03 Apr 2014

NSW mining and petroleum authorisation holders to be "fit and proper persons"

by Nick Thomas, Mark Brady

The "public interest" test for various statutory decisions about mining and petroleum authority would be replaced by a "fit and proper person" test for authority holders and associates.

A Bill currently before NSW Parliament would allow the Government to make decisions regarding current or proposed mining and petroleum exploration licences and mining/production leases (authorities) based on its view of whether the current or proposed authority holder is a "fit and proper person".

This would replace the "public interest" test for decisions on mining and petroleum authorities, which was introduced in late 2013 as a short-term response to corruption findings, but the public interest would remain a relevant consideration for approvals under the (now repealed) Part 3A major project approval regime.

The Bill also would prevent the grant of development consent for coal mining unless the applicant holds an exploration licence for the relevant coal or has the relevant licence holder's consent.

These are proposed as measures to reduce the risk of corruption in decision-making on mining and petroleum authorities.

Background to the changes

Last year, the Independent Commission Against Corruption (ICAC) investigated the grant of three coal exploration licences, and made findings of corruption against some of those involved in issuing the licences. At the NSW Government's request,ICAC also made recommendations for changes to the system of granting and administering mining exploration licences in NSW.

The Government moved quickly to provide a legislative response to the corruption findings, by introducing a "public interest" test under the Mining Act 1992 and the Petroleum (Onshore) Act 1991 for various decisions made in relation to mining or petroleum authorities under those Acts, At the time, the Government indicated in Parliament that this was a short-term measure and it would be reviewed.

The Mining and Petroleum Legislation Amendment Bill 2014 is the product of that review.

The Government has also proposed changes to proceeds of crime legislation, which are directed specifically at proceeds from unlawful behaviour with regard to mining or petroleum authorities, but those changes are beyond the scope of this article.

Mining and petroleum legislation amendments

The Bill proposes the removal of the public interest tests in the Mining Act and the Petroleum Act as a relevant ground upon which decisions about mining and petroleum authorities would be made. This test will replaced with a "fit and proper person test".

Although the "fit and proper person" test generally has a narrower scope of operation than the "public interest" test, and therefore should present less risk overall to a mining or petroleum project proponent, the scope of the concepts incorporated into the "fit and proper person" test is extremely broad.

This proposed test affects decisions:

  • on applications to grant or renew a mining or petroleum authority;
  • on applications to approve a transfer of a mining or petroleum authority;
  • as to whether to cancel a or suspend operations under mining or petroleum authority; or
  • as to whether to restrict operations under a mining or petroleum authority by the imposition or variation of conditions.

The list of matters which the relevant decision-maker can consider in deciding whether a person is a fit and proper person is includes (among other things):

  • whether the relevant person has "compliance or criminal conduct issues";
  • the relevant person's record of compliance with relevant legislation;
  • whether the management of the activities or works are in the hands of a technically competent person;
  • whether, in the decision-maker's opinion, the person is of good character;
  • whether the person is or has been the subject of insolvency action;
  • whether the person has demonstrated the financial capacity to comply with the obligations under the relevant authority; and

whether the person has a formal or informal arrangement, in connection with the authorised activities, with another person whom the decision-maker considers is not a fit and proper person, if the arrangement gives that other person the capacity to determine the outcome of decisions about financial and operating policies concerning those activities.

The fit and proper person test applies to both individuals and body corporates and, in the case of body corporates, the test applies not only to the body corporate itself but also, in some situations, to its directors and to directors of related bodies corporate.

While a fit and proper person requirement is not new in regulatory laws, its scope in the Bill is broader than in other legislation.

Importantly, the Bill states that the fit and proper person test will apply to all decisions made after the Bill is commences operation.

Planning legislation amendments

The proposed amendments also prohibit the submission of an application for development consent (pursuant to the Environmental Planning and Assessment Act 1979) to mine for coal unless the proponent is a holder of an authority which is in force with respect to the coal and the land where the mining is proposed to be carried out, or has the written consent of the holder of such an authority.

This amendment seeks to close a potential loophole where a proponent could circumvent the need to obtain an exploration licence for coal (under the Mining Act) if a planning approval was already in place. This amendment extends to any application made (but not determined) before the commencement of the amendments.

These amendments will also operate to extend to any application for development consent, or modification to a development consent made but not determined before the commencement of the amendments.

Next steps

This Bill is also currently before the Legislative Council.

In addition to the changes proposed in the Bill, the Government may amend mining legislation to address some of the ICAC recommendations about the existing exploration licence regime in NSW.

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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.