Diversification leases: New land tenure for Western Australia

In line with the Western Australian State Government’s commitment to deliver net zero emissions by 2050, changes to the Land Administration Act 1997 (LAA) have been introduced to accelerate the development of proposed renewable energy projects in the state. One of those changes is to introduce a new form of tenure known as diversification leases.

In this article, partner Catherine Wheeler and lawyer Claudia Hill explain the diversification leases, how they will interact with other forms of tenure and outline the proposed benefits to create opportunities for conservation, tourism and economic development and land management for Indigenous Australians.

The Land and Public Works Legislation Amendment Bill 2022 (Bill), introduced to Parliament on 23 November 2022, will amend the LAA and introduce diversification leases to enable proponents to undertake single or multiple land uses on Crown land, where the primary land use can coexist with other land uses. This new form of accommodation will provide more opportunities for proponents to enter the renewable energy market through, for example, carbon farming, hydrogen and wind and solar projects.

What is a diversification lease?

A diversification lease is a new form of land tenure to be granted over large areas of Crown land. This will grant the lessee a non-exclusive lease, which will allow certain activities to be undertaken on the land. Unlike a pastoral lease, a diversification lease can be granted for a range of land uses as agreed by the parties. The uses are proposed to be large scale and may include multiple concurrent uses such as carbon farming, livestock grazing, agriculture, tourism, horticulture and indigenous economic development and land management, environmental offsets for mining companies, conservation purposes and renewable energy.

As the tenure is non-exclusive, a diversification lease will not prevent access by other parties such as mining companies or native title holders and will not extinguish native title rights or interests.

When can a diversification lease be granted?

The process of applying for a diversification lease will require proponents to contact the Department of Planning, Lands and Heritage to discuss the proposal and complete a Crown Land Inquiry Form.

Applications for a diversification lease will be considered on a case-by-case basis by the Minister for Lands, and will have to meet certain minimum considerations, namely:

the proponent requires a large area of ​​the crown land; the proposed use offers social, economic or environmental benefits to the State, the relevant region or locality; the land is suitable for the intended use; if applicable, the award will provide social and economic opportunities to aboriginals/communities; the proponent has demonstrated the ability, capacity and experience to deliver the intended outcome.

Unlike pastoral leases, there is no requirement for the Minister to publicly offer diversification leases. The Minister will have a discretion to grant a diversification lease through a private treaty or through a competitive process such as a public tender.

An option to lease may also be granted by the Minister for Lands, where specific details regarding the project or affected land are not confirmed. The option to rent may include conditions imposed by the Minister.

The Minister for Mines and Petroleum must also approve the proposed use, the location and any substantial structures to be erected on the land in question before the lease is granted, and references for comment will be made to the Department of Mines, Industrial Regulation. and Safety, Department of Water and Environmental Regulation, local government and other relevant agencies before a diversification lease is granted.

What will be the terms of the lease?

Diversification leases are intended to be flexible and as such the terms of the lease will be tailored to the agreed land use.

The term of the lease may be granted for any length of time, possibly with options to renew, as appropriate for the permitted use.

Market rent will apply to all diversification leases and will be assessed by the Valuer General with reference to the permitted use of the lease in question. As such, if the permitted use is changed, the rent must be reassessed accordingly.

It is expected that a tenant under a diversification lease is required by the terms of the lease to:

prevent or reduce the risk of fire; control declared plants, animals and pests; and maintain the condition of soil and native vegetation.

How may the tenant use the land?

The permitted use can be changed with Ministerial approval, and multiple land uses can be permitted under a single diversification lease.

However, there will be certain restrictions regarding land use. A diversification lease will not be granted where the only proposed use is for:

a highly intensive land use; grazing of authorized livestock (cattle, sheep and goats); or mining purposes.

A tenant under a diversification lease will be permitted to develop and construct infrastructure, including cables, as required to carry out their activities. However, the tenant must discuss the location of any material structures and cables with the Department of Mines, Industrial Regulation and Safety in advance, and obtain permission before changing any proposed locations.

A tenant will also be allowed to transfer or sublet a diversification lease, provided permission is obtained from the Minister for Lands. Multiple subleases may be granted, and they may be for different purposes.

Diversification leases will be registered with Landgate and as registered legal interests they can be used as security for loans.

How will a diversification lease interact with other forms of tenure?

As mentioned above, a diversification lease will grant the lessee non-exclusive tenure over the affected land. The tenant will not be authorized to use the land to the exclusion of all others.

Diversification leases are intended to co-exist with mining rights, and as such will allow mining lease holders to enter the land to undertake mining activities as permitted under the Mining Act 1978.

Native title will not be extinguished by the granting of a diversification lease. Indigenous persons, including native title holders and traditional owners, will retain their right to enter unimproved and unrestricted areas of land to undertake activities consistent with their rights under the Native Title Act 1993. When it is established that native title exists or may exist, future legal process under the Native Title Act 1993 needs to be addressed. This will most likely be met through the negotiation of an Indigenous Land Use Agreement with the Indigenous title holders or claimants.

The Minister for Lands may also grant others a license to access the land under the LAA, provided the consent of the lessee and any native title holders is obtained, and this does not adversely affect any relevant interest holders, including the lessee .

Despite the tenure being non-exclusive, some identified areas of land may be recognized as ‘exclusive’, including areas containing substantial structures associated with intensive use, such as processing plants, solar panel arrays and tourism facilities.

Where the diversification lease is to be granted on Crown land that is already the subject of a lease in terms of the LAA, such as a pastoral lease, the relevant portion of land must first be ceded from the existing lease.

Closure

The intention is that diversification leases will provide a simplified new form of tenure that will encourage the growth of renewable energy in the state, as well as create opportunities for conservation, tourism and economic development and land management for Aboriginal people. It remains to be seen whether, and if so, to what extent the need to negotiate with mining proponents, native title parties and other existing pastoral leaseholders may be an obstacle to this new type of tenure.

We will keep you updated as the bill progresses through the Parliament of Western Australia. The bill is expected to be passed in the first half of 2023, with changes to be implemented by the end of the year.