Insights

17/06/14

WA Resources Update | June 2014

Welcome to the latest edition of WA Resources Update, your regular newsletter about key developments for the Western Australian mining sector.


The MRF deadline approaches - have you complied? Or thought about what happens if you are selling tenements?

By Cassandra Hay, Emma McLeod and Julie Lagesse

Compliance with the Mining Rehabilitation Fund Act 2012 (WA) (Act) and the Mining Rehabilitation Fund Regulations 2013 (WA) (Regulations) becomes compulsory from 1 July 2014. 

The Act and the Regulations came into operation on 1 July 2013 on a voluntary opt-in basis to aid in an orderly transition to the new system.

The Act and Regulations require all holders of tenements (except for those the subject of a State Agreement unless listed in the Regulations) to report disturbance data. Holders of tenements with a rehabilitation liability estimate of less than $50,000, based on the prescribed assessment information submitted to the Department of Mines and Petroleum (DMP), will be required to submit the data but will not be required to pay the levy in respect of those tenements.

All tenements holders will need to register for the Mining Rehabilitation Fund by 30 June 2014, and where required, contribute annually a non-refundable levy to the State proportionate to their outstanding rehabilitation costs from 1 July 2014. 

Accordingly, by 30 June 2014, all tenement holders will be required to report disturbance data in respect of their tenements using the DMP’s online system for the period 1 July 2013 to 30 June 2014. Tenement holders will be required to declare the number of hectares disturbed and the type of disturbance in respect of each of their tenements so that their levy payment for the period can be calculated. Tenement holders will be responsible for ensuring that the data submitted is accurate and will have to retain evidence to support the information provided in their submissions. The levy payment will be required following receipt of an assessment invoice.

Penalties for non-compliance will apply if tenement holders do not register and report by the 30 June 2014 deadline. 

The DMP estimated in its 20 May 2014 news release that out of a total of 3,433 tenement groupings, only 1,973 had been registered for the Mining Rehabilitation Fund. 

One additional matter to note is that the liability for payment of the levy falls to those that are the holder of the tenement on 30 June. Companies which have sold or are in the process of selling any tenements should ensure they have arrangements in place for the purchaser to pay the levy if the sale has completed by 30 June but the tenements are still registered in the name of the vendor on that date.  Industry practice is yet to develop in this area, but companies may also want to consider including a clause apportioning the levy between them (such as by an adjustment to the purchase price) for any sales which they expect to occur after 30 June.


5 steps to obtaining consent to an assignment

By Mark Gerus and Thaw Thaw Htin

Farm in, joint venture or sale agreements usually contain an assignment clause by which the holder of an interest in a mining tenement may assign its interests under an agreement and/or in a mining tenement to a third party (Assignee). The assignment clause is often drafted in terms requiring the assigning party (Assignor) to first obtain the non-assigning party’s written consent to the assignment but that the consent cannot be unreasonably withheld by the non-assigning party. Usually the assignment clause also requires the Assignee to agree to be bound by the terms of the agreement with the non-assigning party.

What happens when the non-assigning party refuses to consent? This note examines circumstances where consent is considered to have been unreasonably withheld and proposes some practical steps for an Assignor to consider when seeking the non-assigning party’s consent to assign interests in a mining tenement to an Assignee.

When consent is unreasonably withheld

The proper interpretation of the contract containing the assignment clause is of critical importance in determining whether consent to an assignment has been unreasonably withheld. This is because a non-assigning party may be acting unreasonably in withholding consent if:

  • the reasons for withholding consent are unrelated to the objects of the contract, or to rights, benefits or obligations under the contract;
  • the reasons for withholding consent are not permissible under the contract and are inconsistent with its provisions; 
  • the reasons for withholding consent are not held honestly by the non-assigning party.

All of the facts existing at the time that consent is refused by the non-assigning party are relevant in deciding whether consent has been unreasonably withheld (whether or not known to the party refusing consent), including the party’s own conduct in refusing consent and the reasons given (or not given) for the refusal.

Steps to consider when seeking consent to an assignment

An Assignor seeking consent from the non-assigning party should always prepare for the prospect that a dispute may develop and require intervention by a court. The onus will be on the Assignor to prove to a court that consent has been unreasonably withheld by the non-assigning party. 

The Assignor should consider:

  • having an initial meeting with the non-assigning party to explain the background to the proposed assignment and to find out what information is required by the non-assigning party to consider the consent request;
  • confirming in writing with the non-assigning party the information required to consider the consent request;
  • providing any information requested by the non-assigning party;
  • seeking consent in writing from the non-assigning party;
  • seeking written confirmation of the non-assigning party’s reasons for refusing consent (if consent is withheld).

If negotiation is unsuccessful, an Assignor may have no option but to commence proceedings seeking a declaration that the withholding of consent was unreasonable and an order that the non-assigning party do all things necessary to allow the transfer of the tenement.

In a consent dispute a court will examine the parties’ conduct in deciding whether consent was unreasonably withheld. Therefore, it is critical that the Assignor obtains as much information as possible about the non-assigning party’s reasons for refusing consent and documents all of its dealings with the non-assigning party.


Untangling the red tape of major project approvals

By Christopher Marchesi

A recent study1 has found that:

  • a single liquefied natural gas project could require up to 390 regulatory approvals; and
  • 66 regulatory approvals (both primary and secondary) were required by the AngloGold Ashanti and Independence Group joint venture to develop the Tropicana Gold Project near Kalgoorlie WA.

Statistics such as these are not required to demonstrate that the approvals process for major projects in WA is in urgent need of streamlining. Indeed they underscore the point that inefficient regulatory processes impose unnecessary costs on business.

A state of change

In recent years, the State Government has implemented policy changes that have no doubt played a role in seeing nearly two thirds of major project of investment in Australia being located in WA. 

In 2009, the ‘lead agency framework’ was introduced with the establishment of the WA Department of State Development to provide a single point of entry for project proponents seeking to establish a major project in WA across any industry or any size. 

The mining industry has benefited from efficiencies created by the Department of Mines and Petroleum (DMP) by the introduction of target timelines for non-complex approval decisions and online tracking of those decisions. Quarterly performance reports drive regulatory performance to these standards. Case managers guide project proponents and published memorandums of understanding between Government agencies have no doubt improved the transparency of their actions.

Changes such as these are signs that the State Government has taken seriously the well-funded studies into regulatory efficiency of projects approvals, such as those conducted by the Australian Productivity Commission and countless other State based reviews.

Industry in need 

Despite some recent changes, there are clear examples where a piece-meal approach to regulatory reform in WA has created an inefficient regulatory market. Invariably, the cost of partial reform is to the account of business.

For example, the policy changes implemented at the DMP in recent times have not been replicated under the Crown land regulatory framework administered by the WA Department of Lands. The Crown land legislation applies where a project has insufficient connection to one particular mining tenement. 

Unlike the mining industry where the DMP manages the approval requirements arising out of a programme of works or a mining proposal, proponents of Crown land projects must themselves navigate the multi-agency framework to obtain each disparate approval (ie environmental, heritage, planning and (a myriad!) of other primary and secondary approvals). Significant resources are required to separately plan and execute each of the approval work streams which is a major disincentive to business. 

High profile examples of such projects include the port infrastructure in the Mid-West and the proposed processing facilities to serve the Browse Basin. Other types of projects include the establishment of industrial estates to support the secondary capacity requirements of the mining or petroleum industry, and burgeoning industries such as agriculture that are seeing interest from local and overseas investors.

The role of State Agreements in enabling the development of State significant projects cannot be ignored, however small to medium size enterprises do not often have the benefit of such support of the State.

Where to next

The removal of red-tape for major project approvals is the latest focus of the Productivity Commission. The Commission has found that while Australia has in place the building blocks of a sound approvals system, there is substantial scope to comprehensively overhaul the framework for all jurisdictions in Australia2

By reference to leading international practices, the Commission recommended that the current arrangements in WA be refined (in terms of functions and resources) by the establishment of a ‘major-projects coordination office’ (or similar). 

The key differentiating factor of a ‘major-projects coordination office’ model is that the lead office would be independent of the major projects regulatory system, meaning that they do not have any assessment or approval responsibilities. 

Conclusion 

What is evident is that the approvals framework for major projects in WA is in need of comprehensive reform backed by legislative changes and not just ad-hoc policy change. 

There is no suggestion that a streamlining of the regulatory framework should be at the expense of the broad range of social, environmental and cultural objectives that legislation and its administration should serve. 

However, at a critical point in time when the mining industry is experiencing contraction, and other industries such as agriculture and secondary processing are also looking to take advantage of the abundant natural resources in this State, a case for major project approval reform in WA is compelling.

Footnotes

1.  “Major Project Development Assessment Processes”, Productivity Commission Research Report, released 10 December 2013.
2.  Ibid 

 

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