Refusal of exploration permits considered by Queensland Supreme Court

A recent Queensland Supreme Court decision has examined the rejection of an application for an exploration permit under the MRA on the basis that the targeted resource is actually an unconventional petroleum resource.

The Queensland Supreme Court was asked, by way of judicial review, to consider whether the decision to refuse a series of applications for exploration permits under the Mineral Resources Act 1989 (Qld) (MRA), was affected by an error of law.

The central issue in review was whether the targeted resource was a mineral within the ambit of the MRA, or petroleum under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (P&G Act). The applications for exploration permits were essentially refused because officers of the Department of Natural Resources and Mines (DNRM) considered that the targeted resource was an unconventional petroleum resource and not a mineral under the MRA.

The facts
Between April and May 2014, a number of related entities within the Queensland Oil Shale Group (applicants) made 92 applications for exploration permits under the MRA. Each application was refused in September 2014 by the DNRM. The applications were refused on the basis that the applicants had failed to secure approval of the work programs for the applications, as required by s 137 of the MRA.

The work programs had not been approved because DNRM considered that the applicants were not targeting a ‘mineral’ as defined by s 6 of the MRA. Relevantly, s 6 of the MRA includes oil shale in the definition of mineral. However, on DNRM’s technical assessment of the work program, it found that the exploration rationale, target stratigraphy and proposed drilling techniques were clearly aimed at exploration for unconventional petroleum resources and not mineral exploration for oil shale.

The applicants brought proceedings for judicial review of DNRM’s decision to reject the applications, primarily alleging that the decision maker had taken into account an irrelevant consideration in makings its findings about the work program. It was said that the issue of whether it could be demonstrated that oil shale existed was an irrelevant consideration for the purposes of a grant of an exploration permit under the MRA.

The key provisions
As stated, s 6 of the MRA includes ‘oil shale’ in the definition of mineral and contains a note as follows – ‘For what is oil shale, see s 318AD’.

In addition, the definition of mineral also includes in s 6(2)(f):

a product that may be extracted or produced by an underground gasification process for coal or oil shale (mineral (f)) and another product that may result from the carrying out of the process (also mineral (f));
Examples of underground gasification processes –
combustion, consumption, heating, leaching and reaction
‘Oil shale’ is defined in s 318AD of the MRA as ‘shale or other rock (other than coal from which a gasification or retorting product, as defined in the (P&G Act), may be extracted or produced.’

In turn, s 10(1)(c) of the P&G Act defines ‘petroleum’ to include:

‘a fluid that–
is extracted or produced from coal or oil shale by a chemical or thermal process or that is a by-product of that process and consists of, or includes, hydrocarbons.’
Example of a fluid that is petroleum under paragraph (c)–
mineral (f)’

Finally, s 10(2) of the P&G Act also provides that a substance mentioned in s 10(1)(c) is a gasification or retorting product. The applicants drew attention to definition of oil shale in the MRA and the words ‘from which a gasification or retorting product as defined in the P&G Act, may be extracted or produced’. Essentially, the applicants argued that the substance mentioned in s 10(1)(c) of the P&G Act was imported into the definition of ‘mineral’ in the MRA. If the proposition were accepted, it would follow that a finding that the applicants were not targeting a mineral would be erroneous.

However, the Minister for Natural Resources and Mines (respondent) alternatively drew attention to the reference in the definition of ‘mineral (f)’ to a product that may be extracted or produced by an ‘underground gasification process’ for oil shale. The respondent compared that definition with the reference in s 10(1)(c) of the P&G Act to a fluid that is extracted or produced from oil shale by a ‘chemical or thermal process’. The respondent also drew attention to the fact that s 318AD of the MRA is contained in a chapter of the MRA headed ‘Provisions for coal seam gas’.

Consideration
At the outset, North J found that the P&G Act and the MRA do indeed contain contrary indications as to whether the definition of oil shale in s 318AD is intended to be limited to chapter 8 of the MRA, or is alternatively intended to be of broader application throughout the Act.

Specifically, the applicants drew attention to the note under the term ‘oil shale’ in s 6 of the MRA, namely to ‘see s 318AD’. Moreover, North J acknowledged the ambiguity created by the example of ‘mineral (f)’ under s 10(1)(c) of the P&G Act, this clearly being a reference to ‘mineral (f)’ in the MRA. Therefore, the court was required to resolve the apparent inconsistency between the provisions.

The court referred to the objectives of the MRA and of chapter 8, relevantly to:

‘provide for its operation consistent with the objectives of the Act in parallel with the objectives of the PGA (P&G Act) avoiding wherever possible overlap or conflict’.2

Accordingly, the court found that the definition of oil shale in s 318AD of the MRA draws upon the provisions of the P&G Act only for the purposes of coal seam gas exploration and mining.

In contrast, it was found that where a mining tenement:

‘is concerned with coal or oil shale, it is the MRA which informs the rights, interests and obligations including the meaning or understanding of the mineral called ‘mineral (f).’

The court found that to adopt a construction of the MRA that draws upon the P&G Act to ascertain the meaning of ‘mineral (f)’ would lead to potential incoherence, by introducing into the concept of ‘mineral (f)’, fluids or substances containing hydrocarbons more consistently covered by the P&G Act.

As a result of these findings, DNRM’s decision was not affected by an error of law.

The applicants also alleged that it was not necessary for them to establish the likely existence of a mineral or minerals as a prerequisite to the grant of an exploration permit. The court referred to guidelines issued under the MRA which spell out the importance of an applicant indicating which mineral or minerals are being targeted, and the reasons by which the applicant considers that it might find the minerals at the subject location.

The court also referred to the additional objectives of the MRA, namely to minimise land use conflict and to encourage environmental responsibility and responsible land care management. In recognising that exploration activities might cause impacts upon other land users, the court observed that it would be a relevant consideration that such potential disruption might be fruitless, for example, if no minerals were found. The court also suggested that it was a relevant consideration that the decision maker be satisfied that the applicants are targeting minerals within the meaning of the MRA, and with some prospect of success. As a result, the applications for judicial review were dismissed.

Implications
As a result of this decision, explorers targeting oil shale will need to ensure that their applications and work programs technically demonstrate that the target mineral is oil shale, as defined by s 6 of the MRA, and as further guided by this decision of the Supreme Court. The same considerations may also apply where the explorer is applying for a coal exploration permit.

In addition, similar considerations may apply where the explorer is targeting minerals in the form of slab rock for construction or monumental circumstances, as rock is not otherwise included in the definition of mineral in the MRA.

References


1 Qld Cooper Shale Pty Ltd & Qld Cooper Energy Pty Ltd & Qld Shale Gas Pty Ltd v Minister for Natural Resources and Mines [2015] QSC 360.
2 Ibid 18
.

This article was republished with permission from Carter Newell.

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