Relief on the way for Queensland explorersMay 2020 | Energy & Resources
Exploration has always been a challenging enterprise but in light of current events, including the unprecedented pressure posed by the COVID-19 pandemic and the impact of depressed commodity prices, many explorers are likely looking for some form of relief.
The Queensland Government has responded by announcing a relief package in relation to COVID-19, specifically targeted at the exploration sector.
In addition, various regulatory changes have been implemented which will operate to provide explorers with flexibility in managing their commitments.
We provide some commentary below about what this will mean in the immediate term for explorers transitioning to the new framework.
COVID-19 relief package
Holders of exploration permits (EPs) and authorities to prospect (ATP) may be eligible for a waiver of any rent payable in the period 1 April to 30 September 2020. Specifically, a moratorium has been established for that period so that any rent due and payable during the period will be nil.
Additionally, if an ATP holder makes an application for a special amendment during the moratorium, then the fee for that application is waived.
All other fees and charges under various resources legislation will be capped at 2019-2020 rates.
The COVID-19 pandemic has been recognised as an exceptional event. This may allow exploration companies to apply to vary or amend work programs and relinquishment conditions consistent with the changes pursuant to the Natural Resources and Other Legislation Amendment Act 2019 (Qld) (NROLA). We provide commentary about these changes below.
A streamlined application form has been developed for this purpose and is available on the Business Queensland website.
Other relief initiatives
Other exploration development initiatives have been brought forward as follows:
- 2020 Queensland Exploration Program (QEP): the QEP provides the timing for petroleum, gas and coal exploration opportunities for 2020. The Queensland Government brought forward the timing of a petroleum and coal tender so both tender processes commenced in May 2020 instead of later in the year; and
- Collaborative Exploration Initiative (CEI): CEI provides industry grants in order to support exploration, encourage innovative techniques and assist with the promotion of discovery and development of new minerals. $2.8 million in CEI funding has now moved forward to the 2020-2021 financial year.
In relation to the CEI funding, round 4 is now open for applications with up $200,000 available for direct funding without any co-funding by the applicant. Potential applicants should note that the deadline for submissions is 31 May 2020.
In June 2019, the NROLA was passed by Queensland parliament introducing a suite of substantive changes to the Mineral Resources Act 1989 (Qld) and the Petroleum and Gas (Production and Safety) Act 2014 (Qld) and a number of other Acts.
The substantive changes under NROLA will commence on 25 May 2020.
Holders of EPs for minerals and coal are subject to relinquishment requirements where the area of the EP must be reduced at certain periods through the life of the tenure.
Changes pursuant to NROLA will streamline relinquishment requirements, allowing EP holders more time before the first relinquishment due date and reducing the total area to be relinquished. Additionally, for EP holders, the Minister will have the discretion to modify these relinquishment obligations due to:
- an exceptional event (as described above); or
- circumstances arising from the permit forming part of an exploration project.
An exploration project means a project involving two or more EPs that have a unifying exploration purpose.
For existing EPs, relinquishment obligations will be modified so that only 50% of the area of an EP is required to be relinquished within the first five years after a renewal (provided the renewal occurs after commencement of the changes under NROLA).
ATP holders are also subject to relinquishment obligations. After commencement of NROLA, new ATPs granted will have the benefit of the new, more relaxed relinquishment requirements (as noted for EP holders above); however, existing ATPs will not accrue the benefit of this change.
The holder of an ATP is required to comply with its work program which sets out the nature and extent of exploration activities to be completed during each year of the ATP.
Depending upon the nature of these commitments, the ability of the tenure holder to undertake the work program may be negatively impacted by COVID-19 and require variation. For example, some operators may cease exploration altogether due to uncertainty and cash flow limitations. Alternatively, operational and travel restrictions may mean that the extent of exploration needs to be reduced or modified.
There is scope to amend work programs under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (P&G Act), albeit subject to certain limitations, such as the inability to vary if the work program has previously been extended. An amendment application also requires payment of a fee and no guaranteed timeframe for a decision.
As of 25 May 2020, the changes to the P&G Act introduced by the NROLA will operate to allow the amendment of conditions of an ATP by the Minister if there is an ‘exceptional event’. An exceptional event is defined as an event that:
- affects the carrying out of authorised activities under the permit;
- is beyond the control of the holder of the permit; and
- could not reasonably have been prevented by the holder of the permit.
Explanatory notes for NROLA indicate that this is expected to capture industry-wide events such as natural disasters or economic crises.
As noted above, the COVID-19 pandemic has been recognised as an ‘exceptional event’ and will provide some immediate relief for explorers once those changes commence and appropriate variations and amendments can be sought.
NROLA also introduces the concept of ‘outcomes-based’ work programs as an alternative to the existing activities based work programs. The intention is to allow more flexibility where explorers will be able to adjust their activities in response to exploration results without seeking approval from the Department of Natural Resources, Mines & Energy to vary the work program.
These changes will not impact existing ATPs except to the extent that an application for renewal is required (either before or after commencement). Following commencement, the ATP holder may propose either type of work program in a renewal application.
Similarly, for existing EPs, the changes regarding outcomes based work programs will not apply, other than on renewal.
Amalgamation of PCAs
The NROLA changes include the removal of the 75 sub-block limit for the area of petroleum leases (PLs) and potential commercial areas (PCAs). Additionally, there will be provision for the amalgamation of existing PLs and PCAs.
It is important to note, however, that due to the Mineral and Energy Resources and Other Legislation Amendment Bill 2020 (Qld) (which has very recently been passed by parliament), the commencement of the change allowing the amalgamation of PCAs has now been delayed subject to further amendment.
The above mentioned changes may provide some relief to explorers in certain circumstances.
The changes, coupled with temporary relief announced in relation to the COVID-19 pandemic, may, however, complicate the understanding of obligations under existing ATPs or EPs.
If you require any advice regarding the transition pursuant to NROLA or other temporary changes recently announced for COVID-19 in the exploration sector, please contact our Energy & Resources Team.
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