Iron Ore (FMG Chichester Pty Ltd) Agreement Act 2006

The Agreement is the scheduled agreement as defined in section 3 of the Act, and if varied in accordance with its terms, that agreement as varied from time to time. The Project means the establishment and operation under the Agreement and in accordance with approved proposals of a project for the production of iron ore from the Mining Leases for transportation from those leases (clause 1). Defined Area is the area hatched on the plan annexed to the Agreement, within which land to be granted under the Agreement is drawn (clause 6(1)). Agreement Mining Tenements are the specific exploration licences listed in Schedule 1 Parts A and B, mining leases granted on conversion of those exploration licences, any other mining tenements granted in accordance with approved proposals, and any other mining tenements approved by the Minister under clause 12(10). This class of tenements receives special treatment under the Agreement, including modified application of the Mining Act 1978 (WA). Approved proposal means a proposal approved or deemed approved under the Agreement (clause 1). The Company must submit detailed proposals under clause 8 covering mining recovery, beneficiation, transportation, roads, accommodation, water, energy, aerodrome, residue disposal, ancillary leases and local labour and materials. The Minister may approve, defer or require alterations. Mining Leases are a subset of Agreement Mining Tenements - mining leases granted by way of conversion of all or part of an exploration licence that is an Agreement Mining Tenement, plus any mining leases approved by the Minister under clause 12(10) (clause 1). Iron ore includes beneficiated ore. Metallised agglomerates means the product of a pyrometallurgical iron ore reduction process with not less than 85% total iron excluding carbon (clause 1). The Agreement contains a staged obligation on the Company to investigate and then establish plant for production of metallised agglomerates, subject to economic feasibility and possible alternative projects (clause 20). The JORC Code is used for reporting mineral resources and ore reserves (clause 1). The Agreement also defines private roads, public roads, the said railway spur line (the rail connection constructed by the Company), the Railway (defined by reference to the separately ratified Railway and Port Agreement), and the Company’s workforce and mine workforce (clause 1). The Agreement includes an interpretation clause (clause 2) that provides standard drafting conventions, and crucially states that nothing in the Agreement shall be construed to exempt the Company from compliance with laws relating to native title or requirements under the Environmental Protection Act 1986 (EP Act) (clause 2(2)-(3)).

The primary parties are the State of Western Australia, FMG Chichester Pty Ltd as the Company, and Fortescue Metals Group Ltd as the Guarantor (clause 37 provides an unlimited guarantee of the Company’s performance that continues even after termination). The Agreement directly affects holders of interests in the Defined Area, including native title holders - clause 2(2) preserves the operation of native title laws, and clause 22(3) requires the Company to pay the State the costs of any compensation payable to native title holders for land taken at the Company’s request. Local governments in the Pilbara region are affected by the community development plan obligations: the Company must consult with them on community and social benefits, prepare a plan, and report on ongoing consultation (clause 7). The Commissioner of Main Roads is involved in road construction and damage costs (clause 15). The Access Minister under the Railways (Access) Act 1998 has a discretion to apply the Access Code to the Company’s rail spur line (clause 14(5)). Third parties seeking to use the rail spur line for freight (including iron ore products of third parties) can require the Company to carry their freight subject to reasonable charges and conditions, though the Company is not a common carrier (clause 14(4)). Third parties may also be affected by the modified objection provisions under clause 12(2)(a) - the Mining Act provisions that would entitle a person to object to the grant of a mining tenement to the Company do not apply to certain applications, removing third-party objection rights that would otherwise exist. Employees and the local workforce are affected by the Company’s obligations to use local labour, services and materials (clause 19), and to provide training and employment for indigenous and non-indigenous persons in the Pilbara region (clause 7(1)(a)). The Aboriginal Heritage Act 1972 is modified in its application to the Company, allowing the Company to give notices under section 18 and to be subject to conditions that may restrict use to after approval of proposals (clause 5 of the Agreement). Mortgagees and assignees are affected by the assignment regime (clause 26), which requires Ministerial consent for assignment, mortgage or charge, but limits the need for further approvals under the Mining Act or Transfer of Land Act 1893. The Commonwealth may be involved through clause 24, which requires the Company to apply for Commonwealth licences and allows the State to make representations on the Company’s behalf.

The Company’s key duties include: continuing field and office studies and exploration (clause 4); co-operating with the State and reporting progress quarterly (clause 4(2)-(3)); dedicating all Agreement Mining Tenements to the Project (clause 6(2)); preparing and implementing a community development plan (clause 7); submitting detailed proposals for an initial production of at least 10 million tonnes per annum by 31 December 2006 (clause 8(1)); implementing approved proposals in accordance with the EP Act (clause 9(7)); not producing more than 45 million tonnes per annum without in-principle Ministerial approval and further proposals (clause 11); paying royalties as prescribed under the Mining Act (clause 13); constructing and operating the rail spur line, keeping it in good repair, and providing crossings (clause 14); using local labour, services and materials where reasonably practicable (clause 19); investigating and potentially constructing a metallised agglomerates plant by specified milestones tied to tonnage shipped (clause 20); indemnifying the State against third-party claims (clause 32); and consulting the State on actions affecting the overall interest (clause 35). The Company also has rights: to mine bulk samples up to 1 million tonnes on no more than two Mining Leases before full approval (clause 4(4)); to obtain stone, sand, clay and gravel from Mining Leases without royalty for construction (clause 12(9)); to surrender portions of Mining Leases with the Minister’s consent (clause 12(8)); to transport passengers and freight (clause 14(4)); to install and operate electricity generation and transmission (clause 16); to request the taking of land necessary for the Project (clause 22); and to assign, mortgage or charge its rights with Ministerial consent (clause 26). The State’s duties include: introducing and sponsoring the ratifying Bill (clause 3(1)); granting or arranging ancillary leases, licences, easements and rights of way within three months of proposal approvals (clause 18); maintaining public roads used by the Company to a comparable standard (clause 15(2)); ensuring zoning protection for Agreement Mining Tenements and other titles (clause 25); not resuming the Company’s works or creating easements that unduly prejudice the Project without consent (clause 23); exempting certain instruments from stamp duty (clause 38); and not imposing discriminatory taxes or charges (clause 21). The State also has the right to apply the Access Code to the rail spur line (clause 14(5)), to extend periods at its discretion (clause 29), and to determine the Agreement for material default or abandonment (clause 30).

The Agreement does not create criminal penalties. Enforcement is primarily through contractual termination mechanisms. Under clause 30(1), the State may determine the Agreement by notice if: (a) the Company makes a default considered material by the State in performance of its obligations, or abandons or repudiates the Agreement, and the matter is not remedied within 180 days after notice; or (b) the Company goes into liquidation (other than voluntary reconstruction) and the interest is not assigned within three months to an approved assignee. If the Company contests the alleged default, it must refer the matter to arbitration within 60 days (clause 30(3)(a)). If the arbitration award goes against the Company, the arbitrator sets a reasonable time for compliance (not less than 90 days if the dispute was bona fide) (clause 30(3)(b)). If default is not remedied within 180 days or the arbitration time, the State may enter the Company’s lands and remedy the default itself, with the costs becoming a debt payable by the Company on demand (clause 30(4)). On cessation or determination, all rights under the Agreement and under Agreement Mining Tenements (except exploration licences) cease, and the Company must pay all moneys accrued due (clause 31(1)(a)). Improvements on land become State property without compensation (clause 31(2)), subject to the Company’s right to remove fixed or movable plant within three months if the State does not exercise an option to purchase at a fair valuation (clause 31(3)). Royalties are payable as prescribed under the Mining Act (clause 13); the Act does not set a fixed rate, leaving it to the general law. Clause 12(4)(d) provides that an Agreement Mining Tenement shall not be forfeited except in accordance with the Agreement itself, which provides additional protection beyond the Mining Act. The Guarantor’s liability under clause 37 is unlimited and continues after termination. The arbitration mechanism (clause 34) provides a forum for resolving disputes, with the Commercial Arbitration Act 1985 (WA) applying, and the arbitrator may grant interim extensions. Discretionary powers of the Minister are expressly not arbitrable (clause 34(2)).

Section 6(1) of the Act gives the Agreement overriding effect despite any enactment or other law. Section 6(2) provides that any express or implied modification or exclusion of an enactment in the Agreement operates to the extent necessary. This is a standard State agreement supremacy clause. The Agreement then specifically modifies several Acts. The Mining Act 1978 is heavily modified by clause 12: the Company has no entitlement to retention licences (clause 12(2)(c)); objection rights to mining tenement applications are removed for certain applications (clause 12(2)(a)); section 120AA is deleted for the Company’s applications (clause 12(3)(a)); section 6(1a) and (1d) are modified to allow referral of proposals under the Agreement to the EPA under the EP Act (clause 12(3)(b)-(c)); a relevant mining proposal is defined to include an approved proposal (clause 12(3)(d)); section 82A(2) is qualified so that mining operations dealt with in approved proposals under a Government agreement are not subject to its requirements (clause 12(3)(e)); and section 118A is deleted (clause 12(3)(f)). The Company is not required to comply with expenditure obligations under the Mining Act for Agreement Mining Tenements (clause 12(4)(b)), and tenements cannot be forfeited except under the Agreement (clause 12(4)(d)). The Aboriginal Heritage Act 1972 is modified by clause 5 to allow the Company to give section 18 notices, to include “or the Company as the case may be” in various subsections, and to allow conditions on use that align with the proposal approval process. The Environmental Protection Act 1986 is expressly preserved by clause 2(3) - nothing in the Agreement exempts the Company from compliance with EP Act requirements, including clearing of native vegetation. The Rail Safety Act 1998 continues to apply to the Company’s rail operations (clause 14(2)(c)). The Land Administration Act 1997 is modified by clause 22 for the taking of land: sections 170-175 and 184 do not apply, and section 177(2) is modified to refer to Government agreements. The Public Works Act 1902 is disapplied for railway construction (section 6(3) of the Act) but applies to land taking under clause 22(1). The Railways (Access) Act 1998 and Railways (Access) Code 2000 may be applied to the rail spur line at the discretion of the Access Minister (clause 14(5)). The Government Agreements Act 1979 is preserved (section 6(4) of the Act). The Electricity Act 1945 applies to the Company’s electricity generation (clause 16). The Local Government Act 1995 is relevant through the community development plan and road maintenance provisions. Native title laws are preserved by clause 2(2). The Corporate Act 2001 (Cth) is referenced in the definition of “related body corporate” in clause 20(7)(d).

The Act was assented to on 3 October 2006 and commenced on the same day (section 2). The compilation table in the Notes shows only one compilation: Act No. 44 of 2006. There have been no amendments to the Act itself since its commencement. The scheduled Agreement may be varied under clause 27(1) by agreement in writing between the parties. Such variations must be laid before both Houses of Parliament within 12 sitting days (clause 27(2)), and either House may disallow the variation within 12 sitting days (clause 27(3)). The Act does not require further amending legislation for variations that are disallowed - disallowance prevents the variation from taking effect from the last day on which it could have been disallowed (clause 27(3)). There is no indication in the source that any such variations have been made or disallowed. The Act itself remains in its original form. The 50-year term of the Agreement from the commencement date (3 October 2006) means it will expire in 2056 unless determined earlier (clause 39). The Agreement also had a sunset clause: if the ratifying Bill had not commenced by 31 December 2006, the Agreement would cease and determine (clause 3(3)). That condition was satisfied. No amendment history beyond the original enactment is available from the source.

The source does not name or refer to any litigation. The Agreement contains an arbitration clause (clause 34) that requires disputes arising out of or in connection with the Agreement to be referred to arbitration under the Commercial Arbitration Act 1985 (WA) (now the Commercial Arbitration Act 2012, due to the saving provision in clause 2(1)(g)). Certain discretionary powers of the Minister cannot be arbitrated (clause 34(2)). The arbitration mechanism has been used in other Western Australian State agreement contexts, but no reported cases specific to this Agreement are mentioned. The override provisions in section 6 of the Act would likely shield the Agreement from challenge based on inconsistent legislation, but native title and environmental challenges remain possible given the preservation of those laws in clauses 2(2) and (3). The Aboriginal Heritage Act 1972 modifications in clause 5 could be the subject of interpretive litigation. The fact that the source does not list any litigation history does not mean none exists; it simply means the source does not provide it. A legal analyst would need to conduct separate searches for any reported decisions citing this Act or the Agreement. The arbitration clause itself has been a feature of State agreements that occasionally generates disputes about the scope of arbitrable matters, particularly the boundary between ministerial discretion and reviewable decisions.

Several subtle features require close attention. First, the override provision in section 6(2) of the Act is extraordinarily broad - it gives effect to modifications “expressly or by implication” to any enactment for any purpose in relation to any person or thing. This means even if a modification is not explicitly spelled out, if it is implied by the scheme of the Agreement, it may still operate. Second, clause 5 of the Agreement modifies the Aboriginal Heritage Act 1972 in five specific ways, but the Company acknowledges that nothing in clause 5 constitutes approval of any proposals under the Agreement. This creates a potential sequencing trap: Aboriginal heritage consents under the modified section 18 can be conditioned on proposal approval, but the approval of proposals under clause 9 must occur under the EP Act and native title laws separately. Third, clause 11(3) imposes a linkage between expansion beyond 45 million tonnes per annum and the further processing obligations under clause 20. The Company cannot give a notice to increase production above that threshold unless either the Minister has approved proposals for metallised agglomerates plant (or an alternative project) or the Minister agrees to receive the notice. This is a fundamental constraint on production growth that could catch unwary planners. Fourth, royalties are not fixed in the Agreement - clause 13 simply says the Company shall pay royalties “as may from time to time be prescribed under or pursuant to the Mining Act”. This means the State can unilaterally change royalty rates through Mining Act amendments, and the Company cannot use the Agreement to lock in a particular rate. Fifth, clause 14(5) allows the Access Act and Access Code to be applied to the Company’s rail spur line at the discretion of the Access Minister. The Company acknowledges this and must do all things reasonably requested for that application. This means the exclusive rail infrastructure could become subject to third-party access regulation, potentially affecting the Company’s competitive position. Sixth, the assignment regime in clause 26 requires Ministerial consent for any mortgage, charge, assignment, sublease or disposition, and the Minister may require a deed of covenant from the assignee. However, no approval or consent is required under the Mining Act, LAA or Transfer of Land Act 1893 for transactions made under clause 26 - a significant departure from the general law that could affect secured creditors’ expectations. Seventh, the default notice period of 180 days under clause 30(1) is long, but the State may itself remedy the default and recover costs as a debt (clause 30(4)). This self-help remedy is not subject to arbitration and could lead to substantial cost exposure for the Company. Eighth, clause 37 contains an unlimited guarantee from Fortescue Metals Group Ltd that continues after determination of the Agreement. The Minister may release the guarantor only if reasonably satisfied the Company has financial capacity - a subjective test. Ninth, clause 38 exempts certain instruments from stamp duty but only if executed within two years of the commencement date (3 October 2006). After that date, stamp duty is payable. Tenth, the community development plan under clause 7 is a prerequisite to submitting proposals under clause 8 - if the plan is not approved (or deemed approved through arbitration), the Company cannot lodge its detailed proposals, potentially triggering the 31 December 2007 deadline for approval of all proposals under clause 9(6).

Compliance requires a staged and documented approach. First, the Company must ensure that all exploration, studies and reporting under clause 4 are conducted diligently, with quarterly written reports to the State. Bulk sampling and testing of mining equipment are permitted only on a maximum of two Mining Leases and subject to the 1 million tonne aggregate limit and compliance with the Mining Act and EP Act (clause 4(4)). Second, before submitting any proposals, the Company must consult with relevant local governments, prepare a community development plan addressing training, regional development, community services and a regionally based workforce, submit that plan to the Minister, and obtain approval or arbitration (clause 7). This plan must then be implemented throughout the Agreement. Third, detailed proposals under clause 8 must be submitted by 31 December 2006 (as extended) covering all matters from mining recovery to local labour use. Each proposal must be consistent with conditions endorsed on tenement grants and with the documentation accompanying Mining Act applications (clause 8(2)). Proposals may be submitted separately with the Minister’s approval. The Company must also furnish evidence of marketing arrangements, financial capacity, required rail safety accreditations and readiness to proceed (clause 8(6)). Fourth, the Company must implement approved proposals in accordance with the EP Act and any approvals or licences required under it (clause 9(7)). If the Minister requires alterations, the Company can negotiate or seek arbitration. Fifth, after implementation, the Company must continue to operate the mine, rail spur line, roads and other infrastructure in accordance with the approved proposals. The rail spur line must be kept in good repair and operated safely (clause 14(2), (6)). The Company must comply with all applicable laws, including the Rail Safety Act and the EP Act. Sixth, the Company must pay royalties as prescribed under the Mining Act (clause 13) and must not exceed the 45 million tonne per annum threshold without prior in-principle approval and detailed proposals under clause 11. Seventh, the Company must use local labour, services and materials where reasonably and economically practicable, implement contractual flow-down obligations requiring subcontractors to do the same, and report to the Minister on compliance (clause 19). Eighth, the Company must carry out ongoing investigations into metallised agglomerates and submit detailed proposals by the earlier of either 7 years after first transport of iron ore or when the 100 millionth tonne is shipped (clause 20(1)). Proposals for a plant with capacity of at least 2 million tonnes per annum within 3 years, rising to 3 million tonnes within 8 years, are required (clause 20(2)). If economically unfeasible, the Company may apply for postponement or propose an alternative project (clause 20(3), (6)). Ninth, the Company must keep the State informed of any proposals to source goods or services from outside Australia (clause 8(5), 19(4)). Tenth, the Company must maintain proper records, lodge reports with the Department on mining tenements under the Mining Act, and report on mineral resources in accordance with the JORC Code (clause 12(6)). Eleventh, any assignment, mortgage or charge requires Ministerial consent, and the assignee must execute a deed of covenant (clause 26). Twelfth, the Company must comply with all laws relating to native title and the EP Act as preserved by clauses 2(2)-(3). Finally, the Company should maintain a compliance register tracking all proposal approvals, community development plan milestones, tonnage shipped (for triggering further processing obligations), quarterly reports, native title processes, and any variations or extensions granted under clauses 27, 28 or 29.