Permit Conditions and Administration

Geothermal Energy Resources Act 2005

The aim of this guideline is to assist industry in managing an exploration permit granted or renewed under the Geothermal Energy Resources Act 2005 (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 requirement to:

• Obtain and maintain an insurance policy as directed by the Minister.
• Hold a rehabilitation bond, for an amount specified by the Minister, for the payment of an amount of money to undertake any rehabilitation works required as a result of geothermal operations.
• Submit an annual report and pay 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 (s65).
• Variation of the permit conditions upon renewal, consolidation or transfer (s66).
• Suspension of permit conditions and extension of permit term (s67 and 68).
• Consent to surrender a permit (s73).

In cases of non-compliance with the Act or permit conditions, the Minister may decide to cancel the permit (s74).

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 74 of the Act.

Variation of Conditions

The holder of a permit may apply to 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 for that year becomes guaranteed and cannot be varied.

Commercial circumstances that are common risks in the industry would not normally be considered as 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 survey data resulting in failure to prove up a prospect for drilling
• avoidable delays in contracting a rig or seismic crew.

It is recognised that the Victorian Geothermal industry is developing, and establishing relationships with potential investors. In addition, it is proving new technologies with a higher risk profile, and therefore is in a challenging capital raising position.

Applications for variation made on the basis of failure to raise funding will be assessed on a case by case basis subject to the provision of appropriate substantiating information.

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

An application for variation must be on the Department’s application form, submitted at least 90 days prior to entering the permit year to which the request relates; and include a submission that:

1. outlines the reasons why the approved work program cannot be carried out and a variation is requested; and
2. includes substantiating documentation (e.g. letters, emails, technical data, and plans) which demonstrate why the approved work program has not been achieved; and
3. explains how the proposed variation will improve the overall exploration strategy, and progress the assessment of the geothermal potential of the area; and
4.  advises whether the application is to be accompanied by other applications under the Act, that is:
   a. Renewal, Consolidation or Transfer of Authority (s66).
   b. Request for Suspension of a Condition/Extension of Term of Permit (s67 and 68).

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

• current investment climate for the geothermal industry; and
• results of exploration work to date; and
• development of geothermal exploration technologies that have superseded techniques accepted in the original work program; and
• overall exploration strategy; and
• likelihood that the proposed variation will significantly progress the assessment of the geothermal potential of the permit area; and
• permit holder’s performance on this permit and other authorities under the Act.

Suspension of Permit Conditions and Extension of Permit Term

If granted, a suspension of the permit conditions has the effect of pushing back 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 on the Department’s application form, submitted at least 90 days prior to entering the permit year to which the request relates; 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. includes substantiating documentation (e.g. letters or emails, technical data, plans) to demonstrate 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; and
• disappointing exploration results; and
• poor quality data; and
• failure to prove up a prospect for drilling; and
• avoidable delays in contracting a rig or survey crew.

Each application for a suspension of a permit condition and extension of permit term will be assessed on a case by case basis with consideration given to the:

• current investment climate for the geothermal industry; and
• results of exploration work to date; and
• development of geothermal exploration technologies that have  superseded those accepted in the approved work program; and
• overall exploration strategy; and
• permit holder’s performance on this permit and other Victorian authorities held under the Act.

A suspension of conditions and extension of the permit term may also 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 74, 75 and 76 of the Act.

Permit Surrender

When a permit holder applies to the Minister for consent to surrender, the Minister will consider the application in accordance with section 73 of the Act, before deciding on the application.

The Minister may consent to surrenderapermit 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 the 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 surrender 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, and the payment of all annual fees and monies due); and
• completion of all rehabilitation requirements, such as:
• • 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.