Following on from the recent introduction of the Crown Minerals (Permitting
and Crown Land) Bill 2012 (the Bill) into Parliament, the draft
Minerals Programme for Petroleum and draft Minerals Programme for Minerals
(Excluding Petroleum) were released by New Zealand Petroleum & Minerals
(NZPM) late last week for consultation.
A summary of the more significant proposals in the Bill can be found here: Crown Minerals Act reform is here. This
article does not seek to cover ground which has already been covered in that
The Minerals Programmes are important as they provide further context and
give operational effect to the Crown Minerals Act 1991 (the
Act), including a number of the new provisions in the Bill. We
believe the changes proposed in the new Minerals Programmes are likely to be
more far reaching, in an operational and practical sense, than the changes
proposed in the Bill.
Submissions on the draft Minerals Programmes are due by 5 December 2012 and
NZPM has made it clear that the draft Minerals Programmes will be amended as
required to reflect changes to the Act resulting from the Bill as it moves
through the legislative process.
Although it is not possible to comprehensively summarise all the proposed
changes to the revised Minerals Programmes in this article, we set out below
some of the more interesting aspects of the proposed draft Minerals Programme
Form: the Minerals Programme has adopted the more
discursive style of the Minerals Programme for Petroleum (2005) rather than the
regulations-based style used in the more recent Minerals Programme for Minerals
(Excluding Petroleum) 2008. This should make the Minerals Programme easier to
follow and the Crown seems to have listened to industry on this aspect.
Purpose underlying the Act: the Minerals Programme
gives a reasonably detailed explanation of the proposed new purpose statement to
be included in the Act – being to promote prospecting for, exploration for, and
mining of Crown owned minerals "for the benefit of New Zealand". The phrase "for
the benefit of New Zealand" has been identified in the Minerals Programme as the
over-arching objective of the purpose statement and as the touchstone for
interpreting the rest of the purpose statement and the Act more generally.
The Minerals Programme states that "the benefit of New Zealand" is best
achieved by "increasing New Zealand's economic wealth through maximising the
economic recovery of New Zealand's petroleum resources". This provides some
useful context for the rather general purpose statement proposed in the
Timing and procedural issues with NZPM: The
Minerals Programme contemplates that transaction costs should be minimised,
doing business with Government should be simpler and applications for permits
(including changes to permits) are to be processed quickly and efficiently. This
should help to alleviate some of the long held industry concerns in relation to
Health and safety preliminary assessments: There
has been lot of industry comment about the proposed preliminary HSE assessment,
and the Minerals Programme provides some useful clarification. If a permit
applicant is currently undertaking similar activities (as operator) to those
proposed under the permit application, then in the absence of clear evidence to
the contrary, the Minister will be satisfied that the operator is likely to be
able to meet expected HSE requirements for the types of activities proposed
under the permit. For new entrant operators, the preliminary HSE assessment will
be more involved.
Non-exclusive prospecting permits: currently,
petroleum prospecting permits generally confer exclusive rights on the permit
holder. However, the proposed new Minerals Programme provides for PPPs to be
non-exclusive and that the Minister may grant multiple PPPs over the same or
overlapping areas. This is a significant change in policy and seems intended to
accommodate the Crown's desire to encourage a market for speculative offshore
surveys. The existing policy that PPP holders do not have any right to obtain
subsequent permits continues (which is a necessary result if all future PPPs
will be non-exclusive in nature).
PPPs over existing acreage: Another significant
change is that if the proposed PPP area is already held under an exploration or
mining permit (or existing privilege), the PPP holder must obtain the consent of
the existing permit holder. However, the underlying permit holder is not able to
unreasonably refuse permission (and where there is a dispute the Minister will
make a binding determination). It is not difficult to see numerous practical
issues arising with this proposal.
Speculative prospecting information: a prospecting
permit holder who wishes to be a speculative prospector must apply for a
determination by the Minister and can also lose its status as a speculative
prospector if it no longer qualifies. Information provided to NZPM by a
speculative prospector will not be made public for 15 years after the
information is first obtained. However, if the speculative prospector loses its
status, then the special confidentiality and information protection provisions
will no longer apply. In addition, the 15-year confidentiality period will apply
to information that is obtained by a speculative prospector and sold under
licence to a PEP or PMP holder. It will be interesting to see whether a PEP
holder is able to satisfy work programme requirements (e.g., seismic data
acquisition requirements) by purchasing that data from a speculative prospector.
Reservation of land: the Minister has the power to
specify land that will be withheld from allocation for up to three years. This
is directed towards ensuring that prospective acreage is reserved for
competitive allocation through a Blocks Offer. This approach is likely to be
less significant in practice with the recent abolition of PIT permit allocation,
but will still remain relevant for extension of land applications.
Petroleum exploration permit bids: some clarity is
provided on how the Minister will rank and assess competing exploration permit
bids for a particular block. For example, the Minister will favour committed
work over contingent work and will prefer work categories with high
Exploration permit duration: the Minister may set
different durations (up to 15 years) for exploration permits offered under a
Block Offer. The Minister will take into account whether blocks are onshore or
offshore, geographic remoteness, water depth, the extent of previous exploration
in an area and relevant geological information about the area. However, there is
no specific guidance in the Minerals Programme as to likely durations for
different acreage types as was set out in the consultation document. This
suggests the decision will be made on a case-by-case basis.
Exploration permit transition: the Bill permits
(and will ultimately require) existing permit holders to transition to the new
regime, and the Minerals Programme makes it clear that they will be able to take
advantage of the proposed extended exploration permit durations. One expects
this will be one of the key factors that causes existing permit holders to
transition to the new regime.
Changes to exploration work programmes: consistent
with the Crown's various public statements, the Minerals Programme records that
the Minister will only consent to changes to key deliverables within each stage
of the exploration work programme in exceptional circumstances. Although some
further guidance is provided as to what this means, it is clear the Crown's
expectation is that change of condition applications will be sought (and
granted) less frequently and that permit holders will need to better manage
their ability to deliver on work programme commitments.
Transitioning to next stage of exploration permits:
it is contemplated that exploration permit holders will agree with
the Crown the work programme for the next stage of the exploration permit before
transitioning to it. However, where agreement cannot be reached or changes are
sought to the contingent work programme originally proposed, the Crown has the
residual ability to finally determine the required work programme. It will be
interesting to see how this approach works in practice.
Exploration extension of land applications: the
procedure and requirements for EOL applications have been revised. An
interesting new requirement is that where there is competitive interest in the
requested extension area, the Crown will notify other nearby permit holders to
enable them to identify alternative prospects which extend from their permit
areas into the areas for which the extension has been sought. This is a change
from the current approach.
Alternative field plans: as part of a PMP
application, the Crown may require alternative field development plans to be
submitted and evaluated. This is intended to ensure the development plan is
optimal in terms of ensuring maximum recovery of economic reserves and good
industry practice. This, together with the Crown's new ability under the Bill to
seek to amend agreed development plans in some circumstances, represents a
change in the extent to which the Crown can influence operations under a
producing mining permit.
No overlapping permits: the Bill provides for
section 30(8) of the Act to be repealed (which provides that overlapping
petroleum permits may be granted with consent). This change is expressly
recognised in the Minerals Programme – exploration and mining rights are
exclusive and no other person may explore or mine for petroleum (other than gas
hydrates) within the area of a current permit. We disagree with this proposal
and believe that section 30(8) should be retained as it serves a useful
Gas hydrates: gas hydrate permits may overlap with
PEPs or PMPs. A whole chapter has been included on gas hydrates and this
indicates the Crown is expecting gas hydrates to become increasingly significant
going forward. There are likely to be a number of difficult technical and risk
issues that will need to be addressed where a conventional petroleum operation
and a gas hydrate operation are being undertaken in close proximity.
Coal seam gas: The Crown has sought to address
coordination and interferences issues between petroleum and coal activities
where there are overlapping permits. Although these issues are already addressed
to some degree in existing requirements, the new Minerals Programmes provide
further clarification as to what is expected by the Crown.
There is clearly a considerable amount of detail included in the Minerals
Programme that has been put out for consultation. Many of the changes proposed
will, if they come into force, have significant implications for the way permit
holders interact with NZPM and how they need to organise themselves in order to
meet their obligations under the Act.
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.