Significant changes in effect in Queensland for resource authorities holders and large scale mining leases

Update: On 7 September 2020 key provisions of the Mineral and Energy Resources and Other Legislation Amendment Act 2020 (Qld) (the Amendment Act) commenced.

Resource authority holders should be aware that the changes introduced through the Amendment Act now apply to all direct transfers, change of control events, grants, tenders and transfer approvals. Holders of mining leases should note that there are new requirements to submit development plans alongside applications and renewals for mining leases for certain prescribed minerals. 

The Amendment Act has introduced a raft of changes to Queensland’s mineral and energy resources legislation. It has significant ramifications for change of control events, resource authority applications and renewals, and dispute resolution processes.

On 1 July 2020 major health and safety changes under the Amendment Act commenced. These changes are discussed in detail in the Employment Notes publication.

The final set of Amendment Act provisions, which relate to SEQ water distributor-retailer infrastructure charges, will commence on 1 January 2021.

Key takeaways

• When determining whether to approve an application for the direct transfer of a resource authority, the Minister for Natural Resources, Mines and Energy (the Minister) will now consider the financial resources of the transferee.
• Following an indirect change of control of a resource authority, such as through the sale of the authority holder, the Minister now has a discretionary power to amend or impose new conditions on that authority. Parties can obtain an indicative changed holder review allocation to determine the likelihood of Ministerial intervention based on the risk rating of the proposed new controlling entity.
• When a resource authority is transferred as a result of the holder being placed into administration, receivership or liquidation, no Ministerial approval for the transfer is required.
• Holders of mining leases for prescribed minerals above a threshold are now required to submit detailed development plans in respect of planned mining activities.
• Applicants for the grant or tender of a resource authority, and proposed direct transferees of a resource authority, may be disqualified by the Minister through an assessment that includes whether the subject or their associates has contravened resources, safety or environmental legislation.
• There is a new conferencing mechanism that can hear concerns regarding resource authorities raised by landowners, occupiers or resource authority holders.

Change of control events

Direct transfers: Consideration of financial resources of a transferee

When considering an application for approval to register an assessable transfer of the whole, or a share, of a resource authority (direct transfers) under the Mineral and Energy Resources (Common Provisions) Act 2014 (Qld) (MERCPA), the Minister must now consider whether the transferee has the financial resources to fund the estimated rehabilitation cost for the resource activity. The Government has stated that the amendment fulfils a policy priority to improve financial assurance and promote mine rehabilitation.

Indirect change of control: Ministerial power to amend or impose new conditions

An indirect change of control event occurs when an entity either: commences or ceases to control the resource authority holder under section 50AA of the Corporations Act 2001 (Cth); or the resource authority holder commences or ceases to be a subsidiary of a corporation under s 46 of the Corporations Act. These events typically are triggered through share sales or other restructuring processes involving the authority holder.

If the Minister has been notified of, or otherwise believes that there has been, an indirect change in the holder of the resource authority (an indirect change of control), the Minister may now:

• request information or a document about whether the change has happened; and
• use a new discretionary power to amend existing conditions or impose new conditions on a range of resource authorities, if the Minister considers that the new holder may not have the financial and technical resources to comply with the current conditions.

These new ministerial powers may be applied to a:

• geothermal tenure under the Geothermal Energy Act 2010 (Qld);
• GHG permit or lease under the Greenhouse Gas Storage Act 2009 (Qld);
• mineral development licence, exploration permit, or mining lease under the Mineral Resources Act 1989 (Qld) (MRA);
• lease under the Petroleum Act 1923 (Qld); and
• petroleum lease, pipeline licence, authority to prospect, or petroleum facility licence under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (P&G Act).

Currently, there is no mechanism for parties contemplating an indirect change of control to seek an indicative assessment of whether the Minister will seek to amend or impose new conditions on the proposed new authority holder. However, parties may apply for an indicative changed holder review allocation under new provisions of the Minerals and Energy Resources (Financial Provisioning) Act 2018 (Qld), if the resource authority is allocated to a risk category and the estimated rehabilitation cost for the authority is more than the prescribed amount. If an indirect change of control event would result in a higher risk rating under this review, the Ministerial is more likely to intervene.

Change of control from an operation of law: No ministerial consent required

Ministerial approval is no longer required in order to register a transfer of a resource authority if that transfer is the result of a prescribed ‘operation of a law’. Instead, the prescribed party must notify the chief executive of the operation which has occurred in order for the change of control to be registered. These operations include the:

• administration, receivership, liquidation, bankruptcy, or death of the holder; or
• exercise of a power of sale by a mortgagee or holder of a charge.

Development plans for mining leases for prescribed minerals

The MRA now requires that a holder of a mining lease for prescribed minerals above a threshold submits and receives ministerial approval for a development plan related to that lease. These changes aim to increase government oversight over, and the accessibility of information relating to, large scale mineral mines.

Under the Mineral Resources Regulation 2013 (Qld), the prescribed minerals are bauxite, clays, copper, diatomite, dimension stone, gold, gypsum, lead, limestone, magnesium rich materials, phosphate rock, silica, silver, tin, titanium minerals, zinc and zircon.

A development plan is required to be submitted to the Minister as part of an application for:

• the grant of a ‘prescribed mineral mining lease’, where the applicant proposes to mine a threshold amount of a prescribed mineral in any of the first five years of the proposed lease;
• the renewal of a ‘prescribed mineral mining lease’; or
• the renewal of any other mining lease, where the holder proposes to mine a threshold amount of a prescribed mineral under the renewed lease in any of the first five years of the renewal period.

A current mining lease is now also required to obtain a development plan if it mines a threshold amount of a prescribed mineral during a project year, if the lease is part of a mining project, or a lease year. The mining lease will be classified as a ‘prescribed mineral mining lease’ at the end of the relevant year. That classification will begin a six month countdown, during which the holder must submit a proposed development plan.

A development plan must meet detailed requirements including the provision of information about the nature, extent and location of the planned mining activities for each year.

Disqualification of applicants

The Minister may now disqualify an applicant who is seeking the grant, tender or approval for the transfer of a resource authority.

In deciding whether the applicant should be disqualified, the Minister may consider whether the applicant or their associate:

• has contravened MERCPA or another Resource Act;
• has been convicted of an offence under MERCPA, a Resource Act, the Coal Mining Safety and Health Act 1999 (Qld); the Environmental Protection Act 1994 (Qld), the Mining and Quarrying Safety and Health Act 1999 (Qld) or the Water Act 2000 (Qld);
• has been convicted of an offence involving fraud or dishonesty;
• is insolvent or under administration; or
• is disqualified from managing corporations due to a winding up order, or the appointment of a controller or administrator.

An associate of an applicant includes a controlling entity, a director, a parent company, and a director of a parent company.

Dispute resolution processes

Conferencing with landowners and occupiers

A new conferencing mechanism has been introduced, which enables an authorised officer to initiate a conferencing process between a resource authority holder and the relevant owners and occupiers of the land relating to that resource authority. The process aims to help the parties reach an early and inexpensive settlement of concerns surrounding the resource authority.

An owner or occupier may give notice to the authorised officer of a concern relating to the holder’s conduct, activities that may affect the land, or authority to access the land. A holder may give notice of a concern involving themselves and an owner or occupier. The authorised officer may call a conference if it receives such a notice, or if they otherwise become aware of a concern about a resource authority.

If a party does not attend a conference, an attending party may apply to the Land Court seeking their reasonable costs of attendance. A party must not be represented by a lawyer at the conference unless each other party and the authorised officer agree.

Co-existence plans

A person may seek approval from the Minister under the MRA for a transportation mining lease, or a mining lease for a purpose other than mining, over land in the area of an existing authority without obtaining the consent of the holder of the existing authority. The Minister may only grant the mining lease if they are satisfied the activities can be carried out in a way that is compatible with the authorised activities of the existing authority and the co-existence of the lease and authority would optimise the development and use of Queensland’s resources.

If the mining lease is granted, the holder of the lease and the existing authority holder must negotiate a co-existence plan. If the parties are unable to agree on a plan within three months of the granting of the lease, the matter may be referred to arbitration.

An equivalent process has also been established under the P&G Act where land in the area of a pipeline licence holder is also in the area of a geothermal, GHG or mining lease.

Other changes

A new competitive tender process has been introduced under the MRA that allows the Minister to invite tenders for mining leases. This mechanism has been included to ‘test the market’ for abandoned sites with residual mineral resources.

Security must now be provided before a mining lease application can be granted or renewed under the MRA.

Moving forward

These changes have implications for many aspects of mineral and energy resource projects based in Queensland.

For bidders and vendors seeking to acquire or dispose of an interest in Queensland-based mineral and energy resource projects, these changes impact the scope of due diligence to be performed on a target/bidder and the drafting of joint venture arrangements and other transaction documents. 

For any advice relating to the issues discussed above, please get in touch with the Herbert Smith Freehills team.