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Permit Conditions and Administration

Petroleum Act 1998

The aim of this guideline is to assist industry in managing an exploration permit granted or renewed under the Petroleum Act 1998 (the Act).

Permit Conditions

The conditions applying to a permit granted under Division 2 (initial grant) and Division 3 (renewal) may include, but are not limited to the following requirements:

  • Obtaining and maintaining an insurance policy as directed by the Minister.
  • Holding a rehabilitation bond, for payment of an amount specified by the Minister, to undertake any rehabilitation works required as a result of petroleum exploration operations.
  • Submitting an annual report and paying an annual fee.

Permit holders are expected to maintain permits in good standing and to ensure that all obligations are met under the legislation. Permit conditions, including any special conditions, are to be met within the required time frames.

The Act allows permit holders to apply to the Minister for:

  • Variation of the permit conditions (s102 and 103).
  • Variation of the permit conditions upon renewal, consolidation or transfer (s104).
  • Suspension of permit conditions and extension of permit term (s105 and 106).
  • Consent to surrender a permit (s111).

In cases of non-compliance with the Act or permit conditions, the Minister may decide to cancel the permit (s113).

Work Program Commitments

The permit holder is required to undertake, within the permit boundary, each component of the work program in the designated year or earlier. Failure to do so may result in cancellation of the permit subject to section 113 of the Act.

Variation of Conditions

The holder of a permit may request the Minister to vary any condition imposed on the permit. This includes the work program conditions.  Once a permit year has been entered, the work program becomes guaranteed and cannot be varied.

The Act requires that key objects of the work program are achieved to the maximum extent possible.  Section 27(4) of the Act requires that extraordinary circumstances must exist for the Minister to vary a key object of the work program in the grant term of a permit.  If a permit has been renewed, extraordinary circumstances do not have to be demonstrated.

Commercial circumstances that are common risks in the industry are not considered to be extraordinary circumstances and therefore would not normally be considered sufficient grounds for variation of an approved work program. These may include:

  • difficulty in attracting a farm-in or joint venture partner
  • failure to raise funding to undertake the work program
  • disappointing exploration results
  • poor quality survey data, resulting in failure to prove up a prospect for drilling
  • avoidable delays in contracting a rig or seismic crew.

A request for variation may be made on the grounds of:

  • an event or effect that has caused failure to complete a component of the work program in the permit year; and
  • cannot be reasonably anticipated or controlled via experience or care; or
  • substantial and compelling technical reasons that justify the variation

Wherever possible a variation should result in a work program that is equivalent or superior to the approved work program.

An application for variation should be made on the requisite application form, and include the fee required by Regulation 34 of the Petroleum Regulations 2011.

An application for variation of the work program must be submitted at least 90 days prior to entering the permit year to which the request relates; together with a submission that:

  1. outlines the reasons why the current work program cannot be carried out and a variation is requested; and
  2. contains substantiating documentation (letters, emails, technical data and plans) which demonstrate why the accepted work program has not been achieved; and
  3. explains the extraordinary circumstances that justify variation of the work program (s27) — if the variation request relates to the key objects of the workprogram and the permit has not been renewed;and
  4. explains why these have not been achieved to the maximum extent practicable (s27 and 33) — if the variation request relates to key objects of the work program; and
  5. explains how the proposed variation will improve the overall exploration strategy, and progress the assessment of the petroleum potential of the area; and
  6. advises whether the application is to be accompanied by other applications under the Petroleum Act 1998, that is:
    a. Renewal, Consolidation or Transfer of Authority (s104).
    b. Request for Suspension of a Condition/Extension of Term of Permit (s105 and 106).

Each application for variation will be assessed on a case by case basis with consideration given to the:

  • results of the exploration work undertaken to date; and
  • overall exploration strategy; and
  • technical basis for the variation; and
  • likelihood of the proposed variation to significantly progress the assessment of the petroleum potential of the permit area; and
  • permit holder’s performance on this permit and other Victorian petroleum authorities.

Suspension of the Permit Conditions and Extension of Permit Term

If granted, a suspension will delay the end date of the current permit year. It does not affect the ability of the permit holder to undertake work activities during the suspension period.

When applying for a suspension, the permit holder may also apply for an extension of the permit term for the same period of months as the suspension of conditions. An extension of the permit term has the effect of deferring the end date of each remaining year in the permit term.

An application for suspension of conditions and extension of term must be submitted at least 90 days prior to the expiry of the permit year to which the request relates, include the fee required by Regulation 34 of the Petroleum Regulations 2011; and include a submission that:

1. outlines the circumstances that have caused the unavoidable delay in completing the work in the relevant permit year on time; and

2. is accompanied by substantiating documentation (e.g. letters or emails, technical data, plans etc) that demonstrates both the unavoidable delay and the permit holder’s best efforts to meet the work commitment in the required time frame; and

3. establishes a realistic and achievable time frame for completion of the work commitment; and

4. explains how the work will be completed within the requested time frame by providing evidence of contracts or other documentation that demonstrates that the work will be undertaken in the proposed suspension/extension period.

Commercial circumstances that are common risks in the industry are not considered to be extraordinary circumstances and therefore would not normally be considered sufficient grounds for variation of an approved work program. These may include:

  • difficulty in attracting a farm-in or joint venture partner
  • disappointing exploration results
  • poor quality data
  • failure to prove up a prospect for drilling
  • failure to raise funding to undertake the work program
  • avoidable delays in contracting a rig or seismic crew.

However, a suspension of conditions and extension of the permit term may be considered if further exploration surveys or activities are required to mature a prospect in order to meet a drilling commitment.

Permit Cancellation

Failure to undertake each component of the work program in the designated year or earlier may result in cancellation of the permit.

The full provisions for cancellation are outlined in sections 113, 114 and 115 of the Act.

Grounds for cancellation of a permit may include:

  • Non-compliance with the work program that was to have been carried out under the permit; or
  • Non-compliance with the conditions that apply to the permit or any of the provisions of the Act; or
  • Failure of the permit holder to maintain any insurance policy it is required to maintain under the Act or to lodge any bond required under the Act; or
  • An unexpected significant adverse impact on the environment caused by a petroleum operation; or
  • The permit holder no longer has the funds to carry out its work program; or
  • The permit holder has not paid any amount that is payable under the Act within 90 days after it was due and within 30 days after receiving a written notice of the Minister’s power to cancel.

Permit Surrender

When a permit holder applies to the Minister for consent to surrender, the Minister will consider the application in accordance with section 111 of the Act, before deciding on the application.

The Minister may consent to surrender the permit provided he is satisfied that the permit holder has complied with all the requirements of the Act and the conditions of the permit.

However, if the permit holder can satisfactorily demonstrate that the failure to comply with the Act or conditions of the permit was a result of one or more events beyond the permit holder’s control, the Minister may still consent to the surrender of the permit.

The Minister’s consent to surrender takes effect in the permit year in which the application is made.

When considering giving consent to the surrender of a permit, compliance with the relevant requirements of the Act and permit conditions will be taken into account, including the:

  • status of the permit (this includes the submission of all reports required by the permit conditions and regulations as well as the payment of all annual fees and monies due); and
  • completion of all rehabilitation requirements, such as:
    • ensuring that the permit area is cleared of debris resulting from operations; and
    • wells/drill holes have been plugged or closed; and
    • all required actions have been taken to conserve and protect the natural resources of the area and make good any damage to the surface of the land.

Annual and Final Reports

Subject to the provisions of section 179(1) and Regulation 19, a permit holder is required to lodge:

  • an annual report - due 28 days after the end of the financial year to which it relates;
  • a final report - due 28 days after a permit ceases to have effect.

A report must contain details of:

  • the petroleum operation activities (if any); and
  • conclusions derived from petroleum exploration activities; and
  • reports and studies relating to those activities; and
  • details of the expenditure by the permit holder on each activity undertaken during the year; and
  • the date the report was completed; and
  • the name of the person who prepared the report.