The Crown Minerals (Permitting and Crown Land) Bill was introduced into
Parliament late last week.
The prospect of reforming the Crown Minerals Act 1991 (the "Act") was first
raised in the Petroleum Action Plan released by the Government in November 2009,
and this Bill seeks to deliver on one of the key initiatives set out in the
Action Plan intended to facilitate resources-led economic development.
The Crown has not yet released the revised Minerals Programmes for Petroleum
and for other Minerals that it has indicated will accompany the Bill – but they
are expected imminently. The Minerals Programmes are important as they will
provide further context to the proposed changes and give operational effect to a
number of the new provisions in the Bill.
The current Bill is 76 pages long and contains wide ranging and significant
reforms to the Act. Set out below is a summary of what we consider to be some of
the more significant proposals for the industry:
Two tier permitting system: two permitting tiers
are to be introduced. Tier 2 permits will be available for lower value
operations and will involve less reporting and administrative activity. While
this will not directly affect significant petroleum, coal, ironsands or
non-alluvial gold operations, it should free up Government resources for these
higher value activities.
Changes to permit application process: these
include proposed work programmes being able to have committed and contingent
work components, exploration permits having to include an estimate of expected
total work programme expenditure and, in the case of Tier 1 exploration permits,
the Minister being satisfied the operator has (or will have) sufficient HSE
capability and systems (by way of a "high-level preliminary assessment").
Exploration permit duration: for petroleum
exploration permits, the maximum permit duration will be up to 15 years plus any
appraisal extension term (with a distinction likely to be drawn between offshore
and onshore blocks). The forthcoming Minerals Programmes are expected to deal
with work programme staging and the circumstances in which changes are
permitted. The duration of non-petroleum exploration permits remains at 10
Exploration permit area relinquishment: upon the
grant of the exploration permit or the grant of a permit change application, the
Minister may impose a relinquishment obligation on the permit holder (not more
than twice for any permit). The maximum relinquishment area is 75% for petroleum
permits and 50% for minerals permits. This is a significant change for petroleum
Minister ability to change petroleum mining permit work
programme: for new petroleum mining permits, the Minister will
have the ability to change a permit holder's work programme if the change is
necessary to maximise the economic recovery of petroleum in accordance with good
industry practice. If the permit holder disagrees with the Minister's proposed
changes, the permit holder will be able to require the appointment of an
independent expert to resolve the matter on a binding basis. This proposal has
potential implications for investment certainty in New Zealand.
Changes to permits: mining permit extensions and
appraisal extensions must be sought six months before expiry of the current
permit. Other permit changes must be sought not less than 90 days before the
work commitment due date (or, if there compelling reasons exist, not less than
30 days before the due date).
Permit revocation: the Crown may revoke a permit
if, among other things, the permit holder contravenes a condition of the permit
or the Act. The Crown must give the permit holder prior notice and the
opportunity to remedy the non-compliance. There is a right of appeal to the High
Court on points of law only. This revocation regime is therefore significantly
stricter than the current regime.
Ministerial consent for dealings: the scope of the
Ministerial consent provision for dealings (section 41) has been significantly
narrowed – it will only apply to certain kinds of agreements that impose on
permit holders an obligation relating to the proceeds of production.
Permit holder changes of control: if a permit
holder (or the holder of a participating interest in a permit or a guarantor of
a permit holder's obligations) undergoes a change of control, the permit holder
must satisfy the Minister it has sufficient financial capability after the
change of control. If it cannot, the Minister may revoke the entire permit. This
is a significant new requirement, and will no doubt be of particular interest to
those who hold their permits as tenants in common with other joint venture
Significant mining on DoC land: applications for
access arrangements to allow significant mining activities on DoC land must be
publicly notified (and there is provision for this is occur at the same time as
any concession application under the Conservation Act 1987). The Minister of
Conservation and the Minister of Energy and Resources will jointly determine
what constitutes a significant mining activity based on a list of specified
statutory criteria. This is obviously a significant development for the minerals
Strata permits: the Crown will be able to issue
strata permits. This is a welcome development as it will allow industry
participants flexibility to undertake separate developments in different strata
within the same geographic area under the authority of a permit granted by the
Crown rather than having to rely on contractual arrangements.
Operator designation: joint venture permit holders
must appoint an operator who is responsible for day-to-day management of
activities under the permit. Operator changes are only permitted with the prior
consent of the Minister. Third party operators are not contemplated.
Iwi engagement reports: Tier 1 permit holders must
provide to the Crown an annual report of their engagement with relevant iwi or
Speculative prospectors: petroleumprospecting
permit holders can apply for designation as speculative prospectors (with the
result that it is possible for any data filed with the Crown to remain
confidential for 15 years).
Information request powers: the Minister will have
the power to require permit holders to provide him with a very broad range of
information, including commercial agreements.
Appointment of enforcement officers: there is
provision for enforcement officers to be appointed. They will have search powers
under the Search and Surveillance Act 2012 and will be able to undertake royalty
Minerals Programme transition: existing permit
holders will transition to the new Minerals Programme when they apply to extend
or change their permit or progress to a subsequent permit. They can also opt
into the new Minerals Programme at any time. Importantly, there is a
grandfathering provision for royalties. These transitional provisions will mean
that the reform of the Act will result in changes for all existing permit
By way of a brief concluding comment, many of the changes proposed in the
Bill will benefit industry. There are also a number of provisions industry
participants will need to ensure they are across so as to avoid unanticipated
operational and tenure consequences. Either way, in order to provide some degree
of regulatory certainty, it is to be hoped that they are enacted quickly and
that transitional issues will be clearly and carefully managed.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.