW, $160m solar farm, battery storage and an expansion of WA’s biggest windfarm) by Perth-based solar energy company Stellata, backed by UK investor Ingenious Group.
With a number of other projects in the pipeline across Australia, we expect to see growth in this sector continue.
To continue the discussion or request advice on any of the topics above please contact any of our Resources and Energy team.