Australian Energy and Resources Update 1 Briefing note September 2015 Australian Energy and Resources Update Welcome to our monthly update on Australian energy and resources-related legal developments. Highlights this month include the substantial changes to the Federal Government Ministry in the wake of Malcolm Turnbull's appointment as Prime Minister and the release of long – awaited safeguard rules under the Direct Action Plan. This update is intended as a snapshot and not specific legal advice (nor an exhaustive coverage of all relevant issues). If you would like further information on any specific issue, please let us know. New Federal Ministry replacing the long-serving Industry Minister, Ian Macfarlane. announced The express inclusion of On 20 September 2015, the new innovation and science reflects Prime Minister of Australia, Malcolm Prime Minister Turnbull's focus Key issues Turnbull, announced a number of on innovation as a key New Federal Ministry changes to the Federal Ministry. The component of reshaping the announced changes followed his successful Australian economy. Australia's Draft rules on safeguard challenge to Tony Abbott for the youngest Federal parliamentarian, mechanism for the Emissions leadership of the Liberal Party and Wyatt Roy, has been appointed Reduction Fund released subsequent swearing in as Australia's as Assistant Minister for 29th Prime Minister on Innovation Queensland's "Innovative Resources Tenures 15 September 2015. Mr Turnbull was Former Assistant Treasurer Josh Framework" released for formerly the Minister for Frydenberg has been appointed comment Communications. the Minister for Resources, NOPSEMA's environmental The key points for the energy and Energy and Northern Australia. management process resources sector are as follows: This position had no immediate predecessor in the previous endorsed after 12 months of Warren Truss, Leader of the Abbott Ministry, although Ian operation National Party, remains as Macfarlane had responsibility for NSW Swamp Offset Policy for Minister for Infrastructure and energy and resources matters longwall coal applied to new Regional Development and National Party deputy leader, mine expansion Deputy Prime Minister Barnaby Joyce remains the Christopher Pyne has been Minister for Agriculture and, as appointed the Minister for part of a renewed agreement Industry, Innovation and Science, between the Liberal and National 2 Australian Energy and Resources Update Parties, is now also be emissions below certain baseline baseline will be established using responsible for Water Resources. levels. Public comment on the certain benchmark emissions Water was previously dealt with documents closed in mid-September. Baselines for electricity sector: A under the Environment portfolio The key elements of the proposed separate approach will apply to Greg Hunt retains responsibility safeguard mechanism are as follows: grid-connected electricity for Environment but, as noted generators including the National above, without responsibility for Commencement: The safeguard Electricity Market. A sector Water mechanism will commence baseline of 198 million tonnes of Scott Morrison is the new Federal operation on 1 July 2016 carbon dioxide equivalence will Treasurer, taking over from Joe Coverage: Large facilities with apply to all grid-connected Hockey who announced his direct emissions of more than electricity generators. The Clean retirement from the Parliament 100,000 tonnes of carbon dioxide Energy Regulator will publish a soon after the ministerial equivalence will be required to statement on its website if this reshuffle. keep their net emissions at or baseline is exceeded. Individual The full list of Ministers can be below certain baseline levels. baselines will also apply, accessed here: The entity with operational calculated on the basis of the http://www.dpmc.gov.au/sites/default/f control of the facility will be facility's highest annual iles/files/ministry_List_21_Sept.pdf. responsible for meeting these emissions between 2009-10 and requirements 2013-14, if the sector baseline no Draft rules on safeguard Baselines for existing facilities: longer applies mechanism for the Baselines for existing facilities Flexible compliance will be set using historical data arrangements: Entities may seek Emissions Reduction which reflects the highest level of to avail themselves of certain Fund released reported emissions over the flexibilities under the safeguard The Federal Government's Direct period 2009-2010 to 2013-2014 mechanism including the use of Action Plan adopts a carrot and stick and adjusted to accommodate ACCUs purchased through the approach to achieving its objectives to (amongst other things) facility Emissions Reduction Fund to cut greenhouse gas emissions to 5% expansions or emissions offset emissions (given emissions below 2000 levels by 2020 and 26- variability associated with are based on "net" rather than 28% below 2005 levels by 2020 – the extraction of the natural resource "gross" numbers); exemptions if carrot being the purchasing and or reserve emissions are exceeded due to crediting of Australian Carbon Credit Baselines for new investments: (amongst other things) a natural Units (ACCUs) through the Emissions Baselines for new investments disaster or criminal activity; and Reduction Fund (details of which can will depend upon whether the multi-year monitoring whereby a be found in our September update new facility is already underway facility could exceed the baseline here and our March update here) and (and therefore limited scope to in one year but avoid a breach if the stick being the "safeguard change design) or entirely new. If its average emissions over 3 mechanism". the facility exceeds the years were below the baseline. designated large facility threshold Administration: The Clean On 2 September 2015, the (ie 100,000 tonnes of carbon Energy Regulator will administer Department of Environment released dioxide equivalence) before 1 the safeguard mechanism. The a number of draft legislative July 2020 the baseline will reflect operation of the Emissions instruments and explanatory the audited emissions forecast Reduction Fund including the statements relating to the safeguard provided by the facility operator safeguard mechanism will be mechanism. The mechanism aims to with a true-up after the forecast reviewed by the Government in "safeguard" the emissions reductions period based on actual 2017 / 2018 to ensure its ongoing achieved through the Emissions performance. If the facility does effectiveness. Reduction Fund by requiring large not exceed the threshold, the businesses to keep their net Australian Energy and Resources Update 3 More information about the Emissions The key changes proposed in the NOPSEMA's Reduction Fund and the safeguard paper are related to the exploration mechanism can be found here: phase of resource projects. The environmental http://www.environment.gov.au/climat paper considers that an effective and management process e-change/emissions-reduction- targeted exploration effort will lead to endorsed after 12 months fund/about/safeguard- expansion in the geological mechanism?utm_source=Clean+Ener knowledge of the state and in some of operation gy+Regulator+- instances a profitable resource The process used by the National +Update&utm_campaign=2eec4586a operation and the associated Offshore Petroleum Safety and 6- economic benefits. Environmental Management Authority Consultation_on_safeguard_legislativ (NOPSEMA) to assess and authorise In the interests of promoting certainty, e_instruments&utm_medium=email& the environmental impacts of offshore the paper proposes that resource utm_term=0_56e080d9b7- petroleum and greenhouse gas exploration authorities (or titles) be 2eec4586a6-51741477. activities has been endorsed by the capped, with default maximum terms Federal Environment Minister. Queensland's "Innovative of: In February 2014, NOPSEMA 8 years for minerals Resources Tenures became the sole assessor of the Framework" released for 10 years for coal; and environmental impacts associated comment 12 years for petroleum, with petroleum and greenhouse gas geothermal and greenhouse gas. activities in Australian waters On 4 September 2015, the Other key proposals include: following a strategic environmental Queensland Minister for State impact assessment and approval introducing uniform tenure types Development and Minister for Natural process carried out under the across the different Acts Resources and Mines, Dr Anthony Environment Protection and Lynham, released a policy paper removing the ability to renew the Biodiversity Conservation Act 1999 outlining proposals for modernising term of a resource exploration (Cth). Queensland's resources tenure authority (other than where system. The Innovative Resources proponents have applied for less A condition of NOPSEMA's Tenures Framework is the most than the maximum term) designation as sole regulator was the recent development in a reform removing the requirement for periodic independent review of project that started under the Labor prescriptive work programs and NOPSEMA's compliance with its Government six years ago which is instead requiring proponents to approved environmental management expected to culminate in legislation provide a work plan which details authorisation process. The first being introduced in the second half of the proposed exploration review was to take place after 12 2016. Submissions on the policy objective and geological model