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Energy & Resources Update

Energy & Resources Update focuses on issues relevant to the Australian energy, mining, oil and gas industries.

While the Australian Bureau of Agricultural and Resource Economics' latest annual review of the resources and energy sectors highlights some interesting growth statistics, on the flip side are some important issues that weigh heavily across the sector.

The Australian Competition and Consumer Commission's long-standing interest in the issue of vertical integration in the electricity industry has come to the fore, given the Owen Inquiry Report to the NSW Government and the government's response to its recommendations.

Contrary to what some commentators might believe, the World Trade Organization can accommodate measures focussed on protecting the environment. But it does impose important disciplines on those measures when they impact on international trade.

In spite of Australia's strength as a resource exporter, there are clear signs that exploration is declining, and this is something that will significantly impact the sector in the short, medium and long term.

China's draft Energy Law and first White Paper on energy, released at the end of 2007, are an attempt to address the inadequacy of current energy policies and strategies to support the country's strong energy demands, economic growth potential and environmental responsibilities.

Following an in principle agreement by the Council of Australian Governments on 26 March 2008, a water management plan for the Murray-Darling Basin could be one step closer.

For those operating in the energy and resources sector, the new Division 250 of the Tax Act has important implications for both existing and new contracts, particularly when dealing with Government entities and non-residents.

Click here to print out all of the articles in this edition

Previous issues:

On 1 July 2007 Queensland will introduce full retail competition for electricity. We outline the practical implications of this change for customers and retailers, and the key legal issues.

The Queensland, South Australian and Western Australian governments have each announced renewable energy targets in the past two months. We provide an insight into the measures proposed and the various targets that have been set.

The Energy Reform Implementation Group's, final report Energy Reform: The Way Forward for Australia January 2007 was released on 13 April 2007. While the report asserts that Australia's energy markets are world-leading, it suggests five key areas for improvements.

The hot topic of emissions trading is squarely in the spotlight as States ponder establishing their own emissions trading scheme. Can constitutional powers be used, and what challenges might the States face from industry and the law in bringing about such a scheme?

The first tranche of reforms aimed at strengthening the efficiency and governance of Australia's gas pipelines, and increasing the penetration of natural gas in Australia, are due to commence on 1 July 2007. The new National Gas Law and supplementary National Gas Rules, the role of regulators such as the AEMC and potential long-term benefits for the gas industry are in the spotlight.

An illuminating look at current political thinking on nuclear policy, outlining the ALP uranium policy in the context of state positions and the Howard Government's commitment in this area. The creation of a uranium industry is complex and the debate at State and Federal level will continue to gain momentum.

The Australian Department of Environment and Water is exercising new powers to audit projects with environmental implications, in response to earlier changes to the Environment Protection and Biodiversity Conservation Act. Auditing procedures and compliance issues will impact at least 10% of projects with environmental approvals across all industries.

The Energy Reform Implementation Group, established by the Council of Australian Governments, released discussion papers that foreshadow substantial changes to the National Energy Market last Friday. This special edition of Utilities Update explores some of the important issues discussed in the report.
The introduction of the Wholesale Electricity Market in September was part of a number of significant reforms, which have occurred since 2004, in order to bring about greater energy competition in Western Australia.
The NSW State Government has passed legislation, which will have a major impact on the approval processes for the development of new gas pipelines in New South Wales and energy projects such as natural gas fired power stations reliant on the construction of lateral pipelines for their operation.
As most parts of the country remain parched in the clutches of one of the most severe droughts on record, there is at least no shortage of water reforms from the Commonwealth and State Governments.

The Federal Court of Australia recently ordered ASX-listed company Green Pacific Energy Limited, and its subsidiary Green Pacific Energy Capital Pty Ltd, to be wound up following an application made by the Australian Securities and Investments Commission. The case, ASIC v Green Pacific Energy Limited and Ors [2006] FCA 1254, shows the need for good corporate governance in the management and administration of a company's affairs (whether listed or not).

The Victorian Government has set an ambitious target of increasing the share of renewable energy in Victoria by 10 percent by 2016, which is aimed at facilitating additional wind power generation and other renewable energy projects in the State.
A recent case (AGL Victoria Ltd v SPI Networks (Gas) Pty Ltd & Anor [2006] VSCA 173), involving unaccounted for gas flowing through an unmetered valve, provides an illustration of the extent to which the determination of an expert, used to resolve an issue between the parties under their contract, will be open to subsequent review by the courts.

On 19 September 2006 his Honour Justice Murray Wilcox handed down the decision in Bennell v State of Western Australia [2006] FCA 1243 ('the Noongar Case'). The case focussed on the connection of the Noongar people's interests to 'country' that included metropolitan Perth and more generally in south-west Western Australia.

Energy and resources projects face a range of governmental risks, which are often erroneously described as sovereign risk. Two recent cases of adverse governmental impacts help distinguish different types of governmental risk for the resources and energy sector.
Uranium mining has always been controversial but the lengthening shadow of climate change has reignited the debate in this country. The following articles summarise recent political, legislative and corporate activities and developments across the country.

The Queensland Government has recently seen fit to declare war on the 'electric ant' (otherwise known as 'Wasmannia auropunctata (Roger)').

The Prime Minister recently announced that he would like a 'full blooded debate' on the merits of using nuclear power in Australia, bringing heat back to bear on issues such as carbon pricing, emissions trading, and the role of renewables, nuclear power and clean coal technology in addressing climate change and security of energy supply.

Improvements to the administrative efficiency, effectiveness and integrity of the MRET scheme are proposed by the Renewable Energy (Electricity) Amendment Bill 2006 (Cth) (Bill), which is presently before the House of Representatives.

A recent case decision is useful in framing the boundaries of the duty of care owed by a utility to its customers.

The Federal Court has recently dismissed an appeal from a renewable power station owner who sought to argue that a lower renewable electricity Baseline should have been applied where the station experienced numerous technical and other difficulties during its commissioning phase.

A case from the English High Court demonstrates that utility companies owe a duty of care to each other where their networks/installations share the same general area, and that substantial financial penalties may be incurred (for the cost of rectifying damage) where the negligent act of one utility causes damage as a consequence of interfering with the infrastructure of another utility.

Chinese companies remain active in Western Australia's iron ore sector, investing in new projects and negotiating lucrative equity stakes and off-take arrangements.
Small participating interest holders in LNG projects are exposed to a number of risks in addition to those shared by all participants.
The December 2005 declaration of transportation and connection services provided by Sydney Water Corporation's metropolitan sewerage network, under Part IIIA of the Trade Practices Act, has fundamentally altered the commercial context of negotiations between water and sewerage infrastructure owners and their customers.
International players, predominantly from the US, have increasingly focused on the Australian oil and gas industry over the last few years, looking to capitalise on the available acreage and the relative ease of raising funds.
An exposure draft of new Victorian Aboriginal Cultural Heritage legislation (the Bill) demonstrates that Victoria has done more than glance over the fence at its northern neighbours in developing its approach.

The phasing in of competition in Tasmania's electricity market will take four years.



© Minter Ellison 2008

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