Part 6Production

Part 6—Production 34—Production licences (1) There will be 4 categories of production licence: (a) a petroleum production licence; (b) a geothermal production licence; (c) a gas storage licence; (d) a regulated substance production licence. (2) A petroleum production licence authorises, subject to its terms— (a) operations for the recovery of petroleum or some other regulated substance from the ground including— (i) operations involving the injection of petroleum or another substance into a natural reservoir for the recovery (or enhanced recovery) of petroleum or another regulated substance; and (ii) if the licence so provides—the extraction of petroleum or another regulated substance by an artificial means such as in situ gasification or the techniques used to recover coal seam methane; (b) operations for the processing of regulated substances; (c) operations for the storage or withdrawal of petroleum or some other regulated substance for the prudent supply or delivery of the petroleum or other regulated substance to the market. (3) A geothermal production licence authorises, subject to its terms, operations for the extraction or release of geothermal energy. (4) A gas storage licence authorises, subject to its terms— (a) operations for the use of a natural reservoir for the storage of a regulated substance; and (b) operations for the withdrawal of that substance from a natural reservoir. (4a) A regulated substance production licence authorises, subject to its terms, operations of a kind prescribed by the regulations associated with the production of a regulated substance. (5) A production licence also authorises (subject to its terms) the licensee to carry out other regulated activities within the licence area. 35—Grant of production licence (1) Subject to this Act, a person is, on application, entitled to the grant of a production licence for the production of a regulated resource of a particular kind if— (a) a regulated resource exists in the area for which the production licence is to be granted; and (b) the person holds, or held at the time of the application for the production licence— (i) an exploration licence or a retention licence over the area for which the production licence is to be granted; or (ii) a mineral tenement under the Mining Act 1971 over the area for which the production licence is to be granted; and (c) — (i) in a case where paragraph (b)(i) applies—the exploration licence authorised exploration for a regulated resource of the relevant kind or the retention licence was granted for a regulated resource of the relevant kind; (ii) in a case where paragraph (b)(ii) applies—the mineral tenement authorised operations for exploration for or the recovery of coal and the production licence is to be granted for in situ gasification or coal seam methane production (and other related activities as the Minister considers appropriate); and (d) production is currently commercially feasible or is more likely than not to become commercially feasible within the next 24 months. (2) If the holder of an exploration or retention licence is in default under the terms of the licence, the Minister may decline to grant a production licence until the default is remedied. (3) If— (a) the Minister is satisfied that— (i) a regulated resource exists in a particular area; and (ii) production is currently commercially feasible or is more likely than not to become commercially feasible within the next 24 months; but (b) there is no person who is currently entitled to the grant of a production licence under subsection (1), the Minister may call for tenders for the grant of a production licence and grant a production licence to the applicant who submits the successful tender. (3a) Subsection (3) does not apply if the Minister has entered into a safety net agreement under section 94 in relation to a production licence in respect of a regulated resource in the particular area referred to in subsection (3)(a)(i). (4) Subsections (1)(b) and (c) do not apply if the application is for a gas storage licence. (5) If a person applies for a gas storage licence that is within the area of an existing production licence (the first application), the Minister must— (a) as soon as practicable after receiving the first application, give written notice of the application to the holder of the existing production licence; and (b) if the holder of the existing production licence applies for a gas storage licence within the area of their licence within a period (which must be at least 6 months) specified by the Minister in the notice given under paragraph (a)—consider the application made by the holder of the existing production licence before considering the first application. 36—Power to require holder of exploration licence or retention licence to apply for production licence (1) The Minister may, after consultation with the holder of an exploration licence or a retention licence, give a written notice to the holder stating that— (a) production of a regulated resource is, in the Minister's opinion, currently commercially feasible within the whole or a specified part of the licence area; and (b) the holder of the licence should apply for a production licence of the relevant category for the relevant area within a period (which must be at least 6 months) stated in the notice. (2) If the holder of the licence does not apply for a production licence for the relevant area within the time stipulated in the notice, the Minister may— (a) excise the relevant area from the exploration or retention licence; and (b) call for tenders for the grant a production licence for the relevant area; and (c) grant a production licence to the applicant who submits the successful tender. 37—Area of production licence (1) The area of a petroleum production licence or regulated substance production licence must not exceed either of the following limits: (a) twice the area under which (according to a reasonable estimate at the time of granting the licence) the discovery is more likely than not to extend; (b) 100 km2. (2) The area of a geothermal production licence or gas storage licence must not exceed 1 000 km2. 38—Work program to be carried out by production licensee (1) A production licence may include a condition requiring the licensee to carry out work— (a) for the development of the licence area; and (b) for the production of regulated resources, in accordance with a work program approved by the Minister. (2) If a production licence includes such a condition, a proposed work program must be submitted for the Minister's approval from time to time as required under the relevant licence condition. (3) The Minister may approve a proposed work program with or without addition or variation. (4) The Minister may, on application by the licensee, vary an approved work program. (5) However, Ministerial approval is not required for the acceleration of the work to be carried out under an approved work program. 39—Requirement to proceed with production (1) The holder of a production licence must, subject to this Act, proceed with operations for production of the relevant regulated resources— (a) with due diligence; and (b) in accordance with the conditions of the licence. Maximum penalty: $60 000. (2) If operations for production of the relevant regulated resource have not commenced within 24 months after the grant of the production licence, the Minister may, by written notice given to the holder of the licence, require the holder of the licence to commence the operations. (3) If, in the Minister's opinion, production from the area of a production licence is practicable and commercially feasible, the Minister may, by written notice given to the licensee, require the licensee to undertake or continue operations in accordance with requirements specified in the notice until the licensee satisfies the Minister that the operations are no longer practicable or commercially feasible. (4) A notice under subsection (3) may require production from the area comprised in a production licence at a rate that is no less than a rate specified in the notice. (5) If the holder of a production licence fails to proceed with operations for production of a regulated resource as required under the terms of the licence or by notice under this section (and has not entered into arrangements, satisfactory to the Minister, for future production), the Minister may, by written notice to the licensee, cancel the licence. 40—Term of production licence A production licence is to be granted for an unlimited term. 41—Cancellation or conversion of production licence where commercial operations in abeyance (1) If operations resulting in production from the licence area on a commercial basis have not been carried on within the area of a production licence for 24 months or more (and the licensee has not entered into arrangements, satisfactory to the Minister, for commencing or resuming such operations at a reasonable future time), the Minister may, by written notice to the licensee— (a) convert the licence into a retention licence; or (b) cancel the licence. (2) Before cancelling a licence under this section, the Minister must give the licensee a reasonable opportunity to make representations about the proposed action. 42—Unitisation of production (1) If the Minister is satisfied that— (a) a natural reservoir containing, or suitable for storage of, a regulated substance extends beyond the area of a production licence; and (b) the adjacent area is covered by an exploration, retention or production licence held by a different person, the Minister may, by written notice given to the holders of the respective licences, require them to enter into negotiations with a view to establishing a scheme for working or using the relevant areas as a single unit. (2) If the holders of the licences fail to reach agreement on the terms of such a scheme within a reasonable time, the Minister may, by written notice given to the licensees, establish such a scheme. (3) Before the Minister establishes a scheme under this section, the Minister must allow the holders of the licences affected by the scheme a reasonable opportunity to make submissions on the terms of the scheme. (4) A scheme under this section is binding on the holders, for the time being, of the licences affected by the scheme.