Crown Minerals Act reform is here

Tuesday 25 September 2012

Authors: David Coull and Chris Gordon

The Crown Minerals (Permitting and Crown Land) Bill was introduced into Parliament l​​ate 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:

  1. 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.

  2. 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").

  3. 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 years.

  4. 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 exploration permits.

  5. 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.

  6. 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).

  7. 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.

  8. 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.

  9. 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 participants.

  10. 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 sector.

  11. 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.

  12. 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.

  13. Iwi engagement reports: Tier 1 permit holders must provide to the Crown an annual report of their engagement with relevant iwi or hapu.

  14. 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).

  15. 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.

  16. 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 audits.

  17. 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 holders.

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.


Disclaimer

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.

For more information
  • David Coull

    Partner Wellington
  • Chris Gordon

    Partner & Chairman Wellington
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