Draft Industry Action Plan for NSW minerals industry

The Minerals Industry Taskforce (Taskforce) was formed in 2014 with the goal of addressing challenges faced by the NSW minerals industry, and to drive growth, innovation and productivity in the industry.  The Draft Industry Action Plan (Draft IAP) has been developed by the Taskforce and proposes a number of strategies that are aimed at reversing the fall in mining capital expenditure in NSW and increasing the value of mineral production by 30% by 2020.

The Draft IAP is a long-term strategy, and is seeking the NSW Government’s commitment to the following priority areas:

• a transparent process and integration policy that provides certainty for mining companies investing in NSW
• providing fiscal certainty – ensuring no increase to royalties over the next 25 years and a consolidation of fees and charges to reduce these in real terms over time, and
• developing skills and providing supporting infrastructure to foster a vibrant mining sector.

The flaws in the current planning approval process

The Draft IAP indicates that reform to the planning and regulatory decision making regime is the single most important initiative that the NSW Government can implement to address the current flaws in the process, which include:

• delays in the assessment and determination of projects – alarmingly, a development application can take up to 1323 days from the date of submitting an application to when a decision is made as to whether the development can proceed
• lack of accountability and responsibility in the decision making of the Planning Assessment Commission (PAC)
• failure of the PAC to follow government policy and the advice of the Department of Planning and Environment, and
• manipulation and abuse of the PAC referral and hearing process to deliberately delay a decision being made by the PAC and mislead the PAC about often trivial issues.

Recommendations of the Taskforce

The Taskforce has made 12 recommendations to address the above priority areas, including a number of fundamental changes to the planning approvals process and the role of the PAC in the determination of mining related projects. 

 

Transparent process and integrated policy

The following recommendations have been made by the Taskforce to address the significant issues associated with the planning approval process:

• the Taskforce argues for the removal of PAC as the answer to the ‘broken’ process, or at the least the following reforms are considered vital to improving the system:
• projects undergo only one rigorous and thorough review process and are not subject to a merits-based review, and
• if the PAC is to be retained the following further changes are required:
• return of decision-making authority to the elected government
• finalisation of clear policy parameters for project assessment
• tighten the scope for any PAC assessment
• introduction of clear timeframes for the PAC process, and
• reform of the PAC referral and hearings process
• establishment of a lead agency with the authority, sufficient capability and power to drive cross-agency decisions – this body should be the single point of contact for major resource and industry infrastructure projects
• streamlining the decision-making processes and addressing policy gaps with an emphasis on implementing outcomes and risk based regulation.  For example, the Draft IAP advocates for the reintroduction of a broad based modification power for State significant development into the Environmental Planning and Assessment Act 1979
• NSW Government excellence in service delivery and regulation – the Taskforce recommends that an online lodgment and tracking capability be developed
• clear communication of NSW’s robust regulatory regime by providing clear and factual information to the public, and
• continue to provide information to, and engage with communities – encouraging the use of community liaison officers by NSW Trade and Investment.

 

Fiscal certainty

A number of industry-specific taxes are levied on the minerals industry by the NSW Government such as mining royalties, fees and levies.  Stability in taxes and levies will lead to investor confidence and in turn, the growth of the sectors.

 

The Taskforce is seeking a commitment from the NSW Government for:

• no increases in royalties for the next 25 years, and
• consolidation of mining related fees and levies, and a reduction in the real cost to explorers and miners over the long-term.

The above changes will reduce investment risk by increasing certainty, resulting in increased capital investment in NSW mineral projects.

 

Developing skills and providing supporting infrastructure

Finally, the Taskforce proposes a number of changes to ensure that the NSW Government works together with industry and the skills and training sector to ensure direct investment in developing and maintaining a skilled workforce for a competitive and growing minerals industry.

 

Other recommendations include improvements to pre-competitive geosciences information, funding for research in deep cover exploration, mining operations productivity and low emission energy technology and enhancements to ensure the competitiveness and efficiency of the NSW freight network.

 

Submissions on the report can be submitted via email to the Taskforce’s secretariat (minerals.iap@trade.nsw.gov.au) or by post, Minerals Taskforce secretariat, GPO Box 5477, Sydney NSW 2001 until 5pm Friday, 19 December 2014.

 

 

Patrick Holland, Samatha Daly, Michelle Sirasch, Kate Swain

Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014

On 19 March 2014, the Federal Parliament introduced the Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014 (Cth).  If the legislation is passed, it will significantly alter the landscape of workers’ compensation insurance in Australia. 

The aim of the amendments is to remove the requirement for certain organisations to comply with the separate workers’ compensation schemes of each and every State or Territory, by allowing them to apply for a licence to self-insure under the Safety Rehabilitation and Compensation Act 1988 (Cth).

On 15 May 2014, the Senate referred the Bill to the Senate Education and Employment Legislation Committee (Committee) for inquiry and report.  The Committee’s report was completed 8 July 2014.

Safety Rehabilitation and Compensation Act (Cth)

The Safety Rehabilitation and Compensation Act 1988 (Cth) was established to provide statutory insurance cover for Commonwealth and ACT government employees.  Changes were made to the legislation in 1992 and 2006, allowing certain other organisations to self-insure under the Federal legislation. 

In 2007 however, the Rudd government instituted a moratorium preventing any further self-insurance by non-government corporations.  This ban was finally lifted on 2 December 2013.

Proposed changes to the scheme – national employers

If the Bill is passed, ‘national employers’ will be eligible to self-insure under the Federal Comcare scheme and will be covered by the Work Health and Safety Act 2011 (Cth).  A ‘national employer’ is a corporation that has employer obligations in two or more Australian States or Territories.  A national employer has employer obligations if the corporation is, or would be required to meet the obligations of an employer under a workers’ compensation law of the Australian jurisdiction to pay premiums, contributions or similar payments.

This ‘national employer test’ will replace the current definition of ‘eligible corporation’ under the Act and the associated ‘competition’ test.

The decision whether or not to award a licence will be determined by the Safety Rehabilitation and Compensation Commission (Commission) directly and the requirement that a corporation be declared ‘eligible’ by the Minister will be removed, thus providing a more streamlined application process.

Licensed employers may engage a claim management firm or insurer to manage their workers’ compensation claims.  Licencees will also be required to provide a bank or insurer’s guarantee, for an amount that could be called upon by the Commission in the event a self-insurance licence is suspended or revoked, together with a reinsurance policy.

Benefits of the scheme – resources sector

There is a high prevalence of personal injury claims across the resources sector due to the physically demanding nature of the work.  As such, insurance and risk control is particularly important for employers in the resources industry.

Many companies involved in mining and infrastructure development have projects in regional and remote areas throughout Australia and will operate across multiple States.  These companies may therefore meet the requirements of the new legislation and be eligible for self insurance.

Self insurance may be a particularly attractive option for these larger corporations as a way to increase operating profits through the reduction in compliance costs and overheads associated with the maintenance of insurance in each state. The scheme will also provide those licensees with increased freedom and control through self-management.

The introduction of a single licence for self-insurance for a related group of companies, as opposed to the requirement of single licenses for each corporation, will also increase efficiency and reduce costs and avoid the situation where only some entities within a group are eligible to be licensed, while other members of the same group fail to meet the requirements.

There are currently some 30 employers, which are self-insured under the federal scheme.  Yet, there are approximately 2000 companies operating in two or more States or Territories, which could potentially become licensees.  A large number of those employers are operating in the resources sector, and the legislation therefore has particular relevance with its potential to significantly impact the way risk is managed by those employers.

Findings of the Senate Education and Employment Legislation Committee

The Committee received submissions from 18 organisations, including a number of unions, government departments, as well as the Queensland Government.

In its submission, the Queensland Government called for the Commonwealth to consult further with the States and Territories, in an effort to reach agreement about the proposed amendments, raising a number of areas of concern. 

The Committee chaired by Senator Bridget McKenzie has recommended the Senate pass the Bill.  We now await the Second Reading Speech of the Bill in the House of Representatives. 

Companies who operate within two or more jurisdictions and are interested in reviewing their current workers’ compensation arrangements should seek advice from our Insurance and Risk Group about the process and a comparison between schemes.

Kate Denning, Brad Russell

Trade Agreements with Japan and South Korea

Benefits to the Australian resources sector 

The recent trade agreements reached between Australia, the Republic of Korea (South Korea) and Japan enhance the incentives to trade and the depth of the relationship with two of Australia’s most important trade partners.  This strengthened relationship has specific benefits for the resources sector.

Background

The first half of 2014 has seen Australia finalise two separate trade agreements, the Korea-Australia Free Trade Agreement (KAFTA) and Japan-Australia Economic Partnership Agreement (JAEPA).  These two trade agreements enhance Australia’s already robust resources and energy trade relationships with South Korea and Japan.

South Korea is Australia’s third largest export market, its total trade with Australia amounting to $30.46 billion in 2012/13.  KAFTA, which reduces the trade restrictions between Australia and South Korea, was signed on 8 April 2014.  The Australian Department of Foreign Affairs and Trade predicts KAFTA will see Australian exports to South Korea increase by 25% by 2030 which would result in an approximate increase of $653 million a year after 15 years.

Japan is Australia’s second largest trading partner, its total trade with Australia for the 2012/13 financial year equalling $70.8 billion.  Japan is one of Australia’s largest destinations for thermal and coking coal and iron ore, with Australia’s exports of iron ore and concentrates and coal equalling approximately $23.2 billion.  JAEPA was signed on 8 July 2014 by Japanese Prime Minister Shinzo Abe and Australian Prime Minister Tony Abbott. 

Trade agreement benefits for the resources sector

South Korea
Many of Australia’s resources and energy exports already enter South Korea tariff free.  KAFTA however removes, or requires the removal within 10 years of, the remaining tariffs on products such as LNG and similar gases, titanium dioxide and copper and copper based alloys.

The LNG and other natural gases industry is rapidly growing in Australia, with industry revenue growth for 2013/14 estimated to be 5.2% to reach $11.4 billion.  KAFTA removes the current 3% tariff on LNG and other natural gases entering South Korea. 

Gold producers also benefit, as the current 3% tariff on gold is to be removed upon South Korea ratifying the KAFTA.

Refined copper and various copper alloys currently have tariffs imposed on their importation into South Korea.  These tariffs are to be removed upon the date of entry into KAFTA.   Copper ore and copper concentrate exports from Australia for the 2013/14 financial year are estimated to amount to approximately $7.7 billion.  Reducing tariffs for Australian imports into South Korea will assist Australia in competing against other major copper exporters such as Chile, China and the USA.  

Japan
Similar to South Korea, many of Australia’s energy and resource exports to Japan are already tariff free.  JAEPA, however will see an immediate removal of tariffs from coking and semi coking coal, petroleum oils, aluminium hydroxide and titanium dioxide.

For the 2013/14 financial year, coking coal is estimated to have accounted for 44.2% of Australia’s coal exports.  With Japan being one of the world’s largest producers of steel, a removal of the tariff on coking coal imported into Japan from Australia provides a significant advantage to coal miners in Australia. 

Overall JAEPA will see more than 97% of Australia’s exports receive preferential access or duty free access to Japan, once JAEPA is fully implemented.

Other relevant issues
The Foreign Investment Review Board thresholds for both South Korean and Japanese investors will also increase.  The foreign investment review threshold for both South Korean and Japanese originated investment is to increase from $248 million to $1.078 billion for non-sensitive sectors.

This is positive news as in 2013 South Korea and Japan invested $15,059 million and $130,982 million respectively in Australia.  This spells further gains for Australia’s emerging natural gas export industry which has received significant investment from Japan in projects such as the $34 billion Ichthys project in the Northern Territory, headed by Japan’s INPEX Corporation.

Timeline for the agreements
KAFTA was referred to the Senate Committee for Foreign Relations, Defence and Trade on 27 March 2014, and submissions closed on 13 June 2014.  Once the Committee process is concluded, the bill enacting KAFTA can be passed.  This is expected to take place sometime this year.

As noted, JAEPA was signed on 8 July 2014, and will need to undergo the Senate Committee review process as well.  The bill enacting JAEPA will also likely pass before the end of 2014.   With the Japanese Prime Minister due back in Australia for the G20 summit in November, JAEPA is likely to be progressed quickly through the committee review process.  

Damien Clarke, Duncan Bedford, Emma Murray

Introduction of risk-based scheme for NSW EPLs

Holders of environment protection licences (EPLs) could see their administration fees increase in the 2016/17 financial year.

On Friday 2 May 2014, the Protection of the Environment Operations (General) Amendment (Licensing Fees) Regulation 2014 (Licensing Regulation) came into effect.  The Licensing Regulation introduces a new risk-based licensing scheme that aims to encourage EPL holders to improve their environmental performance.

The risk-based licensing scheme will change the way that EPL fees are calculated and inform the level of regulatory intervention imposed on EPL holders.

Higher fees and a greater regulatory burden will be imposed on operators who have a poor environmental management history or who are carrying out operations that pose significant risks to the environment.  Fees can be reduced when steps are taken to mitigate the environmental risks caused by an operation. 

For more information and comprehensive detail on the Licensing Regulation, please visit the McCullough Robertson website.

Samantha Daly, Patrick Holland, Kate Swain

New ‘fit and proper person’ test to apply on NSW mining title grants

The NSW Government has introduced legislation that replaces the ‘public interest’ test with a ‘fit and proper person’ test which is to be applied by a decision maker when determining whether to grant, renew or transfer an authority under the Mining Act 1992 (Mining Act).

The new fit and proper person test includes consideration of whether the person has contravened relevant legislation; the person has held a mining right or petroleum title that has been cancelled, suspended or revoked; whether the person is of good repute, and the person's character, honesty and integrity.

These changes will significantly increase the uncertainty associated with obtaining, renewing and transferring mining titles in NSW.

Resources participants should also be aware of The Mining and Petroleum Legislation Amendment Bill 2014 that introduces amendments to the Mining Act and the Environmental Planning and Assessment Act 1979, requiring a proponent of a mining project to hold an underlying coal title or have the consent of the title holder prior to lodging a development application for a project that involves the extraction of coal.

The amendments provide that an application (including a modification) for a coal mining project cannot be made or determined unless the applicant is the holder of a mining authority for coal over the land in question or has written consent from the holder of the coal mining authority.  A mining authority is not required over the whole of the land to which the application relates but must be in force for the land where extraction of coal is proposed. 

For more information and comprehensive detail on the above changes visit the McCullough Robertson website.

Samantha Daly, Patrick Holland, Kate Swain

Draft NSW Biodiversity Offsets Policy for Major Projects

There is currently no standard method for the assessment of impacts of major projects on biodiversity. The draft NSW Biodiversity Offsets Policy for Major Projects (Offsets Policy) is seeking to introduce a standardised approach that provides guidance in assessing and offsetting the biodiversity impacts of major projects.

At this point in time, biodiversity impact assessments are undertaken on a case-by-case basis which can result in significantly different offset requirements for different projects.  The Offset Policy aims to minimise these discrepancies and provide an assessment procedure that is practical and reasonable.

The Offsets Policy will apply to major projects in NSW (projects that are declared State Significant Development or State Significant Infrastructure by the Minister for Planning and Infrastructure).

The policy principles

The policy is underpinned by seven key principles:

Principle 1 – Impacts must first be avoided and unavoidable impacts minimised through mitigation measures.

Proponents must avoid and minimise impacts before considering offsets.  A proponent will need to justify why impacts can’t be avoided or minimised.

If an impact can’t be avoided, a reasonable effort must be made to minimise the impact, and offsets used to compensate for the remaining impacts.

Any impacts that are more complicated and severe (e.g. extinction of a species) will require additional consideration by a consent authority before an offset can be used.

Principle 2 – Offset requirements should be based on reliable and transparent assessment of losses and gains

The Framework for Biodiversity Assessment will need to be applied on behalf of proponents in a transparent and repeatable method for assessment by ecological consultants who are accredited specialists under the existing NSW BioBanking Scheme.

Principle 3 – Offsets must be targeted to the biodiversity values being lost or to higher conservation priorities

Offsets will need to have a ‘relationship’ to the biodiversity values being lost:

• Vegetation - the policy no longer requires like-for like’ offsets.  The offsets can now include similar vegetation in the same locality if those vegetation types are more highly cleared than the vegetation that will be impacted by the development in question
• Threatened species - if a species is not critically endangered or listed under the Environment Protection and Biodiversity Conservation Act 1999, with approval, a species may be offset with a similar species in the locality that is under the same or greater level of threat, and
• Aquatic biodiversity - offsets can include similar aquatic habitat in the catchment that is more threatened than the aquatic habitat being impacted upon.

The Offset Policy will broaden the scope of entities that can fulfil offset requirements, and recognises that protecting and improving biodiversity of a similar value, but under a greater level of threat can also provide benefits to the state.

 

Principle 4 – Offsets must be additional to other legal requirements

Offset land can already be managed under legal requirement. The Offset Policy requires offsets to be in addition to other existing native vegetation management.

Public land can be used for offsets even if it has existing legal requirements for environmental management, however a 5% - 7.5% overall discount to the number of biodiversity credits will apply to that land.

Land that is used to create carbon credits which are not 'legal requirements' (i.e. voluntary carbon offsets) can also generate biodiversity credits under the scheme. This means that one offset site can potentially generate both biodiversity credits and carbon offsets.

Principle 5 – Offsets must be enduring, enforceable and auditable

As the impact on biodiversity is usually permanent, the mechanism used to manage an offset site must also be enduring.  As such management actions are required to be enforceable and auditable and comply with the following criteria:

• objective of ongoing management
• sufficient resources available
• plan of management in place
• mechanism can't be altered without an alternative arrangement, and
• the conservation of the offset must be in perpetuity and disclosed to future owners.

Currently, Biobanking agreements are the only mechanism in NSW that satisfy all of the above criteria.

Principle 6 – Supplementary measures can be used in lieu of offsets

Supplementary measures may be used in lieu of offsets if an appropriate offset site cannot be found, however reasonable attempts must be made before supplementary measures will be considered by a consent authority.

Supplementary measures will need to be commensurate with the cost of establishing an offset site.

Principle 7 – Possibility to discount offset if the proposal will provide significant social and economic benefits to NSW

In very limited circumstances, a consent authority will consider modification of offset requirements if it would otherwise prevent a project from proceeding.
 

How the policy will work

The policy principles will guide the Framework for Biodiversity Assessment.  The Framework for Biodiversity Assessment proposed by the Offsets Policy has two stages.

Stage 1 – Biodiversity assessment

Under the Offset Policy, a proponent is required to:

• avoid and minimise impacts on biodiversity
• assess the remaining impacts
• determine if the impacts require further consideration, and
• complete a biodiversity assessment report.

Stage 2 – Fulfil offset requirements

Subject to the outcome of the biodiversity assessment report, the proponent is required to prepare a Biodiversity Offset Strategy setting out one of the following ways to fulfil the offset requirements:

• offset a site secured by a biobanking agreement
• mine site rehabilitation
• contribution to supplementary measures, or
• contribution to a biobanking fund.

The proponent must then submit the biodiversity assessment of Offset Strategy as part of the project application for consideration by consent authority.
 

Biobanking agreements

The preferred offsetting method will be through a biobanking agreement, where an offset site is dedicated to protecting and improving biodiversity to counterbalance the losses of biodiversity on the development site. This is materially different to the current situation whereby proponents have a choice of what method they choose to secure land (eg conservation agreement, covenant etc).

The offset site can be owned by a proponent or, alternatively, the proponent can contribute monetary payments to a landowner to manage an area of biodiversity on their land. 

Improvements in biodiversity on an offset site will be calculated in ‘biodiversity credits’.  A biobanking agreement will identify the number and type of biodiversity credits that will be generated through the landowner’s management actions.  A proponent can then purchase biodiversity credits to compensate for the loss of biodiversity on their development site. 

Once the biodiversity credits have been purchased, they are ‘retired’, removing them from the market to prevent them from being traded in the future.

Voluntary conservation agreements (VCA) are currently the preferred offset mechanism for most major projects in NSW as they provide greater flexibility for the proponent. Also, one of the benefits of a VCA as opposed to a biobanking agreement is the exemption of this land the subject of a VCA from Council land rates.  The Local Government Act 1993 does not currently exempt land the subject of a biobanking agreement from land rates.
 

New flexible ways to achieve your offset requirements

The Offsets Policy has introduced new, more flexible ways (in addition to the biobanking agreements) in which proponents can achieve their offset requirements to ensure that the best and most credible offsets are provided:

• Mine site rehabilitation - Proponents will be able to count ecological rehabilitation of mine sites in calculating offsets, where there are 'good prospects of biodiversity being restored'.
• Broadening of the 'like-for-like' biodiversity requirement - this recognises that the exact same biodiversity may not always be available for an offset.  If like-for-like is not available, offsets that are a 'higher conservation priority' may be targeted, provided they have a relationship to the biodiversity being lost.
• Supplementary measures - If all reasonable measures have been made to locate an offset site, but one is not able to be found, a proponent is able to provide funds for supplementary measures such as:
• threatened species recovery programs
• threat abatement programs, or
• contribution to biodiversity research and survey programs.
  The contribution will be calculated based on what the cost of an offset site would have been for that project.

 

Possibility of a discount on your offsets?

The Offsets Policy will allow a consent authority to reduce offset requirements in certain limited circumstances, where ‘significant social and economic benefits accrue to NSW as a consequence of the proposal’, and the project’s offset requirements may make the project unviable. 

The potential to reduce offset requirements has been introduced under the Offset Policy in recognition that under the Environmental Planning and Assessment Act 1979 a consent authority is required to consider the social and economic aspects of a proposal.
 

Biodiversity offsets fund

The NSW Biodiversity Offsets Fund for Major Projects (Offsets Fund) complements the Offset Policy’s supplementary option by enabling proponents to contribute a monetary amount to satisfy their offset requirements. The fund will then purchase offsets on behalf of the proponent.  The establishment of the Offsets Fund will:

• give proponents increased certainty - proponents will be able to understand upfront how much money they will need to contribute to fulfil their offset requirements
• enable a more strategic and coordinated purchase of offsets located in strategically important biodiversity areas in NSW such as land adjacent to wetlands and rivers, and
• facilitate landowners to establish offset sites on their land that could result in an additional income stream. 

 

Transitional provisions

The transitional period is likely to commence during the second half of 2014.  It is intended that after approximately 18 months, the policy will be implemented through legislation. It is not clear from the draft Policy how the Policy (once finalised) will apply to current development applications where Director-General’s requirements have been issued but the development assessment process is not yet complete.

The Offset Policy will not apply to existing offset sites secured under other long-term mechanisms.
 

Find out more at our free seminar

Partner Samantha Daly and Director of Umwelt environmental consultants Barbara Crossley will lead a panel of experts:

• Environmental law expert Patrick Holland from McCullough Robertson’s Sydney office
• Travis Peake, Manager Ecology/Associate, Umwelt – expert in biodiversity assessment and offsets, and
• Andrew McIntyre, Regional Manager, Hunter Central Coast at the NSW Office of Environment and Heritage

in a free seminar in the Hunter Valley focusing on what you need to know about the NSW Biodoversity Offsets Policy.

Date: Friday 2 May 2014

Venue: Singleton Diggers Club, York Street, Singleton  NSW  2330

Time: 7.15am for 7.30am - 9.00am (light breakfast included)

RSVP: Monday 28 April 2014

Enquiries: Donna White on 1300 MCR 888 (1300 627 888)

Click here to register.

Samantha Daly, Patrick Holland, Kate Swain

High Court rules mining leases do not necessarily extinguish native title

On 12 March 2014 the High Court handed down a unanimous decision in Western Australia v Brown [2014] HCA 8 that mining leases granted pre-1975 do not extinguish native title if the lease does not grant exclusive possession.  The High Court confirmed that mining rights and native title rights can co-exist and, importantly, clarified when native title rights will be extinguished by statutory rights at common law.

Background

The State of Western Australia (WA) entered into an agreement in 1964 with joint venturers to grant two mineral leases to develop iron ore deposits at Mount Goldsworthy (State Agreement).  The State Agreement was made pursuant to section 4(1) Iron Ore (Mount Goldsworthy) Agreement Act 1964 (WA).   Two mineral leases were granted to the joint venturers on 17 February 1966. 

In accordance with the mining leases and the State Agreement, the mining and township infrastructure was built over one-third of the mineral lease area.  The mine was closed in December 1982.  The town was closed 10 years later.

The parties agreed that, subject to extinguishment, the Ngarla People held non-exclusive native title rights over the land (subject to the mineral leases) to access and camp on the land, to take flora, fauna, fish, water and other traditional resources (excluding minerals) from the land, to engage in ritual and ceremony on the land and to care for, maintain and protect from physical harm particular sites and areas of significance.

The State Agreement stipulated that the joint venturers would allow the State and third parties to have access over the mineral lease area provided that such access over shall not unduly prejudice or interfere with the operations.

The questions before the High Court were whether native title had been extinguished as a result of:

• the mineral leases conferring exclusive possession over the land
• the rights under the mineral leases being inconsistent with the native title rights and interests, or
• the joint venture parties exercising their rights to develop and construct mines, a town and associated infrastructure.

The Judgment and the effect of this decision

This High Court decision is relevant for statutory grants made pre-1975.  Leases granted after 1975 are dealt with in accordance with the Racial Discrimination Act 1975 (Cth) and the Native Title Act 1993 (Cth).  Leases granted before 1975 must refer to the common law to determine whether native title has been extinguished.  By addressing the three questions before the Court, this judgment has clarified the test for extinguishment.

Addressing the first of the three questions, the High Court determined that the rights provided under the mineral leases at the time of grant did not give the joint venturers exclusive possession of the land.   On the contrary, the State Agreement provided that both the State and third parties were entitled to access over the land the subject of the leases.  Neither the mineral leases nor the State Agreement expressly provided that the joint venturers were entitled to both possess the land and have the right to exclude any and everyone from the land for any reason or no reason at all. 

With respect to the second question, the High Court ruled that rights granted under the mineral leases were not inconsistent with native title rights.  The court considered whether the existence of the rights granted to the joint venturers necessarily implied that the claimed native title rights and interests could no longer exist.  

The mineral leases did not give the joint venturers a right of exclusive possession.  In this respect, the mineral leases were no different from the pastoral leases considered in Wik Peoples v The State of Queensland (Wik) the mining leases considered in Western Australia v Ward (Ward) or the Argyle mining lease also considered in Ward.  The joint venturers were given limited rights to carry out mining and associated works anywhere on the land without interference by others.  Those rights were not, and are not, inconsistent with the coexistence of the claimed native title rights and interests over the land.

The High Court reasoned that at the time of grant of the mineral leases the native title holders could have exercised all of the rights that are now still claimed on the land without breach of the rights granted to the joint venturers.  Accordingly, there was not then, and is not now, any inconsistency between the rights granted to the joint venturers and the native title rights and interests claimed.

With respect to the third and final question, the High Court overturned the decision of De Rose v South Australia [No 2] (2005) 145 FCR 290 (De Rose).  In the case of De Rose it was held that exercising the right to construct improvements on a pastoral lease was inconsistent with the native title rights and interests claimed.  The construction and improvements on the pastoral lease extinguished native title upon the improved land.  The High Court held that the case of De Rose should not be followed. 

The High Court clarified that although the joint venturers did not have exclusive possession of the land (for reasons discussed above), if the joint venturers were undertaking activities, such as building a house, that was inconsistent with the native title rights and interests, the mining lease rights took priority over the exercise of native title rights.  However, the construction of a house (or any other improvement) will not extinguish the native title rights and once the joint venturers cease to exercise their rights under the mining lease, the native title holders can continue to exercise their rights over the area. 

The extinguishment test

The High Court decision clarified that neither the grant of a mining lease itself nor the construction of improvements (including building houses and towns) on the lease extinguished native title rights.  The holder of the mining lease will need to consider the rights of the mining lease at the time it was granted to determine whether the rights granted extinguish any alleged native title rights and interests (and if so, to what extent).  The court has referred to this as an ‘objective inquiry involving the comparison of rights’.  A determination must be made at the time of grant as to what extent the mining lease rights are inconsistent with native title.  To the extent there is no inconsistency with the rights under the mining lease, the non-exclusive rights can co-exist.

What does this mean for mining companies and pastoralists?

The High Court did not distinguish the mineral leases discussed in this case from the pastoral leases considered in Wik and the mining leases and the Argyle mining lease considered in Ward.  Accordingly, this decision shares practical implications for both mining lease holders and pastoral lease holders. 

This decision has no ramifications for mining or pastoral leases where exclusive possession rights have been granted.  The leaseholder will have exclusive possession where the whole of the land the subject of the mineral lease grant or pastoral lease must be used in a way which would not permit any use of the land by native title holders. 

Importantly, where a mining or pastoral lease does not grant exclusive possession, the leaseholder cannot rely on exercising their rights under the lease as a means of extinguishing native title.  The leaseholders must consider the legal nature and content of the two sets of rights to determine whether they are inconsistent at the time of grant.  There cannot be degrees of inconsistency of rights.  The two sets of rights are either inconsistent or they are not.  To the extent of inconsistency, native title will be extinguished. 

Lyndal Hanrahan, Dominic McGann

Reporting of pollution incidents in NSW – a reminder that not all pollution incidents need to be notified

Environment Protection Authority v Bulga Coal Management Pty Limited [2014] NSWLEC 5

Our client Bulga Coal Management Pty Limited (Bulga) has successfully defended a charge brought by the Environmental Protection Authority (EPA) that Bulga failed to notify the EPA of a pollution incident that occurred at the Bulga Coal Mine as soon as practicable after it became aware of the pollution incident.

This was the first prosecution under the Protection of the Environment Operations Act 1997 (NSW) (the Act) since its inception in 1997, where a plea of not guilty has been entered to the charge of failing to notify under section 148 of the Act.  The EPA has advised the Court that it will not appeal this decision of her Honour Justice Pain in the Land and Environment Court.

The EPA prosecuted Bulga for failing to notify the EPA of a leak from a tailings pipeline as soon as practicable after it occurred.  Bulga pleaded not guilty to this charge and argued that the notification occurred as soon as practicable after the relevant personnel formed the opinion that the incident had caused or threatened material harm.  Bulga did not dispute that the pollution incident had occurred, however it disputed that it had failed to report the incident ‘as soon as practicable’ after becoming aware of the incident, as required under section 148 of the Act.

This case clarifies that the obligation to notify the relevant authorities is triggered when the person forms a subjective awareness that material harm has been caused or threatened (as opposed to the objective position when the person first becomes aware that a pollution incident has occurred).  The Act was amended in November 2012 to require immediate reporting (promptly and without delay) of pollution incidents which cause material harm, however the subjective awareness requirement of whether material harm has been caused is still applicable.

Under the Act, material harm to the environment requires:

• actual or potential harm to the health or safety of human beings or to ecosystems that is not trivial, or
• harm that results in actual or potential loss (including measures to prevent or make good harm to the environment) exceeding $10,000.  

This means that the person must be actually aware that:

• the pollution incident has occurred, and
• the pollution incident has caused or threatened harm to ecosystems that is not trivial, or that it will cost more than $10,000 to clean up the damage,

before that person has an obligation to report the incident.

This decision potentially has far-ranging implications for environmental law in other Australian jurisdictions.

Background

At approximately 11.30am on Sunday, 9 October 2011, a Bulga employee became aware that coal tailings had escaped into Nine Mile Creek (an intermittent waterway which at the time was a dry creek bed).  The tailings had escaped as the result of the failure of a steel T piece in the tailings pipeline, and were described as a ‘trickle’.  The Bulga employee formed the opinion that the potential harm to the ecosystem was trivial as there were no signs of harm to animals or plant life in the area of spill, and the tailings were non-toxic. 

The employee followed Bulga’s internal processes, by taking immediate steps to stop the leak and prevent the further spread of tailings, and by contacting both the Environment Manager and CHPP Manager to inform them of the incident.  The Operations Manager, who was responsible for external reporting of environmental incidents under the Company’s internal incident management procedure, formed the positive view after being informed of the details of the incident that the incident was not causing or threatening material harm to the environment and therefore was not required to be reported on the Sunday.

The following morning, the relevant personnel assembled on site to inspect the pollution incident, and at this time the view was formed by the relevant employees that the cost of the cleanup of the incident would be more than $10,000.  The Operations Manager therefore made the decision that the incident should be notified to the EPA as soon as practicable, and this occurred within one hour of that opinion being reached.

Ultimately, the final clean-up cost to Bulga was $94,550 in internal costs and the external costs amounted to $193,440.

Forming an awareness

The EPA argued that the offence in this case was made out as the EPA was only required to prove, as a matter of objective fact, the incident was of that type and when the relevant Bulga personnel became aware of such an incident was irrelevant. The Court adopted Bulga’s submissions concerning the context of sections 147 and 148 of the Act, that section 147(1)(b) naturally allows the person on whom the duty is cast to make reasonable inquiries as to the anticipated clean up costs that would be incurred to make good any (trivial) harm to the environment caused by the incident.

Overall, the Judge agreed with Bulga that not all pollution incidents are required to be notified to relevant authorities under the Act, as this would lead to a substantial drain on the finite resources of those authorities.

With respect to the EPA’s argument, Her Honour held that if this position was adopted it would lead to unfair results as a person could be held criminally liable for an offence even if they were not aware that the incident was a type that should be reported. Her Honour also suggested that the EPA’s position would be contrary to the principles identified by the Court of Criminal Appeal which reaffirmed the common law presumption that knowledge is an essential element of every offence unless expressly displaced by the drafting of the relevant statute.

The Judge found that a prosecutor must prove beyond reasonable doubt that the defendant failed to report an incident; and in addition, that the defendant was aware that the pollution incident has caused or threatened harm to ecosystems that was not trivial; or that it would cost more than $10,000 to clean up the damage from the incident.

This does not mean that a person can turn a blind eye to the question of whether material harm has been caused and then later argue that they never considered the question.  The Judge noted in this case that an actual knowledge of the materiality of the harm caused could be inferred if the person could be found to be aware of suspicious circumstances or deliberately failed to inquire (wilful blindness).

What to do to ensure you are not prosecuted for failure to notify
It is imperative that your organisation has a clear process to ensure that pollution incidents are managed and reported in accordance with its obligations under the Act. 

In addition, holders of Environmental Protection Licences are required to have implemented Pollution Incident Response Management Plans (PIRMP) and to regularly test these under the Act.  The EPA recently completed its annual compliance audit program of PIRMPs and only one licensee was found to be fully compliant.

As soon as a pollution incident is identified the processes outlined in your organisation’s internal policy or, if applicable, under the PIRMP should be followed.  The PIRMP must identify the person who is responsible for reporting a pollution incident and outline the process that person must following to determine if the incident is reportable, including the process for determining whether the ‘material harm to the environment’ thresholds have been reached.

Importantly, this case has confirmed that it is acceptable for a company to undertake an internal decision-making process to assess whether material harm to the environment has been caused or threatened and therefore whether the incident needs to be reported. In the case of Bulga this process took 24 hours, which the Court ultimately found acceptable given the internal processes undertaken by Bulga during that period and the evidence as to the beliefs that were formed by the Operations Manager during that time as to whether or not material harm to the environment had been caused or threatened.

In forming a view as to whether the incident has caused or threatened to cause material harm – in addition to considering the actual or potential harm to ecosystems that may result from the incident, the responsible person should consider whether it will cost more than $10,000 to clean up the incident. The following questions will assist that person in forming a view as to the materiality of harm:

• how much labour will be involved in the clean up?
• will any equipment need to be brought in to remove material?
• will extensive water sampling be required?

If the responsible person forms the view that the pollution incident has caused or threatens to cause material harm then that person must report to all appropriate regulatory authorities IMMEDIATELY (which means promptly and without delay).

The key message from this case is that it is acceptable to have a hierarchical internal process for determining whether a pollution incident has caused or threatened to cause material harm but that process must be followed to avoid prosecution for ‘failure to notify’.

If you would like McCullough Robertson to review your organisations internal policy or PIRMP, or you would like further information on this topic, please contac our team.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

20% reduction in coal washery rejects levy for NSW operators

From 1 March 2014, NSW occupiers of licensed waste facilities will benefit from a 20% reduction in the levy payable on the disposal of coal washery rejects.  The new levy is $13.30 per tonne, down from $16.60.

What is the levy?

Since November 2009, each tonne of coal washery rejects that are received offsite and applied to land, have been subject to the coal washery rejects levy.  

Under the Protection of the Environment Operations Act 1997, occupiers of licensed waste facilities in NSW are required to pay a levy for each tonne of waste received. Different contributions are payable depending on the type of waste, where it was generated and the location of its disposal.

The aim of the coal washery rejects levy is to motivate the improvement of environmental management of coal waste by making the disposal more expensive, providing an incentive for mine operators to develop an alternative to disposal.

Important change to the levy

Following 30 June 2010, the coal washery rejects levy increased to $16.60 per tonne, up from the initial rate of $15.00 per tonne.

Legislative amendments have been introduced reducing the rate of the levy payable on the dispose of coal washery rejects by 20% for occupiers of licensed waste facilities.  The amendments took effect on 1 March 2014, resulting in a significant reduction in the levy to $13.30 per tonne.

The levy applies once the coal washery rejects is received at the licensed waste facilities irrespective of when it is applied to land.

Exemptions

There are two general exemptions from the requirement to pay the levy, namely:

• the Coal Washery Rejects (Coal Mine Void) Exemption 2009, and
• the Coal Washery Rejects General Exemption 2009.

The Coal Mine Void Exemption applies if:

• the coal washery rejects can only be applied to land to fill a coal mine void, to the original ground level
• the application of the coal washery rejects to land must conform to an approved rehabilitation plan for the site, and
• the application of the waste occurs within six months of receipt at the site.

The General Exemption provides that coal washery rejects which are applied to land in earthworks for civil engineering applications are exempt from certain licensing, contributions and reporting requirements.  The General Exemption does not apply to coal washery rejects that are applied to land for the purposes of mine site rehabilitation.

If your organisation is currently paying the coal washery rejects levy you should consider whether one of these exemptions may apply.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

Expanded CSG exclusion zones to protect critical industries in the Upper Hunter

NSW CSG exclusion zones

The NSW Government announced this week further exclusion zones for coal seam gas (CSG) development across NSW.  The exclusion zones will now apply to an additional 2.7 million hectares of land across NSW in order to protect current and future residential areas as well as critical industry clusters in the Upper Hunter.

CSG exclusion zones are already in place for existing residential areas throughout NSW.  These exclusion zones apply a two kilometre buffer around the residential areas to prohibit any new CSG activities.

The latest announcement will see a prohibition of CSG activities in an additional seven rural villages as well as future residential growth areas.  The rural villages that have been identified include:

• parts of Broke and Bulga, and all of Camberwell and Jerrys Plains, in the Singleton Local Government Area
• all of Sutton Forrest in the Wingecarribee Local Government Area
• part of Goonengerry in the Byron Local Government Area, and
• all of Modanville in the Lismore Local Government Area.

This means that approximately 95 per cent of dwellings in NSW that are covered by current petroleum licences will be protected from any further CSG exploration and development.  The exclusion zones around these rural villages will not impact on State Significant mining developments which will still go through the gateway process before proceeding to the environmental assessment stage.

The future growth residential areas where CSG activities will also be prohibited are in the Gosford and Great Lakes council areas.

These exclusion zones will not prohibit CSG activities which already have development consent.

Upper Hunter Critical Industry Clusters

The wine and equine industries will also be protected from new CSG activities with the addition of 288,000 hectares of critical industry cluster (CIC) land being added to existing CSG exclusion zones. This means that any new CSG exploration or development will be prohibited in the mapped CIC areas.

In addition, development applications for State significant mining in the mapped CIC areas will be subjected to the Gateway process. Finalisation of the CIC mapping will have the greatest impact on mining operations around Muswellbrook with approximately 200,000 hectares being declared as equine clusters.

Petroleum extraction rights under mining leases

These CSG exclusion zones do not apply to those miners that have petroleum extraction rights under existing mining titles.  The CSG exclusion zones only apply to CSG development for the purpose of petroleum exploration or production pursuant to a petroleum title granted under the Petroleum (Onshore) Act 1991. The recovery, obtaining or removal of CSG in the course of mining is not covered by the exclusion zones.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

Foreign investment decisions lack consistency

Two controversial decisions were made regarding foreign investment in the lead up to the holidays – one was highly publicised by Treasurer Joe Hockey, including through a televised press conference. The other was announced quietly via an emailed media release to a selected audience.

You may have missed the announcement on 11 December that China’s state-owned Yanzhou Coal Mining Company doesn’t need to cut its stake in local unit Yancoal Australia Ltd to below 70% and instead can move to 100% ownership.

By contrast the decision that “Australia’s national interest” will be protected by rejecting Archer Daniels Midland Company’s (ADM) proposed acquisition of GrainCorp Limited was highly publicised.

It could be assumed that public perception rather than issues of competition was the significant factor in the Treasurer’s decision. The Graincorp acquisition had already obtained ACCC approval (indicating competition concerns were not determining factors), while the Yanzhou decision basically overturns restrictions on ownership and conditions set by the Foreign Investment Review Board (FIRB) four years ago.

The Government has continued to express its encouragement of foreign investment, but the GrainCorp decision is hard to understand in that context. Interestingly, the issue of food security was not mentioned as a factor, while it was one of the main focuses of the recent Senate enquiry into foreign investment in the agribusiness sector.

In explaining his decision, the Treasurer referred to concerns expressed by grain growers in eastern Australia that the proposed acquisition by ADM could reduce competition, while acknowledging that a “more competitive network” is currently emerging. The Government’s significant consideration was the “high level of concern from stakeholders and the broader community.” It is unclear who these other stakeholders are but Hockey went on to say: “I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally. This would not be in our national interest.”

The Yanzhou decision raised a difficult problem for the Government. In allowing this acquisition, there is a risk that the Government is seen as weak by not enforcing its own conditions. The perception that foreign investors are dictating terms to the government could also undermine public support for the foreign investment regime and ongoing foreign investment more generally. However, as the Treasurer points out, since the original conditions were imposed on Yanzhou, significant challenges have emerged for the Australian coal industry – changing the nature of play completely.

Changing circumstances require revision and flexible decision making. In the case of the Yancoal takeover, it is now not so clear that allowing 100% holding is contrary to the national interest.

It will be interesting to observe the Government’s position evolve in 2014.

Media release: Foreign investment application: Archer Daniels Midland Company’s proposed acquisition of GrainCorp Limited
Media release: Foreign investment decision

Duncan Bedford
Duncan is a Partner at McCullough Robertson and an expert in business and transaction structuring and taxation.