The National Offshore Petroleum Titles Administrator (NOPTA) has recently been advising titleholders that a dealing previously approved and registered against a predecessor petroleum title (eg. exploration permit) must be separately approved and registered against a derivative title (eg. retention lease) for the dealing to have legal force in relation to the derivative title. This article explains NOPTA’s position and the practical implications for parties to dealings and derivative titles.
Recent engagement with NOPTA has revealed a move towards a stricter application of the approval and registration requirements in respect of a dealing under Part 4.6 of the Offshore Petroleum and Greenhouse Gas Storage Act (Cth) 2006 (OPGGSA), particularly in the context of a “derivative” title (such as a retention lease) granted or derived from an exploration permit.
In particular, NOPTA has advised that under the OPGGSA approval and registration of each dealing must occur independently, even if the dealing is related and/or in respect of a derivative title. In other words, registration of a dealing against a predecessor title does not carry-over to a derivative title and a dealing is of no force under the OPGGSA in relation to a derivative title until the dealing has been approved and registered against the derivative title.
For example, a Joint Operating Agreement (JOA) must be approved and registered as a dealing against a retention lease for the JOA to be in force in relation to that retention lease, even if the JOA was previously approved and registered against a predecessor exploration permit.
In addition to impacting the legal force of a dealing in relation to a derivative title, NOPTA’s view may impact upon the transfer of interests in a derivative title. For example, NOPTA is unlikely to approve a transfer of an interest in a retention lease that is governed by a JOA until that JOA has been approved and registered against that retention lease.
Given NOPTA’s approach, not having a dealing approved and registered against a derivative title may be a key risk for a buyer of an interest in a derivative title, particularly if there are multiple dealings that have not been approved and registered against the derivative title. In such circumstances, a buyer may want to consider whether approval and registration of key dealings against the derivative title should be a condition precedent to the acquisition.
Titleholders and/or other interested parties may also want to consider reviewing dealings previously registered against a predecessor title to determine whether those dealings should be approved and registered against any derivative title. Depending on the number of derivative titles and dealings, this may be an administratively burdensome and costly process.
Titleholders and/or other interested parties may also want to consider engaging with NOPTA regarding changes to the OPGGSA to make the approval and registration process for dealings relating to derivative titles more efficient.
NOPTA’s view – a strict interpretation of the OPGGSA
Section 487 of the OPGGSA provides as follows:
“A dealing is of no force, in so far as the dealing would have an effect of a kind referred to in the table in section 486 in relation to a particular title, until:
(a) the Titles Administrator has approved the dealing, in so far as it relates to that title; and
(b) the Titles Administrator has made an entry in the relevant Register in relation to the dealing under section 494.
(our emphasis added).”
NOPTA has recently advised that section 487 of the OPGGSA requires a dealing relating to a title to be approved and registered against that title for the dealing to be in force in relation to that title. For example, if a JOA relates to more than one title, it must be separately approved and registered in relation to each title (including any derivative title) for the dealing to be in force in relation to each title. This view reflects a strict / literal interpretation of the approval and registration requirements in respect of a dealing under section 487 of the OPGGSA.
We note that “dealings” can include a range of documents in relation to a title including JOAs, operating agreements, project development agreements and security documents (see section 486 of the OPGGSA for more detail). A dealing can also include amendments to documents to the extent those amendments relate to the title (and fall within section 486).
On this basis, NOPTA has taken the view that a dealing, such as a JOA, is of no force in relation to a derivative title (eg. retention lease) until the JOA has been approved and registered in relation to the derivative title, even if the JOA has previously been approved and registered in relation to a predecessor title (e.g. exploration permit).
We understand that NOPTA is taking this approach to ensure integrity of the titles register. In other words, NOPTA wants to ensure that a dealing relating to any title is registered against that title on the titles register. This reflects a change in approach by NOPTA compared to approval and registration of past dealings.
NOPTA’s recent regulatory guidance note (published in May 2019) on the grant and administration of retention leases does not provide any additional guidance for titleholders on this issue.
The inevitable solution for titleholders is to submit the dealing to NOPTA for approval and registration in respect of the derivative title. This requires the applicant to submit relevant NOPTA application forms along with the application fee (currently $7500 per title/dealing) and any other relevant supporting documents required by the OPGGSA, including for example, copies of dealing instruments in original form.
Practical issues associated with this approach include the following:
- It may not be possible to comply with the requirement to submit an original version of the dealing with the application. For example, the applicant may not have an original copy of the dealing due to passage of time or the applicant not being an original party to the dealing. We understand that NOPTA is open to finding practical solutions to these types of issues.
- Where multiple dealings have been registered against a predecessor title and those dealings remain relevant derivative titles, the approval and registration exercise could become administratively burdensome and costly for the applicant as multiple applications and application fees will be payable.
- In respect of older dealings, titleholders will be unable to meet the application timing requirements under the OPGGSA which require applications for approval and registration of the dealing to be made within 90 days after the date of execution by the last party to the dealing. We understand that NOPTA understands this issue and is flexible regarding timing requirements in respect of older dealings.
In cases of multiple amendments to a principal agreement, one option may be to terminate the arrangement and to enter into a new agreement (which includes all prior amendments) and seek approval and registration of that dealing against the derivative title. This may avoid the need to submit multiple applications and paying multiple application fees. This approach, however, could give rise to legal, tax and other commercial issues and therefore may not be an effective solution.
It is important to remember that there is no requirement under the OPGGSA to obtain approval and registration of a dealing (i.e. a party “may” apply for approval and registration) and there are no penalties under the OPGGSA for failure to have a dealing approved and registered. However, a dealing will be of no force in relation to the title until the dealing is approved and registered.
Given NOPTA’s current approach / view, we recommend that parties who have registered dealings in relation to a predecessor title review those dealings to determine whether any dealings need to be registered against current derivative titles.
Suggestions to simplify the dealing registration process
Consideration should be given as to whether any changes to the OPGGSA, relevant regulations and policy could be made to make the dealing registration process for derivative titles more efficient and cost effective. Possible changes could include:
- in certain circumstances, dealings registered against predecessor titles could be automatically registered against a derivative title when the derivative title is granted;
- in certain circumstances, at the time the application for the derivative title is made, an applicant could notify NOPTA that the dealing should be registered against the derivative title when the derivative title is granted;
- reduced (or no) application fees for applications to approve and register a dealing that has been previously approved and registered against a predecessor title.
We recommend that interested parties consider engaging with NOPTA regarding possible changes to the OPGGSA, regulations and policy to make the dealing registration process for derivative titles more efficient and cost effective.
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