some ucg news..

Havent read it all yet but thought all you cxy'rs would like a read. I think its a recap.

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http://www.tresscox.com.au/resources/resource.asp?id=540



QUEENSLAND'S UNDERGROUND COAL GASIFICATION POLICY Newsletter Article - 13 November 2009 Printer Friendly

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Overview of the Policy
In recent years, Queensland’s coal seam gas (CSG) industry has seen significant growth, resulting in burgeoning development. At the same time, recent moves towards production via underground coal-seam gasification (UCG) as an emerging method of extracting gas from coal seams has resulted in increased competition for reserves. As licenses are granted and petroleum, gas and various mineral resources are acquired by companies, problems associated with overlapping tenements have emerged. UCG, CSG and minerals extraction have the potential to operate in a single geographic location but at different depths and on different tenements.

A problem that arises is that a granted tenure does not always give rise to a right to exploration or extraction of resources. Therefore earlier this year on 18 February 2009, the Queensland Government released its long awaited policy dealing with conflicts with respect to overlapping tenements for UCG and CSG. The policy clarifies priority for access to resources with the aim of maximising opportunities to exploit production.


The Policy
Objectives
The policy is intended to give UCG pilot projects the chance to demonstrate the technology’s technical, environmental and commercial feasibility. In relation to each mineral development licence (‘MDL’) for the pilot projects, the underground resource rights rest solely with the pilot project, even though a petroleum tenure might cover part of or the whole of the particular MDL. When resource rights are eliminated from petroleum tenure, other rights will persist under that petroleum tenure.
The government expects that bringing the policy into effect may necessitate changes to legislation or certain licences being issued, where the holder of the petroleum tenure in question attempts to set up processing infrastructure on the MDL area.
The policy will permit the consideration of UCG technology, whilst endeavouring to minimise the impact on prospective investment in CSG production for liquefied natural gas and other purposes.


Pilot projects
The Queensland Government, through the Department of Mines and Energy, will adhere to the following policy position:
1.two (2)pilot projects (Linc Energy MDL 309 and Carbon Energy MDL 374) and a pilot project yet to receive MDL approval (Cougar Energy MDLA 385) can proceed;
2.the MDLs listed above with overlapping petroleum tenure have a preference right to the resource;
3.the area dealt with by the above MDLs will be excluded from future applications for petroleum tenure, except for applications for petroleum facilities licences made by the appropriate MDL holder, for the duration of the mining tenure until the end of the MDLs;
4.the area subject to Linc Energy’s MDLA 407 will not be included in any petroleum tenures granted until the Government has decided this application, which will be subject to certain conditions;
5.no additional UCG pilot projects will be permitted on public interest grounds while the three (3) projects listed above are in their pilot phases. The Minister for Mines and Energy may however approve further UCG pilot projects that can further show UCG technology’s effectiveness;
6.the Environmental Protection Agency (‘EPA’) will monitor and report on the UCG pilot projects in the pilot phase, including developing environmental management strategies and obligations;
7.a Government report will be prepared at the conclusion of the UCG pilot projects’ pilot phase in relation to the outcomes of these projects. The Government will then make a decision as to the future feasibility of Queensland’s UCG industry;
8.a scientific expert panel will be appointed to help prepare this Government report.
Industry Consultative Committee
An Industry Consultative Committee (‘the Committee’) will be appointed by the Minister for Mines and Energy. The Committee will consider and submit options to the Government to resolve disputes as to resources and technology.
In the event that the petroleum tenure holder has compensation issues because of MDLs being excluded from overlapping petroleum tenures, the Committee will be responsible for the compensation process. (It has been suggested that this compensation process might be similar to that established pursuant to the Mineral Resources (Peak Downs Mine) Amendment Act 2008 (‘the Peak Downs Amendment Act’)).
The Committee will also consider establishing a process for the grant of future CSG and UCG tenures, which could provide that:
1.a tenure application pursuant to the Petroleum and Gas (Production and Safety) Act 2004 (‘PAG Act’) for a CSG project will not be allowed over any area where a UCG tenure has previously been granted pursuant to the Mineral Resources Act 1989 (‘MRA’) without the prior consent of the MRA tenure holder;
2.a tenure application pursuant to the MRA for a UCG project will not be allowed over any area where a tenure has previously been granted for CSG under the PAG Act without the prior consent of the PAG Act tenure holder; and
3.an application to insert mineral ‘f’ to a MRA tenure will not be allowed unless the applicant is the holder of a ‘specified mineral exploration permit’ (‘EPS’) over the area, the subject of the application.
Tenure issues as at the date of the Government policy
Coal exploration tenure holders which are not subject to overlapping petroleum tenure will be entitled to:
1.select an interest in future UCG activity by applying for an EPS, being mineral ‘f’ as allowed in the MRA and within twelve (12) months of the policy; and
2.make an application for a MDL permitting UCG activity or surrender the EPS in question in relation to UCG within four (4) years of this selection, depending on the result of the Government report.
As to overlapping tenure between CSG tenements and MRA tenements held by persons intending to be engaged in future UCG activities:
1.the CSG tenure holder under the PAG Act will have priority in order to permit the CSG tenure to continue to production;
2.if the question of compensation is then raised, the question will be referred to the Committee in order to resolve the issues;
3.when a decision is made as to (i) and/or (ii) above, the Minister for Mines and Energy must advise the UCG, CSG and related industries of the Government’s policy as to determining co ordination or preference decisions listed in (i) and (ii).
Statutory provisions
It is envisaged that a ‘Restricted Area’ (‘RA’) pursuant to the MRA be implemented over the whole of Queensland as to the mineral ‘f’. Rights existing as to mineral ‘f’ are not intended to be affected. The MRA will be amended in this respect so RAs would be released, so that future grants of UCG tenure are bound by similar restrictions to CSG tenure grants.
Legislative amendments will be made as to compensation issues and area exclusions and will be similar to the statutory compensation application process established by the Peak Downs Amendment Act.


UCG pilot phase proposed monitoring and reporting process
Each UCG trial project will be:

1.thoroughly monitored by the EPA;
2.Appropriate environmental management strategies and requirements for bigger UCG operations will be thoroughly developed by the EPA;
3.Every UCG pilot proponent will prepare a comprehensive project report (‘Pilot Project Report’) of activities, impacts and decisions connected with the proposed UCG pilot projects, with this report to be provided within three months of the end of the trial project, but no later than June 2011;
4.The Minister for Mines and Energy, in consultation with the Deputy Premier, will establish a scientific expert panel to consider the Pilot Project Reports and to help prepare a Government report set out in (f) below;
5.A Government report will be prepared as to the future of Queensland UCG technology including analyses of the Pilot Project Reports, the costs and benefits of UCG for Queensland and advice on how UCG technology could continue on an environmentally sustainable basis, including any conclusions as to CSG and UCG technology interaction as to ‘buffer’ areas in the UCG tenure;
6.The Government report will be finalised not before December 2010 and not later than December 2011; and
7.The Government report will be submitted to Cabinet in 2011 or 2012 and in the event that the Government report makes adverse findings as to UCG technology, it is understood that further constraint or restriction of UCG activities might be recommended.
Ramifications of the Policy

The precise ramifications of the policy will not be known until all the relevant legislative amendments have been made.

However, the policy has the potential to allow both CSG producers and permitted UCG proponents to proceed with more confidence with their plans.











Andrew Bruton
Partner
Phone: 61 7 3004 3527
[email protected]










Alistair Adams
Solicitor
Phone: 61 7 3004 3580
[email protected]