http://www.aar.com.au/pubs/res/csg.htmThe essential features of...

http://www.aar.com.au/pubs/res/csg.htm


The essential features of the new regime are as follows:

Rights under petroleum leases. Rights to CSG will generally be granted by way of petroleum leases. A petroleum lease may 'overlap' an existing coal mining lease.
Rights to CSG for mining leases for coal. Provided there is no pre-existing petroleum lease over the area, all holders of a mining lease for coal will have the right to commercially dispose of, or extract CSG released by or in connection with mining, including for safety purposes.
Coal miners to demonstrate use of hydrocarbon. The Queensland Minister for Natural Resources and Mines will be able to suspend or remove the right to the mineral hydrocarbon from any mining lease, in circumstances where the Minister considers that the mining lease holder is not effectively extracting or utilising the CSG resources.
5-Year Mineral Development Plan. A '5-Year Mineral Development Plan' will now be required for all applications for mining leases with the mineral hydrocarbon and all mining lease applications where there is an overlying petroleum tenure. Holders of an overlapping petroleum lease will be able to extract gas outside areas to be mined in the 5-year plan.
Co-operation Agreements. A Co-operation Agreement must be entered into between parties with overlapping tenures, to define the access arrangements and operational interaction procedures of the two overlapping tenure holders (eg information exchange, well location, timing and completion issues). If the parties cannot reach agreement, there will be mediation and/or arbitration procedures (by the Land and Resources Tribunal) to resolve the matter.
Mineable coal seams. Under the new system, petroleum tenure holders whose actions may jeopardise the future mineability of coal seams will need to comply with certain regulations and protocols. The regulations will apply to defined 'mineable coal seams' and relate to information exchange, drill hole location and access issues. The definitions will be Basin specific and qualified by seam thickness, depth to seam and seam type.
Venting and flaring of CSG. The new regime will require that a tenure holder must demonstrate under its Mineral Development Plan or approved Development Plan that the gas cannot be commercially utilised if it is intended to vent or flare the gas, to prevent indiscriminate venting and flaring of CSG.

Key differences from previous proposed regime

The primary differences between the previous proposed regime and the current one are detailed below:

No additional protection for existing mining rights. Under the previous proposed regime, pre-existing mining leases (ie. mining lease applications and granted mining leases pre 23 October 1996) were to be given CSG rights to the 'centre of the earth'.
No automatic priorities. The previous discussion paper created the concept of 'coal CSG areas', areas in which coal miners were to be given priority in terms of CSG rights. This concept has been removed under the new regime.
In addition, the previous system required subsequent tenure holders to seek approval and access from existing tenure holders where their area of interest overlapped. The new regime greatly diminishes these rules of priority and access. For example, if there is no subsisting petroleum tenure, a mining lease applicant requesting rights to hydrocarbon over an area must wait until advertisements for expressions of interest for a petroleum lease over the area are made. The competing petroleum lease applications will then be assessed against certain criteria. This is in stark contrast to the previous regime where, if there was no conflicting prior title, a mining lease would be granted to the 'centre of the earth' without reference to the rights of any other interested parties.
Hydrocarbon not automatically granted. Although the option exists for mining leases to incorporate rights to hydrocarbon, the discussion paper clearly states that rights to the mineral 'hydrocarbon' will not be routinely granted for a mining lease for coal. The Minister must be convinced that CSG resources exist in commercially viable quantities and that production of the mineral hydrocarbon within the mining lease is planned to an acceptable level and has an appropriate time of commencement.
Uncertainties

The proposed new regime raises a number of questions as to how it will apply in practice. These include:

Importance of including 'hydrocarbon' in mining lease. It is clear that it may be extremely important for a mining lease holder to apply for the mineral 'hydrocarbon' to be added to their mining lease if they wish to secure rights to all CSG within the boundaries of the lease. However, as indicated, there are a number of initial hurdles to overcome.
Scope of Mineral Development Plans. There may be some concern for coal miners that the scope and length of their Mineral Development Plans may not adequately protect their mining operations.
The impact on native title. The Department of Natural Resources and Mines has suggested that the proposed CSG regime will not provide any greater exposure for tenure holders in relation to native title than that under the normal tenure process outside the regime.
However, it would seem that there is no intention to support this argument in the legislation itself. Therefore, there is every possibility that this issue will eventually be tested in the courts.
Tribunal rewriting agreements. The regime intends that the Land and Resources Tribunal will be involved in resolving parties' disputes if a commercial agreement cannot be reached on access, information exchange or other issues. Although the Department foresees the Tribunal being assisted by those with appropriate technical and commercial expertise, this would appear to be an onerous and difficult task. Until a number of such Co-operation Agreements are in the marketplace, there is a degree of uncertainty as to the terms the Tribunal might impose.
Incentives. The discussion paper flags that parties may be given 'incentives' (perhaps by way of royalty reduction) for entering co-operative arrangements, but does not discuss the issue in any detail. Obviously this will be a material issue.
Unitisation. The discussion paper does not deal with the issue of adjoining mining leases and petroleum leases draining each other's CSG resources or what 'unitisation' arrangements may need to be put in place.