Draft Report by Productivity Commission Released
The Productivity Commission (Commission) has released its long awaited draft report on the state of mineral and energy resource exploration in Australia. The report finds that there are a number of unnecessary regulatory burdens placed on resource explorers in Australia. In addition to rising costs and lower productivity, regulatory requirements have contributed to a decline in the competitiveness of Australia's resource exploration industry.
As outlined in our earlier Legal Insight, the extensive consultation process to date has involved submissions from over 30 interested stakeholders and meetings with many more. The Commission is now seeking responses via written submission before 15 July or via public hearings to be held in Adelaide, Perth, Brisbane and Canberra between 26 June and 4 July.
Across all regulatory domains, common concerns relate to:
A focus of several recommendations is to improve the certainty and transparency of the development and administration of regulations. This will benefit all stakeholders — resource explorers, farmers, conservation groups and the wider community.
Set out below are some of the more important draft recommendations and a summary of the Commission's reasons for doing so.
Exploration Licensing and Approvals
Recommendation: Publication of the specific criteria by which exploration licence applications are assessed, the outcomes of such assessment and the reasons why certain bids were successful.
Purpose: Improve the transparency of subjective decision making and demonstrate the integrity of tenement allocation processes, especially where cash bidding systems are used.
Recommendation: Exploration licenses should be of sufficient size and shape to facilitate efficient mine or production wells to be established.
Purpose: Forced relinquishment of land after prior exploration efforts often results in small or odd-shaped tenements. This complicates exploration surveys by requiring approvals from adjacent tenement holders. Recommendation: The reasons for ministerial decisions should be transparent to those persons to whom the decision relates.
Recommendation: The lead agencies for exploration should be responsible for coordinating with other agencies, including providing applicants with guidance on a range of approvals that may be required and how to navigate the approval process.
Purpose: Addresses various problems associated with the involvement of multiple government agencies (eg agencies responsible for heritage, environment, water and land access issues) in exploration licensing and related approvals, such as delays arising from failing to satisfy regulatory requirements and being required to re-submit material to regulators.
Recommendation: Regulators should publish target timeframes for approval processes and provide performance reports against these timeframes on their website.
Purpose: Promotes transparency and accountability in assessing exploration licence and renewal applications with a view to reduce the time needed to process such applications. The draft report also endorses electronic approval tracking systems (like the Queensland "MyMines" platform) to improve timeliness and transparency where application volumes make it cost effective.
While not making a separate recommendation, the draft report makes an additional note that Ministerial approval for a transfer of exploration title should not be a trigger to reassess the title and add further licence conditions, as in NSW and Tasmania. Rather, such approvals should be limited to the assessment of the prospective title holder and its compliance with all regulatory requirements.
Recommendation: Governments should use evidence-based analysis of the economic and social costs and benefits of alternative or shared land use when assessing proposals to explore in parks and reserves.
Purpose: Ensure that land access for multiple uses is decided upon in accordance with risk so that relevant stakeholders can make an informed decision or assessment as to the relevant merits of each competing use. For example, low impact aerial surveys should be permitted so that mineral resources can be determined. This information can then lead to a more evidence-based assessment of the conservation vs. development options for the particular area.
Recommendation: The development of coal seam gas (CSG) exploration regulation should be evidence-based and appropriate to the level of risk.
Purpose: While this recommendation lacks any detail to resolve the competing and seemingly intractable positions of industry and environmental/agricultural groups, it (and the below recommendations regarding the environment) indicates a preference for regulations to evolve with improvements in knowledge and understanding of the impacts of this type of exploration. One can only hope that the outcomes of the current scientific reviews of CSG exploration effects at both the state and Commonwealth level may be the catalyst for such regulatory reform.
Importantly, the draft report has deferred any recommendations regarding the vexed issue of competing resource uses between coal and coal seam gas exploration and production. In NSW, there is no clear priority of each of these uses under current legislation. The Commission has at least acknowledged this regulatory tension and has sought additional information before issuing its final report.
Indigenous Heritage Protection
Recommendation: The Commonwealth's Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (ATSIHP Act) should be retained whilst state and territory regimes reach the Commonwealth standard and thereafter should be repealed.
Purpose: Addresses the widespread industry concern about the significant overlap and duplication between these state/territory and Commonwealth regimes. Initially designed as an interim measure two decades ago, the ATSIHP Act could serve to accredit state/territory regulations once they reach an acceptable standard. The ATSIHP Act could then be repealed. The draft report considers that such an approach would provide an impetus to reform at the state level and ultimately remove the duplication and uncertainty.
Recommendation: Heritage authorities should require lodgment of all heritage surveys, maintain registers mapping and listing all known indigenous heritage and ensure sensitive information is only provided to approved parties for approved purposes.
Purpose: Addresses industry claims that a lack of heritage information results in excessive costs and time delays by having to conduct repeat surveys of the same site. The draft report notes that concerns regarding copyright (from consultants undertaking the survey) and the release of culturally sensitive information, could be resolved through agreed protocols to ensure information is only released to approved persons for an approved purpose.
Recommendation: National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) should undertake environmental assessments and approvals under the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) for petroleum activities in Commonwealth waters.
Purpose: The draft report acknowledges that duplication exists between the responsibilities of NOPSEMA under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and the Department of Sustainability, Environment, Water, Population and Communities under the EPBC Act. The overlap relates to petroleum exploration in Commonwealth waters. This has led to increased costs and delays and even regulators have submitted there has been no additional environmental protection. The recommendation is to remove duplication which would save time and expenses for all concerned.
Recommendation: The Commonwealth should strengthen bilateral arrangements with the states and territories for environmental assessments and accredit state/territory approval processes where appropriate. State and territory governments should favourably consider conferring their petroleum related regulatory powers in their waters to NOPSEMA.
Purpose: These recommendations are designed to restart the stalled process of removing duplication of environmental regulation between the states and the Commonwealth. These recommendations are timely given the passage of legislation last week in the Senate amending the EPBC Act to allow the Commonwealth, over and above existing state regulatory frameworks, to conduct environmental assessments of CSG and coal mining proposals where water resources are potentially affected. Recommendation: Governments should ensure their environmental exploration regulations are the minimum necessary, proportionate to the risks involved, focused towards performance based outcomes and away from prescriptive conditions.
Purpose: Counteracts the recent trend of 'top-down' regulatory creep where mining-related risk assessment parameters have crept down into exploration activities. Importantly, the Commission "supports outcomes-based approaches (rather than prescriptive approaches), recognising that exploration companies will often be in a better position than regulators to identify the most efficient and effective means to minimize a particular adverse impact" 1.
Recommendation: Governments should ensure that where there is scientific uncertainty regarding the environmental effect of exploration, regulatory settings should evolve with the best available science and be evidence based.
Purpose: Importantly, the draft report suggests that scientific uncertainty does not reduce the need to conduct a cost-benefit analysis of exploration activities which includes using uncertainty factors in risk assessments. It goes on to note that uncertainty is but "one factor that should be considered when deciding whether exploration can reasonably be expected to increase the community's wellbeing" 2.
The Commission's final report will be issued to the Australian Government by September 2013.
The Commission also notes that while exploration represents only a small share of the economy, its importance is in sustaining Australia’s much larger resource extraction industry. We hope that whichever government is formed after the next election, its response to the Productivity Commission's work will be high on its agenda.
Interested parties may comment on the recommendations in draft report in writing by Monday 15 July 2013 or by attending one of the following public hearings:
Further details on opportunities for further comment can be found in the draft report on page iii.
 Draft Report, p.195
 Draft Report, p.198
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.