24 Free Trade Agreements, Anti-Corruption, Sanctions, Export Controls, Whistleblowing Laws, Foreign Influence and Modern Slavery
Australia is self-sufficient in most minerals of economic importance and has an extensive resources sector. The mining industry contributes about 8.2% to Australia’s gross domestic product and just under half of the value of total goods exported.
Gold, silver, nickel, coal, lead, industrial diamonds, manganese, tantalum, copper, zinc, iron ore and ferrous compounds have been produced in commercial quantities for a long time, as has uranium since the 1950s; oil and gas since the early 1960s; and bauxite, alumina and aluminium since the 1970s. There is also considerable exploitation of mineral sands.
The diverse nature of Australia’s resources means there is a wide range of commercial opportunities for ventures including exploiting minerals directly; establishing mineral processing industries; and providing technical expertise, services and equipment to the industry.
Australia and its continental shelf have substantial petroleum reserves. Australia’s main oil-and condensate-producing areas are the North West Shelf of Western Australia and the Bass Strait, off the coast of Victoria. Significant new condensate production is occurring in West and Northern Australia and is primarily directed for the export market. Abundant natural gas resources have been identified in the North West Shelf of Western Australia, central Northern Territory and south west Queensland. Australia’s natural gas resources meet Australia’s domestic gas needs and support substantial gas-based processing industries. Liquefied natural gas (LNG) production will substantially increase over 2019 with the ramping up of the Wheatstone, Ichthys and Prelude LNG projects. Australia has edged past Qatar to be the world’s largest LNG exporter. Australia is expected to be the largest LNG exporter for 2019 and into 2020.
Coal bed methane has more recently been developed on the east coast, particularly in Queensland (there are currently legislative restrictions in place in Victoria, New South Wales, Tasmania and the Northern Territory). Several LNG plants operating at Gladstone in Queensland use coal bed methane as a feedstock.
The Australian Government’s policy on uranium has been to develop the export potential of Australia’s industry by allowing the mining and export of uranium under strict international agreements designed to prevent nuclear proliferation. Presently, there are only three uranium mines operating in Australia (Ranger in the Northern Territory and Olympic Dam and Beverley in South Australia). The Western Australian Government has reintroduced a ban on new uranium mining projects that was effected on 20 June 2017, although the Kintyre, Yeelirie, Mulga Rock and Wiluna projects which had approval prior to the ban were able to proceed. Queensland maintains a ban.
19.1 General overview: mining and petroleum legislation
Most of Australia’s mining activity is conducted onshore. There is significant offshore petroleum exploration and production. A number of statutes (federal, state and territory) govern mining and petroleum operations. In general, any company wishing to conduct exploration or development must satisfy the government concerned that it has the financial and technological resources to support the activities proposed.
State and territory governments administer the acts and regulations bearing on the mining and petroleum industries within their jurisdiction. This includes:
- the issue of exploration and production titles and the approval and registration of dealings affecting those titles;
- the approval of mineral and petroleum exploration and development projects (usually in two stages);
- the supervision of operations to ensure the observance of good mining and oilfield practices, compliance with health and safety requirements and the protection of the environment; and
- the levying of rents, royalties and other charges.
A mining title, which could be an exploration licence, a mining lease or a title for ancillary purposes (such as for processing facilities, accommodation or power transmission lines), must be obtained under the relevant legislation before any exploration or mining operations may be undertaken in respect of minerals which are the property of the Crown. It is important to inspect the relevant mining register as well as any available title documents to assess the terms and conditions attaching to the mining title and any registered dealings.
Most mining and petroleum statutes contain a requirement that the holder of a title obtain government approval in respect of certain dealings affecting mining or petroleum titles.
In general, an assignment or sale involving a transfer of all (or part) of a mining or petroleum title will require government approval and registration.
Almost all natural resources in Australia are owned by or reserved to the Crown. It is, however, possible to have privately owned minerals. It is important to check the original property grant to determine whether all minerals have been reserved to the Crown. In any event, the right to explore for or mine minerals (whether privately owned or otherwise) is dependent upon the grant of the relevant government approvals.
19.2 Mining titles
Each state and the Northern Territory has a mining statute for mining in general. Other legislation regulates coal mining.
The state and territory mining statutes are similar in structure and approach, but there are many variations in the legislative treatment of mining titles. There are also differences in the practice and procedures of the federal and state government mining departments in the administration of the legislation and regulations.
Two principal forms of title exist under mining statutes:
- the exploration title (usually called an exploration licence), required to conduct exploration activities, including drilling and testing; and
- the production title (usually called a mining lease), required to conduct commercial mineral extraction activities.
An exploration permit or mining lease will be subject to prescribed terms and conditions. These will include obligations to lodge periodical reports and pay rent. Conditions imposed on a mining title may also regulate how and when certain exploration or mining activities can be undertaken.
For example, in Western Australia, in respect of an exploration licence applied for:
- before 10 February 2006, relinquishment of 50% of the exploration licence is required at the expiration of both the third and fourth year of the exploration licence term; and
- after 10 February 2006, 40% of the ground must be surrendered at the end of the sixth year of the exploration licence. The purpose of these compulsory surrender provisions is to prevent large areas of land from being tied up by one explorer and to provide equitable access to land by other explorers.
Mining royalty arrangements differ among the states and territories and also vary depending on the nature of minerals mined.
Environmental and planning approvals
Separate land use planning and environmental legislation has been enacted by each Australian state and territory. In general, some form of environmental or land use approval is required when a company proposes to undertake exploration activities.
In the case of approvals for potentially high-impact activities such as mining, the decision to grant a primary approval is usually made by the relevant state or territory government. This means that the approval process is likely to be influenced by political considerations.
While the approval process varies according to the jurisdiction, the following are some common features:
- an approval cannot be granted in relation to exploration/mining activities without the approving authority considering any and all possible impacts on the environment by reason of that activity;
- preparation of an environmental management plan or environmental impact assessment will be required where the activity is likely to have a significant impact on the environment;
- certain, or all, members of the public may have to be notified and given a right to make submissions/object before any approval is granted; and
- the approving authority may refuse to approve the proposed mining activity or may grant approval with any conditions considered appropriate. In the context of a proposed mining project, the conditions will be broad in scope, number and detail. The project cannot commence or proceed except with, and in accordance with, the approvals granted.
In the context of a proposed mining project, key environmental considerations will include the impacts on:
- groundwater sources and flows;
- climate change;
- flora and fauna;
- Aboriginal and non-Aboriginal heritage; and
- human communities.
These factors will need to be considered in detail in any impact assessment or environmental approval.
In addition to the state and territory legislation, the provisions of the Environment Protection and Biodiversity Conservation Act 1999 (Cth) require a company to obtain approval for any activity that is likely to have a significant impact on one or more of the following matters of national environmental significance:
- a declared world heritage property;
- a National Heritage place;
- a wetland of international importance (declared under the Ramsar Convention);
- a listed threatened species;
- a listed threatened ecological community;
- a listed migratory species protected under international agreements;
- a Commonwealth marine area;
- the Great Barrier Reef Marine Park;
- nuclear actions (including uranium mines); and
- in the case of coal mining or coal seam gas activity, a water resource.
Accordingly, before any exploration work or mining activity is carried out in relation to a proposed mining project, an assessment must be made of whether the activity is likely to have a significant impact on any one or more of the matters listed above.
In addition to the above preliminary assessment procedures, a number of other licences/approvals may be required for specific activities in relation to both exploration and mining. Such licences/approvals include:
- approvals for road closures;
- approvals in relation to the use of explosives and radioactive substances;
- approvals to extract water from a particular water source; and
- approvals to use water at a particular site.
This is not an exhaustive summary of the different approvals/licences that might be required in relation to a proposed mining project in Australia. Where approval is required, the relevant legislation makes it an offence to proceed until the approval is first obtained. This is a complex area of law involving multiple jurisdictions, authorities and pieces of legislation. We recommend that legal advice is sought (and environmental consultants retained) well in advance of commencing a proposed project.
There is obviously tension between an owner or occupier of land (often a farmer) and a mining title holder who needs to access and/or disturb that land. The law here can be quite complex.
Consent is required for the grant of a mining title over certain types of occupied land. In other cases, consent is required for entry onto occupied land after the title has been granted.
Under state mining legislation, it is necessary to compensate a landholder where that landholder’s surface rights are affected by mining operations. Compensation to be paid to the owner or occupier may include compensation for deprivation of possession of the surface of the land, damage to the surface of the land and loss of or damage to any improvements (among other things).
19.3 Other titles: petroleum and gas (including coal seam gas)
In all states and territories (other than the Australian Capital Territory) separate legislation covers onshore, as distinct from offshore, petroleum exploration and production. In terms of offshore exploration and production, there is a state offshore regime (which extends three natural miles seawards from the baseline of the territorial sea) and a federal offshore regime (which extends to waters which are more than three nautical miles seawards of the baseline of the territorial sea). State legislation also exists to regulate the construction and operation of petroleum pipelines. In respect of gas pipelines, national access principles have been developed to allow third parties to negotiate access to some of the larger gas pipelines in Australia.
As with minerals, different types of petroleum titles are issued under the petroleum statutes. These include exploration permits which authorise exploration for petroleum, as well as production licences which allow a holder to recover petroleum following a commercial discovery and to conduct necessary production operations and works. A petroleum pipeline licence is required to construct and operate a petroleum pipeline.
Coal seam gas
Coal seam gas (CSG), also called coal seam or coal/bed methane, is a naturally formed gas consisting of methane. The methane is typically attached to the coal surface (fractures and cleats) or micropores and held in place by reservoir and water pressure. CSG is released when pressure on the coal seam is reduced, usually after water is removed from the seam.
CSG has long been extracted in connection with coal mining for safety reasons, but has gained recent attention in Australia as a viable energy source in its own right.
For example, in Queensland, CSG (being a hydrocarbon) can be exploited through a coal mining lease (with appropriate conditions) or through the relevant petroleum legislation. Once again this is a complex area. Because gas can be exploited differently according to the nature of the title, there is considerable scope for overlap.
However, it should be noted that the following restrictions in relation to CSG apply in Australian states and territories:
- Victoria has a permanent ban on onshore unconventional gas exploration methods, including CSG and hydraulic fracturing (also known as ‘fracking’), as well as a moratorium on conventional onshore gas exploration to 30 June 2020; and
- Tasmania has a moratorium on hydraulic fracking in the state until 2025.
The Northern Territory previously had a moratorium on fracking, which was lifted on 17 April 2018 following a scientific inquiry.
There is the possibility of overlap between coal, petroleum, CSG and oil shale titles. It may be necessary for title-holders to enter into appropriate coordination agreements. This is a very complex area and miners are advised to seek advice on proposed resource projects.
Legislation regulating the capture and storage of carbon dioxide underground also adds to the overlap complexity.
Geothermal power is energy generated from heat stored in the earth, or the collection of absorbed heat derived from underground. In Australia, geothermal energy is not used as a power source but there are known locations where geothermal energy is detectable. Two types of geothermal projects are currently being developed in Australia – enhanced geothermal systems and hot sedimentary aquifers. Most of the projects are still at proof-of-concept or early demonstration stage.
A number of states have legislation in place regulating exploration for geothermal energy. Some states also have legislation in place regulating the exploitation of geothermal energy by way of production licences.
19.4 Native title and Aboriginal cultural heritage
In 1992 the High Court held that the common law of Australia recognises and protects 'native' title. Native title over land or waters is not a 'title' in a conventional sense. Native title is a 'bundle of rights' derived from traditional laws and customs acknowledged and observed by Aboriginal people. For example, native title rights can include the right to control use of or access to land and the right to hunt, fish and gather. Native title rights and interests may be communal, group or individual, but are not transferable (such as by way of sale and purchase).
Native Title Acts
Native title legislation exists at both the federal and state levels. The Native Title Act 1993 (Cth) (NTA) came into effect on 1 January 1994. The purpose of the NTA is to recognise and protect native title. The NTA covers five main areas:
- land access procedures where the grant of an interest in land or waters may affect native title ('future act' procedures);
- extinguishment of native title;
- native title claims;
- confirmation of the validity of certain statutes, land titles and public works; and
- compensation for extinguishment of native title.
Land access—future acts
Non-legislative acts done after the commencement of the NTA on 1 January 1994 which affect native title (such as grants of freehold titles, mining and petroleum titles and other Crown tenures) must comply with the future act provisions of the NTA. These provisions provide certain procedural rights to native title holders and registered native title claimants.
Depending upon the nature of the interest to be granted, the procedural rights accorded to native title holders and registered claimants will range from a right to receive notice or an opportunity to comment, through to a right to negotiate with the prospective grantee.
Titles which are granted in compliance with the future act provisions are valid. They will affect native title in the manner set out in the NTA. Mining interests do not usually extinguish native title; rather, they usually prevail over native title rights for the duration of the grant.
Titles which are not granted in compliance with the future act provisions of the NTA may be invalid.
Importantly, if it can be demonstrated that native title has already been extinguished in relation to the land, the NTA can have no operation.
Native title may be extinguished over land or waters in a number of ways including by legislation, or by the grant of interests in land which are inconsistent with the continued existence of native title. There may be no native title if an Aboriginal group loses its connection with its traditional lands.
The NTA clarifies the types of acts that have resulted in the extinguishment of native title. Each of the states and territories have enacted legislation which provide that comparable acts taken by the state and territory governments also extinguished native title, although there are minor differences between them.
Native title may have been extinguished in whole or in part. For example, the grant of a freehold title is completely inconsistent with native title so that the grant of such title prior to 1994 (with some exceptions) will have wholly extinguished native title. In contrast, the grant of a pastoral lease may only be partially inconsistent with native title so the grant of such a lease may have extinguished some native title rights over the relevant land (such as any right to control access or use), but may not have extinguished other rights such as a right to pass over, or a right to collect bush medicine on the land.
Native title claims
Under the NTA, Aboriginal people may lodge an application for a determination that native title exists. This involves a hearing by the Federal Court as to whether a particular group of Aboriginal persons can establish that native title continues to exist in relation to particular land and waters, and has not been extinguished.
The National Native Title Tribunal (NNTT) and/or the Federal Court may offer assistance in mediating an outcome, and many determinations are made by consent of the parties.
If a lodged native title claim passes a statutory test it will be registered by the NNTT and those claimants will be entitled to receive the benefits of certain procedural rights under the future act provisions of the NTA.
The NTA and complementary state and territory statutes ensure that any interest in land or waters granted before the commencement of the NTA in 1994 are valid in native title terms and the rights under those titles are fully exercisable.
Some states and territories have legislation which creates certain types of Aboriginal land. There are usually additional procedural requirements in relation to accessing this land.
Aboriginal cultural heritage
The Australian Government and states and territories each have legislation which protects Aboriginal cultural heritage.
While the regimes differ in detail, it is generally an offence to disturb Aboriginal cultural heritage without obtaining a consent. It may also be necessary to prepare a plan for the management of cultural heritage during construction or operation of a project.
19.5 Joint ventures
Joint venture arrangements provide a convenient structure for bringing together capital and talent for mining and petroleum enterprises. For more information regarding joint ventures, see Chapter 3 of this publication, 'Business Structures'.
19.6 Foreign investment
The Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) regulates acquisitions by foreign persons of Australian assets or shares in Australian companies. This is set out in more detail in Chapter 10 of this publication, 'Foreign Investment Regulation'.
19.7 Government assistance and taxation
In Australia, taxes are imposed by the Australian Government, state and territory governments, and local government bodies (see Chapter 11 of this publication, ‘Taxation, stamp duty and customs duty’). Expert advice is required in planning an investment in Australian natural resources and in ensuring ongoing compliance with taxation obligations. To give just one example, the Australian Tax Office is vigilant on transfer pricing, including when a mineral or petroleum is sold to other parts of a corporate group in foreign jurisdictions.
The Petroleum Resource Rent Tax (PRRT) is a federal profits-based tax that applies to offshore and onshore Australian oil and gas projects (as a separate regime in addition to the federal income tax). In November 2018, the Australian Government announced a number of proposed changes to PRRT to apply from 1 July 2019, including that onshore projects would no longer be subject to PRRT. An amendment bill to this effect was introduced in February but has not been passed as at the date of this publication.
Transfer (stamp) duty is a state-based tax affecting a broad range of transactions. Each state and territory in Australia has its own stamp duties legislation, resulting in a complex set of duties laws. As transfer duty can have a significant impact on natural resources transactions and companies, it is important that investors be aware of and consider the potential duties implications of a proposed transaction.
Various natural resource royalties are applied by state and territory governments on mineral, petroleum and gas production within the applicable jurisdiction. Excise is also levied by the Australian Government on certain forms of petroleum.
On the reverse side, Australian Government assistance to the natural resources industries substantially takes the form of income taxation concessions.
Special tax deductions exist for capital expenditure on exploration and production of petroleum and natural gas. These include the amount spent on successful cash bids and the costs of exploratory surveys, drilling and well-head plans, natural gas liquefaction plant, access roads, and housing and welfare.
A company which is mining or prospecting for minerals may also be allowed deductions for capital expenditure on exploration and prospecting, site preparation, buildings, access roads, certain treatment plants, other improvements and plants necessary for those operations, housing and welfare and site rehabilitation.
Cash bids relating to general mining and exploration titles are also deductible. Various tax deductions are also available for the use of transport facilities.
The timing for the deductions depends on the nature of the expenditure. For instance, exploration related expenditure can sometimes be deductible immediately in full, whereas other capital expenditure is generally deductible (amortised) over the life of the applicable individual asset, project, or mining/petroleum right (title) to which that expenditure relates.
19.8 Government and industry bodies
The other significant role played by the Australian Government in the resources industry is through the Commonwealth Scientific and Industrial Research Organisation (CSIRO), which aims to increase the international competitiveness, export earnings and value of services provided by the minerals, energy and construction industries.
The CSIRO is a supportive institution that plays a coordinating and advisory role within the industry, rather than performing a regulatory function.
In addition, state governments offer various forms of assistance to the industry including free technical services, field examinations of mining prospects, advice on exploration and development, selection of sites for water supplies and a range of other services.
The Australian Government released Australia’s National Resources Statement in February 2019 setting out the Government’s policy and long-term reform agenda for the Australian resources sector. The statement contains an action plan to achieve the following five priorities to:
- deliver the most globally attractive and competitive investment destination for resources projects;
- develop new industries and resources regions;
- invest in new technologies and approaches, especially to deliver better environmental outcomes;
- create well paid and secure jobs; and
- support communities to ensure they receive benefits from the development of Australian resources.
Queensland is the only Australian state to have a Coordinator-General with its own legislation and the power to expedite projects considered to be of 'state significance'. These projects commonly include coal mine developments and expansions. The Coordinator-General’s office also manages a Coal Infrastructure Taskforce to ensure Queensland’s coal infrastructure can support production.
The object of industry bodies is to promote mining and petroleum interests and act as advocates for those interests. Most states have a Minerals Council or Chamber of Minerals and Energy, and at the federal level there is the Minerals Council of Australia. The Association of Mining and Exploration Companies also plays a role in this regard.
In the petroleum industry, the Australian Petroleum Production and Exploration Association Limited (APPEA) promotes upstream interests, and the Australian Institute of Petroleum promotes downstream interests. Both are national bodies with state branches.
Last updated: 01/03/2019