Western Australia introduces policy framework on use of diversification leases

The new Policy Framework (409KB / 8-page PDF), published in July by Department of Planning, Lands and Heritage (DPLH), includes previously unknown details of the considerations that the Minister for Lands will apply in determining whether a diversification lease should be issued, as well as setting out the process for granting a diversification lease. It provides useful guidance for applicants, as it will assist them in determining whether a diversification lease is appropriate for their projects.

Diversification leases allow for multiple land uses over a single stretch of Crown land. We had previously speculated that their use would open up opportunities for innovative renewable energy projects.

The Policy Framework sheds light on seven aspects on the operation of the regime.

Consideration of applications

Applications will be considered on a case-by-case basis. The Policy Framework sets out the factors that the Minister of Land may consider when granting a diversification lease. At a minimum, the Minister of Lands may consider that:

• the proponent requires a large area of Crown land. Where the proposed activities for the diversification lease could be carried out on a smaller area of land, consideration may be given to an alternative, more appropriate form of tenure;
• the proposed use provides social, economic or environmental benefits to the state, relevant region or locality;
• the suitability of the land for the proposed use;
• the grant will provide social, cultural and economic opportunities to First Nations people or communities if possible; and
• the proponent has proved or will be able to prove that it has the capability, capacity and experience to deliver the expected outcome.

Granting diversification leases

There is a process by which diversification leases will be granted by the Minister of Lands. The Policy Framework provides previously unknown details about this process, including that diversification leases may be granted through a private treaty or a competitive process depending on the demand for the land and value of the location.

The Minister for Land will have discretion to identify the preferred proponent where there are competing applications for a diversification lease over the same area. The Minister for Lands will consider factors such as:

• the benefits to the state, the relevant region or locality;
• the rights and interests of existing land users and interest holders;
• ensuring a diversity of investment;
• the proponent’s record in engaging with First Nations people and communities; and
• any other considerations that the minister may deem relevant.

Before a diversification lease can be granted, the Minister of Mines and Petroleum must first give approval for the proposed use and locations of those uses on the land and the location of any substantial structure to be erected in the land the subject of the lease. Other ministers such as the Minister for Environment may also be asked to provide advice if they have an interest in the land.

The Policy Framework also explains the process under which diversification leases may be varied, transferred, subleased or mortgaged.

Intended use of the land

The Policy Framework highlights the significance of the permitted use of the land in the diversification lease. All activities on a diversification lease will be authorised under the lease conditions and the lease conditions will be tailored to each particular lease.

A diversification lease will not be granted where another type of lease is more appropriate for the way in which the land will be used. It is unlikely to be granted solely for a highly intensive land use; grazing authorised stock; or mining purposes.

The lessee is also expected to start using the diversification lease in accordance with the lease within the period specified in the lease or else risk having their lease terminated.

Improvements and existing infrastructure

The Policy Framework touches on the approach that might be taken to any existing infrastructure on the lease land. Existing substantial structures, underground and surface laid permanent electrical and fibre optic cables will be identified in the diversification lease. Underground and surface laid permanent electrical and fibre optic cables will be protected without requiring specific approval. Where a substantial structure exists on the lease area, the area can be protected from mining up to 100 metres if approved.

The Policy Framework reveals that diversification lessees will be able to develop and construct infrastructure as required to conduct their business.

Term of the diversification lease

The term of the diversification lease will be considered on a case-by-case basis. The Policy Framework also provides some information on the terms that may be given on diversification leases. Long term leases may be considered, and renewals may be considered on a case-by-case basis. If there is an indigenous land use agreement (ILUA) – between a First Nations party and another person or agency for the use of an area of land or water – the length of the term will be reflective of what has been agreed in the ILUA.

Market rent

Market rent will apply to all diversification leases. Lessees will be required to make a payment of six months’ rent in advance and rent will be determined by the Valuer-General based on the likely income stream.

Conditions on expiry or termination of the diversification lease

The Policy Framework provides some details on what to expect at the end of a diversification lease. Upon expiry or termination of lease, the lessee will be subject to conditions to yield up and rehabilitate the land. The lessee may or may not be entitled to compensation by an incoming purchaser for improvements it has made to the land. However, the state is not liable for any compensation for such improvements.

Co-written by Aaliya Sallie of Pinsent Masons.