New change of control rules and disqualification criteria on the way for Queensland resource authority holders

By Mark Geritz and Storm Scarlett
21 Feb 2020
Direct and indirect changes of control and new broadranging disqualification criteria for proposed holders of resource authorities will be under the microscope if the Mineral and Energy Resources and Other Legislation Amendment Bill 2020 is passed.

Direct and indirect changes in control will be a key focus for Queensland resource authority holders, as the State Government is creating new rules which will affect resource authority holders and proposed resource authority holders, complemented by disqualification criteria which could affect who can become a resource authority holder.

The Mineral and Energy Resources and Other Legislation Amendment Bill 2020 (MEROLA Bill) was introduced into State Parliament on 4 February 2020, and will amend various pieces of Queensland legislation, including the:

  • Mineral Resources Act 1989 (MRA);
  • Mineral and Energy Resources (Common Provisions) Act 2014;
  • Mineral and Energy Resources (Financial Provisioning) Act 2018 (Financial Provisioning Act);
  • Petroleum and Gas (Production and Safety) Act 2004 (P&G Act); and
  • Petroleum Act 1923.

Although the MEROLA Bill will affect a wide range of issues in the resources sector, in this article we'll focus on the financial assurance and regulatory framework changes, particularly those aimed at resource authority holders' technical and financial capability, compliance history and corporate behaviour.

Change of ownership of a resource authority / Change of ownership of entity holding a resource authority

A key change impacting resource authority holders is a strengthening of state oversight over changes of control of the ownership of a resource authority.

Where there is a direct change of ownership of a resource authority (ie. where a resource authority, or a share of a resource authority, is directly transferred to another entity), the Minister will be required to consider whether the proposed transferee has the necessary financial resources to fund rehabilitation activities of the relevant tenement.

Where there is an indirect change of ownership (ie. where an entity starts or stops controlling the holder of a resource authority or the holder of a resource authority starts or stops being a subsidiary of a corporation under the Corporations Act), the Minister will have powers to assess the new holder's financial and technical capacity to comply with the conditions of the resource authority, and to add new conditions or vary existing conditions of the resource authority. 

There will be natural justice rights provided to the resource authority holder in that it will be notified of the Minister's proposed decision and given an opportunity to make submissions about the proposed decision.

The above direct and indirect changes of ownership may also lead to a change in the risk category of the resources authority holder for the purposes of the Financial Provisioning Act and therefore the financial assurance that needs to be provided under that Act.

Disqualification criteria for resource authority applicants and transferees

If the MEROLA Bill is passed, resource authority applicants for the grant of resource authorities – including under tender processes – and potential transferees of resource authorities will be assessed against a broad ranging set of new disqualification criteria. The criteria will include considerations such as whether the applicant or an associate of the applicant has:

  • contravened the resources legislation;
  • been convicted of an offence against resources, safety, environmental and water legislation in Queensland, the Commonwealth or other States;
  • a relevant criminal history; and
  • a history of maladministration of a company. This includes being a director of a body corporate that is or was subject to a winding up order or for which a controller or administrator is or was appointed (within 10 years before the application or tender was made).

There is also a broad catch all criteria of "any other matter the decision maker considers relevant to making the [disqualification] decision". 

An "associate" is broadly defined and includes an entity the decision-maker considers is in a position to control or substantially influence the applicant's affairs in connection with the resource authority.

Although the decision maker "may" disregard contraventions of legislation and convictions having regard to the degree of seriousness, the degree of harm caused, the length of time that has elapsed since the contravention or conviction and the extent to which the applicant or associate was involved, the decision maker is not expressly bound to do so.

Natural justice rights will be provided with respect to proposed disqualification decisions.

Requirement for development plans for mining leases for minerals other than coal or oil shale

Holders of mining leases for minerals other than coal or oil shale would be required to submit a development plan detailing the nature and extent of activities undertaken on a resource authority.

Mining lease holders will be obliged to comply with their development plans. This requirement will apply to current and future mining lease holders that are, or consider they will be, mining above prescribed thresholds. The requirements will be similar to the existing requirements for coal mining lease holders.

Mining lease tendering process

A new competitive tendering process for certain mining leases is proposed. The Government has indicated that this will be used for repurposing abandoned mine sites. Successful tenderers will still need to proceed through the standard requirements for mining lease applications such as native title, objections and the need for an environmental authority.

Relinquishment requirements for petroleum leases

The P&G Act will be amended to allow for areas of authorities to prospect that are being progressed to petroleum leases to count towards relinquishment requirements of the authority to prospect.

Improved regulatory efficiency

There are also a number of proposed changes that are designed to streamline regulatory processes across the various pieces of resource legislation. These changes include:

  • creating a dispute resolution framework for certain overlapping tenement scenarios where there was previously a veto right given to one of the resource authority holders;
  • streamlining and consolidating conference provisions;
  • allowing a simultaneous application process for replacement of petroleum leases under the Petroleum Act 1923 to the P&G Act and amalgamation of multiple petroleum leases into one petroleum lease;
  • removing the requirement for coordination arrangements where overlapping tenements are held by the same entity;
  • allowing the Minister to refuse a mining lease application if compensation is not determined and three months have elapsed since all objections to the mining lease have been withdrawn;
  • requiring payment of security prior to grant of mining leases;
  • empowering the Minister to declare areas of land as 'excluded land' for exploration permits and mineral development licences;
  • allowing persons to serve documents via email where agreed;
  • removing the need for Ministerial approval for non-assessable transfers and other dealings; and
  • removing the requirement for a royalty return when there is no royalty payable.

Other matters in the MEROLA Bill

If the MEROLA Bill is enacted, it will also:

  • implement legislative changes to support abandoned mine rehabilitation; and
  • introduce industrial manslaughter offence provisions and mandate certain requirements for persons in critical safety statutory roles for coal mining operations.

We'll look at these aspects in future Insights.

Next steps for the MEROLA Bill

The MEROLA Bill has been referred to the State Development, Natural Resources and Agricultural Industry Development Committee for detailed consideration and report by 27 March 2020, and we expect it will be law in the coming months.

Resource authority holders should consider whether they agree with the proposed changes and, if not, should lodge a submission to, and perhaps appear before, the above committee.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.