On 25 October 2012, the NSW Parliament passed the Petroleum (Onshore) Amendment (Royalties and Penalties) Bill 2012 (Bill).
The Bill will bring a close to the ‘royalty holiday’ for petroleum production and significantly increase penalties for breaches of the Mining Act 1992 (NSW) (Mining Act) and the Petroleum (Onshore) Act 1991 (NSW) (PO Act). The Bill will also confer jurisdiction on the Land and Environment Court to hear proceedings for offences under the PO Act.
To encourage and stimulate investment in the petroleum industry in New South Wales, a ‘royalty holiday’ was established under the PO Act whereby petroleum producers were exempted from paying royalties for the first five years of production. After this period, the royalty amount increased incrementally to 10 per cent of the value of the petroleum produced over the next five years.
In light of projections for coal seam gas (CSG) production in the State to exceed $1 billion annually by 2025 and the growth of the industry, the Bill has removed the royalty concessions to increase revenue to the State. From 1 January 2013, royalty payments will apply to all current and future production leases commencing when production starts. The royalty amount will be 10 per cent of the value of the petroleum produced.
These amendments will bring the PO Act into line with the royalty regime for coal mining under the Mining Act.
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