24 Apr 2013

Tendering for coal exploration tenements in Queensland - where to now for Restricted Area 394?

by Prue Warner, Mark Geritz

A new tendering system is now in place for coal exploration permits in Queensland, but the previous moratorium on new coal-related tenement applications still exists.

Restricted Area 394 (RA 394) (introduced on 30 January 2012) placed a moratorium on the application for and grant of new coal-related mining tenements in Queensland. Media releases from the Queensland Government indicated that this was an interim measure while a full tender system for exploration permits for coal (EPCs) was introduced.

That system has now been introduced by the Mining and Other Legislation Amendment Act 2013 (Qld) (MOLA), but RA 394 is still in place. We look at how the new tender system works and whether Restricted Area 394 should now be lifted.

Competitive tender process

All new applications for EPCs are now subject to a compulsory tender system.

Exploration Permits for Minerals (EPMs) are still generally subject to the standard application process with the competitive tender process only applying if a call for tenders is made for a particular area (in which case standard applications are not permitted).

Pursuant to the new tender process, project proponents must:

  • Wait for a call for tender (indicating, among other things: area, closing time, conditions and term);
  • Lodge a tender in response (complying with specific requirements such as a program of works and estimated human, technical and financial resources to be committed to the tenement); and
  • Wait for notice of whether successful or unsuccessful.

The Minister cannot approve a tender that does not meet the basic criteria that most importantly include compliance with the Mineral Resources Act 1989 (Qld) (MRA) and approval of the program of works (by the Minister).

Once these basic requirements have been met, the Minister may otherwise use his discretion and may create a short list and engage in further negotiations or may simply select a preferred tenderer. The Minister may also revoke a tenderer's appointment if they fail to do all things necessary to enable the grant of the exploration permit.

Tenderers may withdraw or amend their tenders before the closing date without penalty. A withdrawal after the closing date risks losing the tender security (see below).

Cash bidding vs tender security

There is also the potential for the Minister to apply a cash-bid requirement to a call for tender, which is likely to occur in highly prospective areas. The proceeds from the winning bid will become government revenue and are not able to be invested into the tenement. It is our understanding that cash bids will be confidential.

Cash bids are not to be confused with "tender security" which is a prescribed amount that must accompany all tenders to demonstrate the commitment of the tenderer. Unsuccessful tenderers will have their security amount refunded, but the Minister may elect to keep security of a tenderer who withdraws after the closing date.

A summary is shown in the flow chart below.

Flow chart – competitive tender process for exploration permits

Flow chart – competitive tender process for exploration permits

Restricted Area 394 – lift or leave?

RA 394 has not been lifted with the introduction of the new tender regime.

The terms of the government gazette creating RA 394 indicated an exception to the moratorium in the event that the Minister published a call for tenders. Therefore, the new tender system can still operate with RA 394.

However, a significant problem for industry that remains because of the confirmed continuation of RA 394 is that the grant of parcel prospecting permits are prohibited except for the limited circumstances specifically referred to in RA 394. This means that common and important uses of parcel prospecting permits for prospective mining lease holders including the following remain largely prohibited:

  • applying for an ML over areas of an EPC or mineral development licence (MDL) that have been excluded from that EPC or MDL for various reasons including native title;
  • where an ML is to be made over part of an area that is additional to the area covered by the existing EPC or MDL to ensure that the resource can be extracted in the most efficient manner including appropriate buffer zones;
  • to ensure the validity of any subsequent ML, particularly if there is any doubt in relation to the validity of the EPC or MDL.

Our view is that there is no good reason for RA 394 to remain in force now that the new tender process is mandatory and that its continued existence has the potential to prejudice the development of the State's coal resources.

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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.