NSW energy: 2012 in review

On the back of its decisive election win in 2011, the NSW Coalition Government implemented a number of major initiatives affecting the energy and resources sector in 2012.

These developments reflect a heightened interest in the regulation of the energy and resources industry in NSW. While some provide opportunities for industry participants, they have also increased the regulatory and compliance burdens on them.

Resource exploration and extraction in NSW

Two very high-profile sources of energy, coal seam gas and uranium, were the subject of legislative and policy reform in 2012:

• the removal of the 26 year-old ban on exploration for uranium deposits which allows explorers to review the nature, extent and location of uranium deposits in NSW, but does not yet permit the mining of those deposits; and
• the release of a draft code of practice for coal seam gas explorers which, the NSW Government claims, will subject the coal seam gas industry in NSW to the toughest controls in Australia.

While the long-term role of uranium and CSG in the State's energy mix is not settled, there are some indications that they will play a greater role, and so more reforms can be expected.

Other policy and legislative changes affecting exploration and extraction more generally include:

• the development of a Strategic Regional Land Use Policy to balance the needs of the mining, petroleum and agricultural sectors, and those of the wider community;
• the completion of a selective audit of coal and petroleum licences in NSW which assists explorers to identify high-right areas of non-compliance and the implementation of best-practice approaches to ensure that licence conditions are complied with;
• the development of a template NSW land access agreement which serves as a useful tool for licence holders and land holders, in making the negotiation basics more efficient;
• an end to a "royalty holiday" for petroleum producers and the imposition, from 1 January 2013, of a 10% royalty applying from the date of the commencement of production; and
• significant increases for maximum penalties under the Mining Act and the Petroleum (Onshore) Act. By way of example, for corporations, the maximum penalty for certain offences has increased to $1.1 million.

These changes signal greater regulatory involvement in the NSW energy and resources industry. Indeed, these initiatives, coupled with the fact that the Government has not finished implementing its policy objectives, signal an increase in regulatory intervention going forwards.

Electricity generation

Two key changes this year affecting energy generation in NSW include:

• the passing of legislation to sell the State's power generators and sell or lease the Cobbora coal mine; and
• the release of draft planning guidelines for wind farms in NSW which provided the first comprehensive assessment framework for wind farms in this State.

More should be expected:

• energy prices in NSW are under scrutiny in IPART's triennial review, which will set maximum standard power tariff prices for 2013-2016; and
• the NSW Parliament's Public Accounts Committee has flagged a greater role for uranium in electricity generation, which would be a significant shift if implemented.

Of course all of this takes place against the backdrop of the Federal Government's White Paper on Energy Policy.

You might also be interested in...

• "The Economics of Energy Generation" and the future energy mix for NSW
• Energy White Paper - more competition, less regulation