In the recent decision of Icon Energy Limited v Chief Executive, Department of Resources [2023] QSC 227, HopgoodGanim Lawyers acted for Queensland-based oil and gas explorer Icon Energy Limited (Icon) in successfully applying to the Queensland Supreme Court to set aside a decision made by the Chief Executive of the Department of Resources (Chief Executive) to refuse to accept an application for renewal of a petroleum permit (Decision).
The Decision provides key insight into:
- the scope of the Chief Executive’s role when deciding whether to receive or process applications made under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (P&G Act); and
- what information is relevant to establish the financial capability of an applicant, when considering the capability criteria in the P&G Act.
Background
In general terms, the process for applications for the grant or renewal of petroleum tenures under the P&G Act is a two-step process:
- the “relevant person” (usually the Chief Executive) must decide whether or not the application is made in accordance with the requirements of the P&G Act (or otherwise substantially complies with those requirements). If so, the relevant person must accept the application. If not, the relevant person must refuse to accept the application (unless they decide is substantially complies);
- if the application passes the first step, it is then processed in accordance with the P&G Act and the Minister ultimately determines whether to grant or reject the application.
In this case, the Chief Executive decided to refuse to accept an application made by Icon to renew ATP 855 (Renewal Application). In short, the Chief Executive found that the Renewal Application failed to “address” the capability criteria under the P&G Act, particularly in relation to whether Icon was “capable of carrying out authorised activities for [ATP 855] having regard to [Icon’s] … financial … resources”.
The principal point of contention between the parties was the extent of the Chief Executive’s role under the P&G Act. This question turned on an interpretation of the relevant statutory provisions.
Financial resources – the alleged “insufficiency”
To address the financial resources aspect of the capability criteria, Icon submitted a Financial Capability Statement as part of the Renewal Application. Amongst other things, the Financial Capability Statement detailed Icon’s:
- current financial position (by citing publicly available financial statements);
- historical expenditure on ATP 855;
- historical track record of past capital raisings; and
- current negotiations with potential investors and joint venture partners.
The reasons for the Decision (Reasons) set out the Chief Executive’s findings, including that:
- Icon did not have funds readily available to be allocated to the proposed commitments for ATP 855, being an estimated $34.75 million;
- Icon had not provided sufficient details to establish the relevance or recency of Icon’s historical capital raising efforts;
- Icon had failed to establish the portion of commitments that were currently funded and what portion was contingent on future funding; and
- Icon had not provided sufficient details of the potential investors and joint venture partners with which it was negotiating or any evidence to demonstrate the likelihood or financial capability of those parties contributing any portion of the $34.75 million estimated commitment.
As a result, the Chief Executive decided that the Financial Capability Statement did not contain sufficient information for the Minister to be satisfied that Icon had the necessary financial resources, and that there were no substantial or demonstrably reliable statements for the Minister’s consideration.
The arguments
Icon contended that the Chief Executive made three errors of law when making the Decision, as follows:
The requirement to "address" the capability criteria
| Icon's position | Chief Executive's position | The Court's finding |
|---|---|---|
Icon contended that “address” meant to “speak directly to” or “to give attention to or deal with a matter or problem”.
| The Chief Executive contended that “address” meant “to take on as a topic for discussion or inquiry, or as a problem to be solved; to deal with; tackle or confront”. | The Court held that the proper meaning of “address” does not involve any degree of evaluative component as to the quality of the information in an application. Rather, it means to “direct to” or “respond to” the capability criteria. |
Whether sufficient or substantial information was required
| Icon's position | Chief Executive's position | The Court's finding |
|---|---|---|
Icon contended that the Chief Executive asked the wrong question by considering whether there was sufficient or substantial information such that the Minister could be satisfied that Icon had the necessary financial resources. In Icon’s submission, the P&G Act did not require the Chief Executive to form an opinion about the quality of the information in the Renewal Application. | The Chief Executive contended that it was within his power to engage with and evaluate the Renewal Application, determine whether or not the Renewal Application met the requirements and to make the findings he did. The Chief Executive also contended that he was required to carry out an evaluative exercise of the substance of the information provided in the Renewal Application. | The Court held that:
The Court ultimately determined that the Chief Executive erred in requiring information of a certain quality to be provided. |
Whether Icon was required to show "readily available funds"
| Icon's position | Chief Executive's position | The Court's finding |
|---|---|---|
Icon contended that capability as to financial resources did not require it to have the funds “readily available to be allocated to proposed commitments for ATP 855”, which was estimated to be $34.75 million. Icon contended that its financial capability to carry out the authorised activities could be demonstrated by several matters, including past performance and the quality of the resource. | The Chief Executive contended that the P&G Act does not specify the matters to be satisfied for the Decision. | The Court held that financial resources include funds readily available to an applicant, but is not limited to that. Financial resources could include:
However, the Court ultimately found that the Chief Executive did not limit their consideration to readily available funds. |
There was also a dispute between the parties as to whether there was an element of subjective belief to the Chief Executive’s Decision. Icon contended that whether or not the Renewal Application was made in accordance with the requirements of the P&G Act was a jurisdictional fact (meaning that the Court could determine whether or not that fact existed), whereas the Chief Executive contended that it required the formation of an opinion by the Chief Executive.
The Court held that whether the Renewal Application was made under the requirements of the P&G Act was a jurisdictional fact. In this case, contrary to the Decision, the Court found that the Renewal Application did address the capability criteria by referring to:
- Icon’s publicly available financial statements;
- Icon’s past track record in the petroleum exploration and production sector;
- Icon’s ability to raise capital through ASX stock market listings, as well as money it had raised for exploration projects in the past;
- the potential size of the resource within ATP 855;
- the money expended in relation to ATP 855; and
- a non-binding letter of intent and terms sheet to raise $100 million in a staged investment process, which had been announced to the ASX.
The Court ultimately made a declaration that the Decision was null and void. As the Court found that the Renewal Application did address the capability criteria, the Court proposed a declaration that the Renewal Application complied with the requirements of the P&G Act.
Implications for the industry
The Court’s judgment has two important implications for applications under the P&G Act:
- it clarifies the scope of the inquiry at the first step of the application process. At that first step, the relevant person is not to undertake an evaluation of the quality of the information provided in the application. Their role is limited to determining whether the application complies with the requirements of the P&G Act. It is then up to the Minister to assess the quality of the information provided in deciding whether to grant or reject the application;
- it also provides useful guidance as to the types of financial resources that may be relevant to the “capability criteria” under the P&G Act. Relevantly, the Court confirmed that financial resources can include historical information as to past fundraising performance, as well as current and future potential fundraising agreements (even if such agreements are non-binding or conditional on future events), and is not limited to readily available funds.
For further information on the Court’s recent findings, please contact HopgoodGanim Lawyers’ Litigation and Dispute Resolution and Resources and Energy teams.