20 December 2013

Reverse the Curse: Maximizing the potential of resource-driven economies

According to a recent report from think-tank Chatham House, arbitration cases have increased nearly fourfold between 2001 and 2010 in the mining sector, reflecting tensions among stakeholders which escalated with the commodity price boom. The rise in commodity prices increased popular expectations, and governments accordingly came under pressure to show that citizens would receive greater benefits as a result of the rising resource revenues.

In the face of growing uncertainty about future prices and demand, however, extractive companies started to face pressure from their shareholders to scale back, delay or even cancel projects.

Governments were therefore seeking to benefit from windfall profits during price spikes, whilst on the other hand the companies wanted the ability to delay or downsize the project during a downturn.

Unfortunately, many contracts did not provide the flexibility required; the Chatham House report notes that model contracts of the 1990s have by and large failed to weather the commodities price boom.

For more information click here for the full article.

For further information, please contact Jay Leary, Partner, Naomi Lisney, Associate or your usual Herbert Smith Freehills contact

18 December 2013

New McKinsey Global Institute Report: Reverse the Curse: Maximizing the potential of resource-driven economies

On 5 December 2013, Herbert Smith Freehills hosted a breakfast panel session in its London offices to mark the publication of a new report by the McKinsey Global Institute (MGI), 'Reverse the Curse: Maximizing the potential of resource-driven economies'.

Dr Fraser Thompson, a Senior Fellow at MGI, gave an overview of the report. Fraser then joined the panel, chaired by Greg Mulley (Herbert Smith Freehills, London, Head of Mining), with Kate Carmichael of International Council on Mining & Metals, and Herbert Smith Freehills Mining Team partners Stéphane Brabant (co-head Global Head of Mining) and Jennifer Bell.

The latest report outlines the changing resource landscape and the opportunities and challenges for resource-driven governments and companies in the extractive industry.

All too often, governments have failed to make the most of potential resource wealth. In fact, many resource-driven economies have underperformed those without natural endowments, which is a huge lost opportunity for economic development and poverty alleviation when we consider that about 70% of the world’s poor live in resource-driven countries. If resource-driven countries, particularly those with low incomes, could use their resource sectors effectively as a platform for broader economic development, this could transform their prospects.

This changing resource landscape will also have significant implications for extractive companies, financing and investment. As exploration and production increasingly shift to developing countries and frontier markets, companies that can reframe their mission from simple extraction to ongoing partnership in economic development are likely to secure a real competitive advantage.

Please click here for the full MGI report.

Attendees at the seminar commented that they found the session to be very insightful, informative and overall felt the report identified significant issues that the resources industry is facing.

A key theme of the MGI report is effective communication and engagement with the government and local stakeholders at all stages of a project.  Our dedicated global mining team covers every aspect of the industry, including public and private M&A, joint ventures, IPO’s and secondary capital raisings, compliance, crisis management, dispute resolution and every stage of the project life cycle.

For further information, please contact Greg Mulley (Partner, London), Jennifer Bell (Partner, London), Stéphane Brabant (Partner, Paris), or your usual Herbert Smith Freehills contact.

13 December 2013

Qld: Government grants Environmental Approval for North-Queensland projects

On 11 October 2013, Federal Environment Minister Greg Hunt (Minister) approved three North-Queensland projects.

The Minister approved:

  • the Abbot Point capital dredging program which involves removal of 3 million cubic meters of spoil in respect of Terminals 0, 2 and 3, making the Port of Abbot Point one of the world’s largest coal ports;
  • Adani’s T0 Project, a $3 billion, 70mtpa expansion of Terminal 1 at the Port of Abbot Point and associated infrastructure (including a 2.75km outloading jetty and conveyor, new wharves, ship loaders and development of two offshore berths);
  • Arrow Energy’s Curtis Island LNG processing plant, a $17.46 billion project involving a 9.45km underwater gas transmission pipeline from the mainland to Curtis Island.

The Minister’s approval of the projects was accompanied by some of the ‘strictest conditions in Australian history’ due to the potential impact on the Great Barrier Reef. The Minister imposed 95 environmental conditions on the Abbot Point capital dredging program and 53 on the Curtis Island LNG processing plant.

Indian mining giants GVK and Adani Group, the owners of Terminal 3 and Terminal 0 (respectively) stand to benefit most from the Minister’s approval. Both companies are developing significant coal projects (and associated infrastructure) in the Galilee Basin, the coal from which is expected to be exported through the Port of Abbot Point.

The projects mentioned above are all still subject to final investment decision.

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

10 December 2013

Australia-Korea FTA concluded

On 5 December 2013, Australia and South Korea concluded negotiations for a Free Trade Agreement (FTA).

Trade with South Korea was valued at AU$31.9 billion in 2012, making Korea Australia’s fourth biggest two-way trading partner (following China, Japan and the United States) and third largest export market.

As a result of the FTA, tariffs will be eliminated on key Australian exports to Korea such as beef, wheat, dairy, wine, horticulture and seafood, resources, energy and manufactured goods. The FTA will also provide new market opportunities in other industries such as education, telecommunications and financial, accounting and legal services.

View the full article here.

For further information, please contact Lewis McDonald, Leon Chung or Donald Robertson or your usual Herbert Smith Freehills contact.

26 November 2013

Report of the Victorian Gas Market Taskforce released

The Victorian Gas Market Taskforce, which was led by former Howard Government Minister Peter Reith, has released its final report.

The Taskforce was commissioned by the former Victorian Premier, Ted Baillieu, in December 2012 to consider ways to improve the operation and efficiency of the east coast gas market, and increase gas supply.

The recommendations in the report support the development of the onshore gas industry in Victoria to increase gas production, in the context of the depletion of offshore gas reserves and projected increases in the price of gas.

Key recommendations

The report’s key recommendations include the lifting of the current ban on hydraulic fracking and the issue of further CSG exploration licences.

The report also recommends that a Gas Commissioner be appointed to promote community consultation and the dissemination of credible information about CSG, with a view to increasing community confidence in the CSG industry.

Further consultation

In releasing the report , Premier Denis Napthine said that this was the ‘first step in a consultative process to seek Victorians’ views on issues of concern in regard to onshore gas in Victoria’.

Feedback on the report is being sought until the end of March 2014, prior to a 12 month community consultation process to be facilitated by the Minister for Energy and Resources, Nicholas Kotsiras.

A report on the findings of this 2-stage consultation process is planned to be released in July 2015.

Ban on fracking to remain

Dr Napthine also announced that the ban on hydraulic fracking would remain in place until at least July 2015 while the consultation process was ongoing.

According to Dr Napthine, a key factor to be considered by the Victorian Government in relation to the development of the onshore gas industry is the impact to the water table and aquifers, and the Victorian Government would not support onshore gas production until there is scientific evidence showing that the industry would not risk Victoria’s assets.

The bottom line

While the Taskforce’s recommendations clearly support the development of the onshore gas industry in Victoria,  it is unlikely that there will be any movement towards the industry’s development until at least the second half of 2015.

For further information, please contact Myra StirlingSenior Associate, Brad Popple, Solicitor, Melbourne or your usual Herbert Smith Freehills contact.

21 November 2013

Ghana plans to reintroduce a mining windfall tax

The Budget and Economic Policy Statement of 2013 reiterates the willingness of the government to implement a windfall tax on mining profits.

The windfall profit tax was introduced in the Budget and Economic Policy Statement of 2012 and was debated, but not implemented, by Parliament in 2012.

The 2012 proposal was that all entities engaged in mining operations in Ghana would, in addition to their annual corporation tax, pay a windfall tax on their adjusted cash balances for the relevant period. The windfall tax rate proposed was a flat 10% on the adjusted cash balance, such balance being calculated by deducting from chargeable income all taxes paid or payable, all capital expenditures incurred on depreciable assets and inventory during the year of assessment and adding any interest allowed as tax deduction,  capital allowances and any negative cash allowance brought forward. The windfall tax would apply to any positive tax adjusted cash balance after the relevant deductions and additions are made.

Despite the opposition of mining companies, this tax was again debated, however the conditions of its implementation are not yet determined, in particular its interaction with the stabilisation provisions.

For further information, please contact Linda Feniniche, Avocat, Hiba Abi Haidar, Avocat, Paris or your usual Herbert Smith Freehills contact.

18 November 2013

Qld: Government releases Galilee Basin Development Strategy

On 7 November 2013, the Queensland Premier, Campbell Newman, released the Galilee Basin Development Strategy (Strategy). The Strategy acknowledges the long-term economic benefits that opening up the Galilee Basin to mining would bring to Queensland and is designed to support and encourage business and industry to develop key infrastructure across the region.

The Strategy details government initiatives aimed at early development of the southern and central Galilee Basin (with priority to be given to ‘first movers’). These initiatives include:

  • lowering start-up costs by offering a discounted royalty period which will gradually ramp-up to full royalty by the end of the period,
  • streamlining land acquisition, planning, approvals and red tape reduction by compulsorily acquiring land for projects, delivering project approvals in a timely way and consider declaring projects ‘prescribed projects’ to overcome unreasonably delays in obtaining project approvals,
  • positioning Abbot Point as the Galilee’s gateway to the world by reserving the Terminal (T2) development site for a proponent to develop coal stockpiling and handling infrastructure, and
  • supporting infrastructure development and corridors by supporting the development of localised water solutions, encouraging and assisting private investment in relevant electricity transmission and prioritising the development of roads critical to opening up the Galilee Basin.

No further details have been released at this stage.

Notably, the Strategy comes less than a week after approval of GVK’s Kevin’s Corner project which is expected to be Australia’s biggest coal project. Kevin’s Corner joins the adjacent Alpha Coal project which was approved in August 2012.

In addition, Aurizon has been developing an integrated rail transport and port solution for Galilee Basin coal over the past two years.

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

15 November 2013

Victoria to raise the bar for mining exemptions

The Victorian Minister for Energy and Resources recently introduced the Mineral Resources (Sustainable Development) Amendment Bill 2013 (Vic) (the Amendment Bill) into the Victorian Parliament.

The Amendment Bill, if passed, will likely make it more difficult for land to be declared exempt from exploration and mining licences. The Minister will now be required to consider the value of mineral resources (including coal seam gas) before an exemption is granted.

Under the existing Mineral Resources (Sustainable Development) Act 1990 (Vic) (the Act), the Minister has the power to exempt any land from being subject to a licence granted under the Act (i.e., exploration licence, mining licence, prospecting licence or retention licence). Currently, when deciding whether to grant an exemption, the Minister must take into account ‘the social and economic implications of the decision’.

What will change?
The Amendment Bill would amend the Act so that the Minister would be obliged to take into account ‘the known or potential value of mineral resources on the land and the impact that the proposed exemption may have on that value’ when deciding whether to exempt land from being subject to a licence.

The amendment has been proposed following recommendations made by the Victorian Parliament’s Economic Development and Infrastructure Committee in its inquiry into greenfields mineral exploration and project development in Victoria (22 May 2013).

In particular, the Committee had recommended that the Victorian Government develops a land use policy framework to better manage competing land uses in Victoria.

Who will be impacted?
The impact of the proposed amendment is likely to make the Victorian mining legislation more conducive to the development of the mineral and extractive resources industries. In doing so, the changes will be of concern to community groups seeking to apply for mining exemptions to prevent exploration and mining (including in respect of coal seam gas) in their local areas.

The Amendment Bill also contains other proposed amendments to the Act which are aimed at reducing the administrative and regulatory burden on industry, including the introduction of statutory time frames for the processing of licence applications and the streamlining of work plan requirements.

For further information, please contact Myra Stirling, Senior Associate, Liam Hickey, Solicitor or your usual Herbert Smith Freehills contact.

8 November 2013

NSW Aboriginal cultural heritage — a changing legislative landscape

A complete overhaul of the legislative framework for Aboriginal cultural heritage in NSW is underway. The review is aimed at delivering a more efficient and effective process for the protection of Aboriginal cultural heritage and obtaining development approvals. Public feedback on a model proposed by the NSW Government is currently being sought.

In 2012 the NSW Government established an independent Aboriginal and Cultural Heritage Reform Working Party. In December 2012 the Working Party made 23 recommendations for legislative reform. In 2012 and 2013 the NSW Office of Environment and Heritage managed 2 stakeholder public consultation programs. In response to these recommendations and public consultations, the NSW Heritage and Aboriginal Affairs Ministers have now released a discussion paper detailing a conceptual, proposed new model for the protection and management Aboriginal cultural heritage in NSW.

Key features of the proposed new model are:

  • the creation of new, stand-alone Aboriginal cultural heritage legislation,
  • new definitions and objectives to increase the protection of Aboriginal cultural heritage,
  • the creation of local Aboriginal cultural heritage committees,
  • decentralised Aboriginal cultural heritage management with local Aboriginal cultural heritage committees being a ‘one stop shop’ responsible for all consultation and decision making for local Aboriginal cultural heritage matters, including undertaking mapping and creating plans of management,
  • an expanded, publicly accessible Aboriginal cultural heritage register database,
  • making publicly available maps identifying areas of high, low or no Aboriginal cultural heritage value, and plans of management which will outline specific strategies for managing the Aboriginal cultural heritage identified in the maps,
  • statutory project agreements which are ‘fit for purpose’ made between proponents and local Aboriginal cultural heritage committees for the management of areas identified as high or unknown Aboriginal cultural heritage value,
  • a new funding system for which a series of options are being consulted on,
  • mandatory timeframes and legislated processes including for making project agreements and managing unexpected finds, and
  • a legislated dispute resolution and appeal process.

The discussion paper calls for public feedback. A series of 11 stakeholder consultation workshops are proposed to be held in NSW in November and December 2013. Formal submissions in response to the discussion paper must be made by 14 February 2014.

Following the consultation and submission process, feedback will be provided to the Government for consideration in drafting an exposure Bill. The public will be given further consultation opportunities on release of the draft exposure Bill.

For further information, please contact William Oxby, Partner, Alice Hoban, Senior Associate, or your usual Herbert Smith Freehills contact.

1 November 2013

Qld: Draft Qld Ports Strategy proposes to concentrate port development in QLD to 5 key port areas

The Queensland Government released its draft Ports Strategy on Thursday 17 October 2013.

The draft Ports Strategy proposes to:

  • declare that Brisbane, Mackay / Hay Point (in 2 separate zones), Gladstone, Townsville and Abbot Point ports will be the 5 priority port development areas (PPDAs) in Qld,
  • limit port expansion and development to within these 5 PPDAs (by prohibiting capital dredging for deep water port facilities outside the PPDAs) until 2022,
  • permit port and terminal expansion and development (including dredging) within the 5 PPDAs via a Government-facilitated staged and incremental expansion process, and
  • require PPDA’s to comply with a set of master plan guidelines (the details of which have not yet been released).

The draft Ports Strategy aims to:

  • achieve a balance between the ‘twin goals’ of sustainable economic port development and environmental protection, and
  • preserve the Queensland Government’s commitment in the GBR Ports Strategy (which is based on UNESCO recommendation) to restrict port development outside Queensland’s established major trading ports within or adjoining the GBRWHA.

The draft implementing legislation is intended to be in place by next year.

The Queensland Government is also continuing its review of port governance and supply chain coordination and delivery across the Queensland port network.

The closing date for submissions is Friday 13 December 2013.

To review the draft Ports Strategy: Queensland Ports Strategy Draft for consultation

23 October 2013

NSW streamlines standard mining lease conditions

On 17 October 2013, the NSW Resources and Energy Minister Chris Hartcher announced significant amendments to the standard conditions for mining leases to reduce regulatory duplication. The amendments will result in the removal of conditions that that seek to address matters already regulated by other government departments, such as the Department of Planning. The amendments will also involve the deletion of conditions that are covered by obligations under the Mining Act and other mine safety legislation, as well as other conditions that have become outdated and redundant.

The removal of the duplications will cut the number of conditions for future standard coal mining leases in NSW from 24 to nine, and for other mining leases from 23 to eight. The NSW announcement comes a week after the Queensland government said it would streamline the approvals process for exploration permits for coal and mineral exploration.

NSW Resources and Energy Minister Chris Hartcher said the changes are part of a range of actions the Government is taking to minimise the costs of doing business in NSW and boost investment certainty. The NSW Government has already committed to new service delivery standards, reducing the times for assessing applications under the Mining Act from 1 July 2013. Target time frames for assessing all minerals applications will be cut to 45 business days (from 80 business days), while times for processing coal applications and coal renewals will be reduced to 95 business days and 55 business days respectively.

16 August 2013

Arbitration in Africa: Recent developments

The Court of Appeal of the Lagos Judicial Division recently issued a pro-arbitration decision holding that courts may only intervene in arbitral proceedings where specifically permitted by Nigeria’s arbitration law and set aside an injunction obtained ex parte by Nigeria’s state oil company NNPC restraining arbitration proceedings brought by Chevron and Statoil.

Meanwhile, the Democratic Republic of Congo (“DRC“) has become the 150th state to accede to the New York Convention, making a notable reservation that excludes enforcement of arbitral awards that relate to mining interests in the DRC.

Whilst these developments continue the encouraging trend towards international norms in arbitration judicial practice and legislation in parts of Africa, careful planning and an awareness of the continent’s legal diversity remain as important as ever for businesses operating in the region.

Nigerian courts may not injunct arbitration proceedings

Foreign parties involved in arbitrations either seated inside or outside of Africa face the risk of interventionist practices by local courts which may be less familiar with international arbitration.

The Court of Appeal of the Lagos Judicial Division issued a decision on 12 July 2013 which evinced a more pro-arbitration approach. In October 2012, the Nigerian National Petroleum Corporation (“NNPC“) successfully obtained an ex parte injunction from the lower courts in Lagos restraining arbitration proceedings in relation to NNPC’s tax dispute with Chevron and Statoil on the basis that tax matters are non-arbitrable. Chevron and Statoil appealed the injunction.

The injunction was overturned on a number of grounds: in particular, NNPC had failed to comply with the requirements for an ex parte injunction, including its duty to fully and frankly disclose material facts to the lower courts. One such example was the arbitral tribunal’s offer to hear submissions as to arbitrability in a bifurcated proceeding, which NNPC had rejected. NNPC had also failed to prove the urgency that might warrant an ex parte application.

Arguably the most important part of the decision was the Court’s strict interpretation of Section 34 of Nigeria’s Arbitration and Conciliation Act which provides that “A court shall not intervene in any matter governed by this Act except where so provided in this Act.” The Court held that the word “shall” was mandatory and that the Act did not provide any exception to the prohibition on intervention that would permit the court to issue an ex parte interim injunction.

Whilst this decision is good news for parties conducting arbitrations seated in Nigeria, it remains to be seen whether the same approach will be followed by the Court in the appeals pending against NNPC’s injunctions restraining other arbitrations brought by international oil majors.

The DRC’s cautious embrace of the New York Convention

In July 2012, the DRC became a Member State of OHADA (Organisation pour l’Harmonisation en Afrique du Droit des Affaires – Organisation for the Harmonisation of Business Law in Africa) which permitted the enforcement of foreign arbitration awards seated in other OHADA states. About a year later, on 26 June 2013, President Joseph Kabila, signed Law No. 13/023 authorising the DRC’s accession to the New York Convention. As the treaty’s 150th signatory, the DRC has expanded the scope of foreign arbitral awards that may be enforced by its courts, but with four reservations.

The first two reservations are fairly common amongst Convention signatories, being provided for by Article I(3) of the Convention – namely (1) the reservation on the basis of reciprocity whereby the DRC will apply the Convention only to the recognition and enforcement of awards made in the territory of another Contracting State, and (2) only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the DRC. What constitutes “commercial” activities in the DRC are broadly defined by various OHADA Uniform Acts.

The third and fourth reservations appear to signal a protectionist approach by the DRC government as regards its mining industry and to address concerns that accession to the Convention would result in local enforcement proceedings of arbitration awards owned by FG Hemisphere against DRC’s state mining company Gécamines (click here to view our earlier post on this case). The third reservation specifies that enforcement of awards under the Convention will only be possible in relation to awards which post-date the DRC’s accession. The fourth and most notable reservation is that the DRC will not apply the Convention to awards related to immovable property situated in the DRC, thereby excluding real estate, and in particular, mining rights (defined as immovable property by Article 3 of the DRC’s Mining Code).

In 2012, the DRC’s growth rate was 7% and yet the country came in the bottom five in the World Bank’s “ease of doing business” survey. Whilst the extractive industries remain DRC’s largest source of export income, its reservation to the scope of the New York Convention in relation to mining rights will not of itself accelerate in-flows of foreign direct investment into the sector. This will be seen by some as a missed opportunity.

These developments continue the encouraging trend towards international norms in arbitration judicial practice and legislation in parts of Africa. However, it is clear that careful planning and an awareness of the continent’s legal diversity remain as important as ever for businesses operating in the region.

For further information, please contact Craig Tevendale, Partner, Robert Rothkopf, Associate, or your usual Herbert Smith Freehills contact.

This article was originally published here.

6 August 2013

Reporting by extractive companies on government payments: EU Directive published in the official journal and us court suspends SEC rule

There have been developments in the US and the EU in relation to the implementation of requirements for reporting by extractive industries on government payments.

The new EU Directive (Directive 2013/34/EU) requiring the disclosure, on a project by project basis, of payments to governments by companies operating in the extractive (oil, gas and minerals) and logging industries has become effective by being published in the Official Journal of the European Union. Member States now have until 20 July 2015 to implement the Directive. There are no changes of substance to the Directive since the version published in April, but some reformatting means the relevant Article numbers have changed.

In the US, a summary judgment has been granted by the D.C. District Court in the case of American Petroleum Institute v. Securities and Exchange Commission, No. 12-1668 (D.D.C. 2013) suspending the SEC rule implementing new project by project reporting requirements for SEC registered companies. The decision was based on the SEC rule requiring public disclosure of all the information reported by companies and the fact that disclosure would be required even if it violated local law (the EU requirements also contain no exception from the disclosure requirement where to do so is prohibited by local law). 

The US decision is important to issuers who are listed in both the US and EU. Under the EU Directive, such issuers will be exempt from complying with the EU regime if they comply with an "equivalent", ie the US, regime. The US decision leaves the issue of whether the US regime will be determined to be equivalent, and even it is eventually determined to be equivalent, the timing of that decision, uncertain.

We have produced a briefing on the US court's decision following the challenge to the SEC's implementing rule and a briefing summarises the key aspects of the new EU requirements, when they come into force and how they compare with the US requirements. If you would like a copy of either or both publications, please contact: Greg Mulley or Carol Shutkever 

4 July 2013

BCIPA – ‘construction work’ no longer applies to construction works on mining leases

The Queensland Supreme Court recently delivered a judgment indicating that the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) does not apply to ‘construction work’ carried out on land subject to a mining lease. The case of Agripower Australia Ltd v J&D Rigging Pty Ltd & Ors, delivered on 25 June 2013 has significant implications for the mining and construction industries.

What happened?

The case concerned the Skardon River Mine at Cape York in Queensland. Land at the mine was subject to 2 mining leases. The Applicant, Agripower Australia Ltd (Agripower) owned the mining plant. The First Respondent, J&D Rigging Pty Ltd (J&D) was the operator of the mine.

Agripower contracted with J&D to dismantle and remove the mining plant. Approximately 5 months later, J&D delivered a BCIPA payment claim to Agripower for $3.1 million. Agripower resisted and contended it was not obliged to pay J&D’s payment claim because among other things, the contracted work was not ‘construction work’ for the purposes of BCIPA. As a result of the subsequent adjudication determination Agripower was ordered to pay J&D in excess of $2.5 million.

Agripower brought proceedings in the Queensland Supreme Court seeking a declaration that the adjudication decision was void because the contract work was not ‘construction work’ within the BCIPA meaning.


Justice Wilson determined that BCIPA payment claims only operate where ‘construction work’ is performed under a ‘construction contract’. The mining plant to be dismantled by J&D had to consist of structures or works forming part of land to fall within the scope of ‘construction work’.

Justice Wilson determined that the works agreed under the contract did not amount to ‘construction work’ because:

  • mining leases create an entitlement for the leaseholder to extract minerals but  do not create an interest in land the subject of the mining lease;
  • the mining plant did not form part of the land because there was a statutory removal obligation and the plant was put in place for temporary purposes; and
  • the mining plant was not a fixture forming part of the land at common law.
The mining and construction industry has traditionally accepted that the BCIPA system applies to construction activities carried out at mine sites. The decision of Justice Wilson signals a clear departure from this approach.

20 May 2013

2013 Budget – Changes affecting the mining sector

The Federal Government’s 2013-2014 Budget (the Budget) contains a number of changes to existing tax rules some of which are expected to have adverse implications on the mining sector.

Changes to accelerated tax depreciation arrangements

The Federal Government announced immediate changes to Australian tax laws which impact income tax deductions available to mining companies. The changes defer deductions for the cost of acquiring mining rights (e.g. exploration permits or mining leases) and information which is first used in exploration, from an immediate deduction to a deduction spread over:
  • 15 years; or
  • the life of the mine, whichever is shorter.

Although full details are yet to be released, the following expenditure will continue to be immediately deductable:
  • costs of acquiring mining rights and information from government authorities;
  • costs incurred in generating new information or improving existing information; and
  • mining rights acquired under a recognised “farm-in, farm-out’ arrangement.

The changes apply to taxpayers who start to hold the mining right or information after 14 May 2013.

These changes may significantly impact the acquisition prices of exploration assets and also have the potential to inhibit junior mining companies ability to obtain investment through the sale of prospective interests to investors on a full or partial cash basis.

Practically, there are also a number of issues surrounding the 15 year or life of mine deduction mechanisms which are yet to be clarified.

Reduction in funding for mining and energy initiatives

Funding has also been significantly reduced to the following mining and energy initiatives in the Budget with:
  • $500 million withdrawn over three years from the Carbon Capture and Storage Flagships Program;
  • $370 million deferred over three years from the Australian Renewable Energy Agency;
  • $274 million withdrawn over two years from the Coal Sector Jobs package;
  • $88 million withdrawn over two years from the National Low Emissions Coal Initiative; and
  • $29 million withdrawn over two years from the Coal Mining Abatement Technology Support package.
For further details, please visit the Federal Government Budget website

7 May 2013

Environment Protection and Biodiversity Conservation Amendment Bill 2013

The Environment Protection and Biodiversity Conservation Amendment Bill 2013 (the Bill) was introduced into Parliament on 13 March 2013 and proposes to amend the Environment Protection and Biodiversity Conservation Act 1999 (EPBC). The purpose of the Bill is to establish a new matter of national environmental significance (NES) in relation to the impacts coal seam gas and large coal mining development (together, the Developments) have on water resources.

According to the explanatory memorandum, the Bill proposed two major changes by:
  • Implementing civil penalties and offence provisions (similar to those that already existing the EPBC for existing NES) for taking an action involving the Developments that has, will have or is likely to have a significant impact on a water resource, without obtaining an approval or an exemption from approval under the EPBC; and
  • ensuring the impacts that the Developments have on water resources are assessed at a national level, in accordance with the assessment process under Part 8 of the EPBC.

The type of Developments that will be affected by the Bill are those that include “activities involving extraction”. Consequently, any part of the Developments that do not form part of the extraction process will not fall within the ambit of the Bill. For example, the definition of Coal Seam Gas Development would not generally include infrastructure used to transport coal seam gas, as this does not form part of the extraction process.

A ‘Water Resource’ includes surface water, ground water, a watercourse, lake, wetland or aquifer (whether or not it currently has water in it). A Water Resources includes all aspects of the water resource, including water and organisms.

Should the Bill be passed by Parliament and receive Royal Assent, the new provisions may apply to projects where development assessment or EPBC approval has already commenced. However as much as possible, the transition provisions are designed to minimise disruption to the assessment of existing projects.

The Department of Sustainability, Environment, Water, Population and Communities also intends to develop guidelines which set out the criteria to assist decision makers assessing whether a proposed action will have a significant impact on a matter of national environmental significant and subsequently require assessment and approval under the EPBC. The proposed guidelines will not be legally binding.

15 April 2013

Increasing media attention around fraccing has in part elevated stakeholder concerns

On 29 August 2012, the Petroleum and Geothermal Energy Resources (Environment) Regulations 2012 (WA) (Environment Regulations) commenced operation, codifying the existing requirement for all onshore petroleum activities to have an approved Environment Plan. To support the Environment Regulations, the Department of Mines and Petroleum (DMP) has also published Guidelines for the preparation of an Environment Plan (Guidelines) and an Information Sheet on chemical disclosure (Information Sheet).
The Environment Regulations were developed following Dr Tina Hunter’s report ‘Regulation of Shale, Coal Seam and Tight Gas Activities in Western Australia’ (
Hunter Report). The Hunter Report found that while the DMP’s processes to protect the environment from onshore petroleum activities were adequate, the regime lacked legal enforceability. Dr Hunter recommended that the Environment Regulations be written to provide legal certainty and ensure enforceability.
Increasing media attention around onshore unconventional gas activities in WA, in particular fraccing, has in part elevated stakeholder concerns. This is recognised in the Hunter Report, with the use of chemicals in the fraccing process identified by Dr Hunter as a cause of ‘community distress’. Dr Hunter recommended that the DMP provide full, transparent disclosure of all chemicals used in WA fraccing operations and this requirement has been built into the Environment Regulations.

Complying with the new chemical disclosure requirements, particularly in respect to the protection of proprietary information, is a key concern arising from these reforms.

Read our WA Fraccing regulations article here.

21 February 2013

Committee to oversee QLD’s land access reform ‘Action Plan’ announced

As promised after the state election in 2012, the Queensland Government has confirmed the details of the committee that will advise them on the issues identified in the Six Point Action Plan to reform the state’s land access laws.

The seven member committee will be chaired by Dr David Watson, and will provide a forum for resource and rural industry bodies to resolve issues relating to resource sector development.

Other members of the committee include Wayne Newton, President, AgForce Grain Ltd; John Cotter, chair, Queensland Gasfields Commission; Dan Galligan, CEO, Queensland Farmers’ Federation; Matt Paul, Queensland Director, Australian Petroleum Producers’ and Explorers’ Association; Bernie Hogan, Regional Manager, Queensland, Association of Mining and Exploration Companies; and Andrew Barger, Policy Director, Queensland Resources Council.

The announcement also confirmed that the committee will specifically advise on:
  1. a review of heads of compensation to ensure no erosion of property rights and the expansion of Land Court jurisdiction to include matters of conduct;
  2. the introduction of an alternative dispute resolution process;
  3. the introduction of a requirement that any Conduct and Compensation Agreement (CCA) to be noted on land title;
  4. an option for parties to “opt out” of a formal land access agreement at the election of the property owner;
  5. the development of standard CCAs for mineral, coal and coal seam gas industries; and the creation of a single resource for property owners and resource companies.

14 February 2013

Queensland lifts ban on shale oil mining

Yesterday the Newman Government announced a new oil shale policy that it will allow the development of a commercial shale industry in Queensland but leaves in place the existing 20 year moratorium suspending development of the McFarlane oil shale deposit near Proserpine. 

The policy will set rigorous environmental controls on the industry and will allow existing oil shale operator Queensland Energy Resources Ltd (QER) to progress its trial plant at Gladstone to commercial stage.

The rights to several large oil shale resources in Queensland are currently held by QER, who will now be able to proceed directly to commercial production given their pilot plant near Gladstone had successfully demonstrated the viability of its processing technology.

To date, there has been extremely limited commercial application of oil shale in Australia and overseas and for this reason all proposed oil shale developments and activities will be subject to detailed environmental assessments on a project-by-project basis. Under the new policy, proposals will be assessed on their merits and will require a trial stage to determine the feasibility and environmental performance of any unproven technologies.

The approval process for any oil shale development will require operators to adopt best practice environmental management techniques and comprehensive monitoring of the process, and its emissions, wastes and impact on the community and environment. Existing and new operators in the oil shale industry will need to prepare full Environmental Impact Statements for their projects.

In Australia the largest oil shale deposits are in Queensland with oil shale deposits totalling more than 20 billion barrels, with major deposits located in areas such as Yarwun and Proserpine.

The oil shale industry has the potential to create a large number of new jobs in Queensland, including thousands of jobs in the construction phase of oil shale projects alone, and provide royalties and other economic benefits for regional communities and the broader economy.

23 January 2013

Climate Change Regulation in Australia: Opt-in Scheme for Liquid Fuels

What’s Happened?
The Clean Energy Act 2011 (Cth) contemplates the creation of an ‘Opt-in Scheme’ for liquid fuels.
Regulations for the Opt-in Scheme came into effect on 10 December 2012. The Scheme will operate from 1 July 2013 onwards.
The Scheme will allow a person to apply to the Clean Energy Regulator to be declared a designated opt-in person in relation to amounts of liquid fuels.
A person so declared is a liable entity in relation to those amounts, and takes on that liability instead of paying an equivalent carbon price under fuel tax and excise legislation.
Who needs to know?

Anyone who is a large user of liquid fuel – or who is a member of a GST group, or a participant in a GST joint venture, which is a large user of liquid fuel – should consider using the Opt-in Scheme.
Lodgement Deadline?

Applications for designation in financial year 2013-2014 need to be lodged with the Regulator on or before 31 March 2013.


Use of the Opt-in Scheme may yield cash-flow benefits. Under the Scheme, carbon liability only needs to be paid periodically: in ‘flexible charge’ financial years, by the end of the following February; and in ‘fixed charged’ financial years, 75% by the end of June and the remainder by the following February. Outside the Scheme, carbon liability is ‘inbuilt’ under the fuel tax and excise legislation.

Use of the Opt-in Scheme may also yield lower compliance costs by providing the opportunity to acquit liability using potentially lower priced emissions units (such as carbon credit units generated under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth), and eligible international emissions units).

The Scheme may be of particular benefit to the mining industry.

This article was written by John Taberner, Consultant, Sydney and Michael Voros, Special Counsel, Perth.

17 January 2013

Current trends and regulatory changes for the mining industry in QLD – a quick review

If announcements are anything to go by, the immediate future for the mining industry at a regulatory level is looking brighter. The Queensland Government has announced their intention to attempt to decrease the inefficiencies that currently exist at a compliance level in the resources sector.

Accordingly, the Queensland Government has recently enacted legislation to streamline and harmonise procedures for dealing with different types of resource interests, including exploration permits and mining leases.

The legislation reduces the initial terms of mining claims from 10 years to 5 years, and creates a new class of ‘non-assessable transfers’ (change of name, transfers of mortgages and subleases), that are not required to be assessed before being registered. The legislation also creates a new online platform, which aims to deliver information contained in mining and petroleum registers more efficiently.  

The Queensland Government has also announced its intention to minimise the red tape that exists in current legislation. The Office of Best Practice Regulation released a report in October 2012 recommending an immediate review of occupational health and safety legislation and workers’ compensation legislation that “impose red tape, increase the cost of business and reduce competition” with a view to reducing the burden of regulation by 20% over six years. 

15 January 2013

Mining companies take note – new ASX reporting requirements to take effect at the end of the year

New ASX reporting requirements, due to come into effect in December 2013, are set to significantly change how listed mining companies report to the market. 

The new requirements oblige mining companies to report in accordance with the 2012 JORC Code, the latest edition of which was published on 20 December 2012. The changes require mining companies to report on estimated mineral resources and ore reserves by the inclusion of an annual mineral resources and ore reserves report in the annual report and to disclose production targets for major projects.

In these reports, the mining companies will need to include all material information to allow shareholders to understand the reported estimates of probable and proved ore reserves for major mining projects.

Additionally, the new listing rules also streamline the requirement for prior written consent of the competent person for annual reports.

There will be a twelve month transition period, with the new requirements to come into force on 1 December 2012.