Federal Court of Australia

Seadragon Offshore Wind Pty Ltd v Minister for Climate Change and Energy [2024] FCA 1290

ORDERS

THE COURT DECLARES THAT:

1.    When determining an application for a feasibility licence under the Offshore Electricity Infrastructure Act 2021 (Cth) (‘the Act’), in circumstances where the Respondent is satisfied that an applicant meets the merit criteria required to be granted a feasibility licence, the Respondent may lawfully grant a feasibility licence under s 33(1) of the Act for a licence area smaller than the area applied for, including in circumstances where the Respondent has determined that the application is not eligible to be included in an overlapping application group within the meaning of regulation 11 of the Offshore Electricity Infrastructure Regulations 2022 (Cth).

THE COURT ORDERS THAT:

2.    The Respondent’s decision be set aside.

3.    The Respondent determine the Applicant’s application for a feasibility licence dated 26 April 2023 according to law.

4.    The Respondent pay the Applicant’s costs of the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

Introduction

1    This case concerns a decision by the Minister for Climate Change and Energy (‘the Minister’) to refuse to grant a feasibility licence to the Applicant (‘Seadragon’). The decision was made under s 33(1) of the Offshore Electricity Infrastructure Act 2021 (Cth) (‘the Act’), which provides:

33    Grant of a feasibility licence

(1)    The Minister may, by written notice, grant a feasibility licence in respect of an area to an eligible person if:

(a)    the eligible person applies for the licence under the licensing scheme; and

(b)    the area is a declared area, or a part of a declared area, under a declaration at the time the licence is granted; and

(c)    the Minister is satisfied that granting the licence would be consistent with any conditions that apply to the declaration; and

(d)    the area meets the requirements in subsection (4); and

(e)    the Minister is satisfied that the licence meets the merit criteria; and

(f)    any other requirements prescribed by the licensing scheme are met.

2    The question which arises is whether the Minister has the power under s 33(1) to grant a feasibility licence over an area reduced in size from the area in respect of which the application for the licence was made. In broad terms, the Minister indicated to Seadragon that he was contemplating not granting the licence because the area it had applied for overlapped with other licence applications of greater merit. Seadragon submitted to the Minister that he should, in that circumstance, grant it a licence over a reduced area from which the overlapping parts had been excised. Despite that submission, the Minister proceeded to refuse Seadragon’s application. In his submissions in this Court, the Minister accepts that the refusal decision was made on the basis that s 33(1) did not permit him to grant Seadragon a licence over a reduced area.

3    The sole issue is whether this construction of s 33(1) was correct.

4    Whilst Seadragon’s originating application contains a contention that the Minister failed to deal with its submission that he had the power to grant the licence over a reduced area, nothing turns on this. If the Minister was correct in his view of s 33(1), any failure on his part to consider the exercise of a power which he did not have was irrelevant. Likewise, if the Minister was incorrect in his view of s 33(1), this will entail that his exercise of the power in s 33(1) was afflicted by an error of law. If so, then whether he also denied Seadragon procedural fairness along the way is immaterial since the decision must in any event be set aside. The procedural fairness case has no relevance to the outcome of the proceeding and may be put aside.

5    Seadragon’s application for relief under s 39B of the Judiciary Act 1903 (Cth) may also be disregarded since Seadragon indicated at the hearing that it was only pursuing relief under the Administrative Decisions (Judicial Review) Act 1977 (Cth) on the basis of an error of law (under s 5(1)(f)).

6    So far as the evidence is concerned, the parties prepared a Hearing Book which I treated as being in evidence except to the extent that I excluded specific matters from it. The only matters specifically excluded were the affidavit of Ms Heidi Asten affirmed on 17 June 2024 (which was not read or relied upon by Seadragon) and aspects of two affidavits of Ms Carolyn Sanders sworn on 28 August 2024 and 8 October 2024 respectively (which Seadragon did read and rely upon). Ms Sanders was the General Manager and Executive Director of Flotation Energy Pty Ltd (of which Seadragon was a wholly owned subsidiary). Seadragon did not read §§9-16, 37-58 or 60-62 of Ms Sanders’ first affidavit nor annexures CS-8 to CS-12 thereto, and §§17-19, 22 and 24-28 of that affidavit were read as submissions. Seadragon read Ms Sanders’ second affidavit in its entirety but only as evidence of Ms Sanders’ belief as to the need for an expeditious judgment. The Minister did not object to this course.

7    For the reasons which follow, the Minister’s decision should be set aside. The Act is accompanied by the Offshore Electricity Infrastructure Regulations 2022 (Cth) (‘the Regulations’). The Regulations are important for the Minister’s submissions since they deal extensively with the topic of how overlapping applications are to be handled and how licence areas may be varied. However, they only deal with the topic of overlapping applications of ‘equal merit’ (discussed below) and it is not in dispute that the applications in question were not of equal merit.

8    It is convenient to begin with the terms of the Act and the Regulations and to explain the facts in more detail as they become pertinent. The Regulations depart from custom by labelling their constituent provisions ‘sections’. To avoid overlap (a germane endeavour), I will refer to those provisions as ‘regulations’ and to the provisions of the Act as ‘sections’.

The Offshore Electricity Infrastructure Act 2021 (Cth) and the Offshore Electricity Infrastructure Regulations 2022 (Cth)

9    The Act came into effect on 2 June 2022. The objects of the Act are to provide an effective regulatory framework for offshore renewable energy infrastructure and offshore electricity transmission infrastructure: s 3. Both parties’ constructions are consistent with these objects and they therefore do not advance the debate. Largely the issue here concerns what one can glean from the word ‘effective’. I accept that both constructions lead to a result which can be described as effective. For similar reasons, I have not found anything in the explanatory memoranda which accompanied the Act and the Regulations helpful in ascertaining the meaning of s 33(1).

10    The Act presents as an orthodox licensing scheme under which a prohibition is placed on a particular activity coupled with a power to grant a licence to engage in that activity. By s 15(1), the Act prohibits the construction, installation, commission, operation, maintenance or decommissioning of fixed or tethered infrastructure which is offshore renewable energy infrastructure or offshore electricity transmission infrastructure in what the Act refers to as the ‘Commonwealth offshore area’. The Commonwealth offshore area consists of the territorial sea of Australia together with the exclusive economic zone but does not include the coastal waters of a State or the Northern Territory: s 8. In practice, this means that the Commonwealth offshore area runs out from the 3 nautical mile limit to the edge of the exclusive economic zone: see Babington v Commonwealth [2016] FCAFC 45; 240 FCR 495 at 504-505 [42], [47] per Kenny, Perram, Robertson, Griffiths and Perry JJ.

11    The prohibition in s 15(1) is lifted in the case of persons holding a licence: s 15(2)(a). Licensing is regulated by Chapter 3. Four kinds of licence are contemplated: (a) a feasibility licence which authorises the licence holder to assess the feasibility of an offshore infrastructure project and apply for a commercial licence; (b) a commercial licence which authorises the holder to carry out an offshore infrastructure project; (c) a research and demonstration licence which authorises research into or demonstration of offshore renewable energy infrastructure or of a technology, system or process; and (d) a transmission and infrastructure licence which authorises the holder to store, transmit or convey electricity and to assess the feasibility of such works: see respectively ss 30, 39, 49 and 58. This case is concerned with the first kind of licence, a feasibility licence. The grant of feasibility licences is governed by Division 2 of Chapter 3.

12    Common to all of the various licences is what s 29 refers to as ‘the licensing scheme’. Section 29 provides:

29    Licensing scheme

(1)    The regulations must prescribe a scheme (the licensing scheme) relating to:

(a)    applications for licences; and

(b)    the offering and granting of licences; and

(c)    transfers of licences; and

(d)    changes in control of licence holders; and

(e)    management plans; and

(f)    any other matters that this Act provides for the licensing scheme to deal with.

(2)    The licensing scheme may include any other provision that may, under this Act, be included in the regulations.

13    The licensing scheme is contained in Part 2 of the Regulations, Division 3 of which relates to licence applications. Subdivision B deals with feasibility licences whilst Subdivision C deals with the other licences.

14    Section 32 of the Act provides specific instruction on what the licensing scheme is to say about feasibility licences:

32    Applications for feasibility licences

(1)    The licensing scheme must prescribe procedures for:

(a)    eligible persons to be invited to apply for feasibility licences; and

(b)    eligible persons to apply for feasibility licences; and

(c)    applications for feasibility licences to be considered; and

(d)    the Minister to offer to grant feasibility licences.

(2)    The licensing scheme must require an application for a feasibility licence to describe the proposed commercial offshore infrastructure project for the feasibility licence.

Financial offers

(3)    The licensing scheme may provide for:

(a)    the Minister to invite eligible persons that have applied for feasibility licences to submit financial offers in relation to their applications; and

(b)    the Minister to decide which applicant or applicants to offer to grant licences to on the basis of their financial offers; and

(c)    such a licence to be granted only if the amount of the financial offer is paid to the Commonwealth.

15    The critical provision is s 33. I have already set s 33(1) out above but the full provision is as follows:

33    Grant of a feasibility licence

(1)    The Minister may, by written notice, grant a feasibility licence in respect of an area to an eligible person if:

(a)    the eligible person applies for the licence under the licensing scheme; and

(b)    the area is a declared area, or a part of a declared area, under a declaration at the time the licence is granted; and

(c)    the Minister is satisfied that granting the licence would be consistent with any conditions that apply to the declaration; and

(d)    the area meets the requirements in subsection (4); and

(e)    the Minister is satisfied that the licence meets the merit criteria; and

(f)    any other requirements prescribed by the licensing scheme are met.

(2)    The licence area of a feasibility licence is the area in respect of which the licence is granted (other than any part of that area that becomes a vacated area).

Note:    See the definition of vacated area in section 8.

(3)    The notice of grant of a feasibility licence must:

(a)    specify the licence area; and

(b)    state the day on which the licence comes into force; and

(c)    state the end day of the licence; and

(d)    specify the conditions that are to apply to the licence; and

(e)    include any other matters prescribed by the licensing scheme; and

(f)    be given in accordance with the licensing scheme.

(4)    The licence area:

(a)    must be continuous; and

(b)    must not include any part of the licence area of any other feasibility licence or commercial licence; and

(c)    must not exceed the maximum area prescribed by the licensing scheme; and

(d)    must be entirely within the Commonwealth offshore area at the time the licence is granted.

16    Section 33(1)(b) requires the area in respect of which a licence is granted to be a declared area or to be part of a declared area. What is a declared area? Section 17 empowers the Minister to declare a specified area in the Commonwealth offshore area for the purposes of the Act. On 17 December 2022, the Minister exercised this power in respect of an area in Bass Strait off Gippsland, Victoria. The area consists of the three non-contiguous areas marked in red in the following diagram:

17    There is no dispute that Seadragon is an eligible applicant. It lodged its application for a feasibility licence on 26 April 2023. That application was made in respect of the area defined by the continuous black line in the above diagram. The dotted black line within the continuous line represented the area in which it proposed to assess the feasibility of an array of wind turbines. In practice, this meant that the array would be surrounded by a small buffer zone consisting of the gap between the continuous black line and the dotted black line. Regulation 7(1) limits the size of the area for which a feasibility licence may be granted to 700 square kilometres. Seadragon’s application was for that precise area. In the diagram above, the aqua line is of no present relevance and may be disregarded.

18    There were 37 applications for feasibility licences in the declared area. On 22 December 2023, the Minister issued to Seadragon (and a number of other applicants) a notice entitled ‘Notice of Intention Not to Grant a Feasibility Licence’. At this point, it is useful to observe that s 33(1)(e) requires the Minister to be satisfied that a feasibility licence meets the merit criteria. Those criteria are set out in s 34:

34    Merit criteria for a feasibility licence

(1)    For the purposes of this Act, a feasibility licence held or applied for by an eligible person meets the merit criteria if:

(a)    the eligible person is likely to have, or be able to arrange to have, the technical and financial capability to carry out the proposed commercial offshore infrastructure project for the feasibility licence; and

(b)    the proposed commercial offshore infrastructure project is likely to be viable; and

(c)    the eligible person is suitable to hold the licence; and

(d)    any criteria prescribed by the licensing scheme are satisfied.

(2)    The licensing scheme may provide for:

(a)    matters that may or must be considered in any decision under this Act about whether a feasibility licence meets the merit criteria; and

(b)    the suitability of an eligible person to hold a feasibility licence to be assessed with regard to the suitability of other persons (including another person that controls the eligible person); and

(c)    procedures for making decisions under this Act about whether a feasibility licence meets the merit criteria.

19    There is no dispute that Seadragon met the merit criteria. But the Minister’s notice to Seadragon of 22 December 2023 stated that Seadragon’s application had been found to be of lower merit than an application with which it overlapped on two of the criteria in s 34, namely technical and financial capability and suitability.

20    Although no provision of the Act contemplates that applications which have met the merit criteria may thereafter be ranked according to their relative merit, the licensing scheme in Part 2 of the Regulations assumes that applications of equal merit which overlap may be grouped together and then handled under a series of provisions. It says nothing about applications which overlap with applications of greater merit.

21    As already noted, applications for licences are regulated by Division 3 of the licensing scheme. The structure of the licence process starts with reg 9 which allows the Minister to invite eligible persons to apply for feasibility licences. The Minister did this on 17 December 2022 by the Offshore Electricity Infrastructure (Invitation to Apply for a Feasibility Licence) Instrument (No 1) 2022 (Cth). An invitation must specify the day on or before which applications must be made: reg 9(3)(b). In this case, the date specified was 27 April 2023. Seadragon’s application was made on 26 April 2023. Regulation 10(2) then specifies the form that an application must take:

(2)    The application must:

(a)    be made in the manner and form that is:

(i)    approved by the Registrar; and

(ii)    published on the Registrar’s website; and

(b)    be made on or before the day specified in the invitation under paragraph 9(3)(b); and

(c)    include a description of the proposed commercial offshore infrastructure project to be assessed under the feasibility licence; and

(d)    be accompanied by any other information or documents required by the approved form; and

(e)    be accompanied by any other information or documents specified in the invitation under subsection 9(4).

22    The approved form requires an applicant to submit a map of the area in respect of which the licence is sought. Thus, the effect of reg 10(2)(d) was to require Seadragon to submit with its application a map of the area over which it sought the licence. It did so and the area in respect of which the licence was sought appears in the diagram above.

23    In practice, because an applicant for a feasibility licence does not know who else has applied for a feasibility licence or in respect of which parts of a declared area, it is likely that multiple applications might overlap.

Overlaps with existing licences

24    The licensing scheme deals with the problem of overlapping applications in two different ways. The first, which is not directly relevant, arises where the application for the feasibility licence overlaps with an existing licence. This situation is addressed in reg 10(4):

Applications for licences that cover existing licence areas

(4)    If an application for a feasibility licence covers an area that is, or is part of, the licence area of an existing licence, the Registrar may:

(a)    notify the holder of the existing licence that the application has been made; and

(b)    inform the holder of the existing licence of:

(i)    the name of the applicant; and

(ii)    the proposed licence area of the feasibility licence (including a description of the location, shape and size of the area); and

(iii)    the kind of project that the applicant proposes to carry out in the proposed licence area; and

(c)    invite the holder of the existing licence to make a submission in relation to the potential grant of the feasibility licence.

Note:    The licence area of a feasibility licence must not include any part of the licence area of any other feasibility licence or a commercial licence (see paragraph 33(4)(b) of the Act).

25    Because there are only four categories of licence there are only four types of potentially already existing licences, i.e., feasibility licences, commercial licences, research and demonstration licences, and transmission and infrastructure licences. The effect of reg 10(4) is to require the Registrar to notify the holder of the existing licence of the application for the feasibility licence and to invite it ‘to make a submission in relation to the potential grant of the feasibility licence’.

26    Regulation 10(4) must be read with the constraint on the Minister’s power which is set out in s 33(4)(b), namely, that a feasibility licence cannot be granted over any part of the licence area of any other feasibility licence or commercial licence. That might appear to make the procedural fairness regime in reg 10(4) somewhat pointless in the case of those two kinds of licence although not in the case of research and demonstration licences and transmission and infrastructure licences (in respect of which no such prohibition exists). However, a power exists in the Minister to excise from a licence area portions which are not being used. This power is in s 38(1)(c) as qualified by ss 38(2)-(4) which between them permit the Minister to remove an area from an existing licence, either on the licence holder’s application (s 38(2)) or on his own initiative (s 38(3)), because the holder has not carried out any offshore infrastructure activities in the area. These provisions state:

38    Varying a feasibility licence

(1)    The Minister may, by written notice to the holder of a feasibility licence, vary the licence to:

…

(c)    remove one or more areas from the licence area.

…

(2)    A variation under subsection (1) may be made on the application of the licence holder, which must be made in accordance with the licensing scheme.

(3)    A variation under subsection (1) may also be made on the Minister’s own initiative, but only if:

(a)    the variation is made at the same time as:

(i)    the Minister extends the end day of the licence under a provision of the licensing scheme made for the purposes of section 37, if the extension is made as a result of an application by the licence holder; or

(ii)    the Minister makes a decision to transfer the licence under subsection 70(1); or

(iii)    the Minister makes another variation under this section as a result of an application by the licence holder; or

(b)    the Minister becomes aware that there has been a change in control of the licence holder, and the variation is made in connection with that change in control.

(4)    An area may be removed under paragraph (1)(c) only if:

(a)    the licence holder has not carried out any offshore infrastructure activities in the area; and

(b)    the Minister is satisfied that the licence holder does not intend to carry out any offshore infrastructure activities in the area under the licence or under a commercial licence; and

(c)    the removal does not result in the remaining licence area being non‑continuous.

27    The exercise of this power on the application of the licence holder as contemplated by s 38(2) is further regulated by reg 31(1) which provides:

31    Application to vary a licence

(1)    An application to vary a licence must:

(a)    be made in the manner and form that is:

(i)    approved by the Registrar; and

(ii)    published on the Registrar’s website; and

(b)    be accompanied by any other information or documents required by the approved form.

28    One implication arising from ss 33(1)(d), 33(4)(b), 38(1)(c) and 38(4) is that an applicant may apply for a feasibility licence in respect of an area over which, at the time of the application, the Minister has no power to grant a licence. This will occur where an applicant includes in its proposed licence area an overlap with an existing feasibility or commercial licence.

29    In a similar vein (although unrelated to the question of overlap), s 33(1)(b) entails that an application need not be made with respect to an area within a declared area so long as it is declared by the time the Minister grants the licence.

Overlaps between applications of equal merit

30    The second kind of overlap dealt with by the licensing scheme concerns applications for feasibility licences which are of equal merit. The relevant provisions establish a reasonably complex mechanism for determining how overlapping applications of equal merit are to be handled which it is convenient to summarise before setting out the provisions.

31    The mechanism has two stages. In the first stage, the Minister may determine the existence of an overlapping application group: reg 11(2). This can only occur where each application in the group overlaps with at least one other application in the group and, importantly, only where the Minister considers each application to be of equal merit: reg 11(2). The Registrar is then required to invite the members of the overlapping application group to submit revised applications to remove the overlap: reg 12(2). If a revised application is made, it is taken to replace the original application (thereby overcoming the difficulty that a fresh application would be out of time): reg 12(6). This process may resolve the problem of overlaps but equally it may not. For example, one or more of the applicants may not submit a revised application despite the invitation to do so, or the revised applications may still overlap, or some combination of the two.

32    If this occurs, then the Minister may determine that the remaining overlapping applications form a financial offer group: reg 14. In that situation the Minister may invite the members of the financial offer group to make a financial offer to the Commonwealth: reg 15(2). Elaborate provision is then made for determining which of the applicants will be granted feasibility licences: reg 16. Such a determination operates largely, although not entirely, by reference to the financial offers which have been made (or, in some cases, not made).

33    The provisions dealing with the determination of overlapping application groups are regs 11-13:

11    Applications for feasibility licences that overlap—Minister may determine overlapping application groups

(1)    This section applies if:

(a)    the Minister has invited applications for feasibility licences under section 9; and

(b)    2 or more such applications have been made in response to the invitation.

(2)    The Minister may determine that a group of 2 or more of the applications forms an overlapping application group if:

(a)    the Minister considers all of the applications in the group to be of equal merit; and

(b)    each application in the group overlaps at least one other application in the group; and

(c)    the licence areas proposed by all of the applications in the group (including parts of those areas that overlap, and parts that do not overlap) together form a continuous area; and

(d)    the Minister is satisfied that, if not for the overlap or overlaps, a feasibility licence could be offered in response to each of the applications in the group.

Note 1:         For example, if applications A and B overlap each other, and applications B and C overlap each other, applications A, B and C may be in an overlapping application group even if applications A and C do not overlap.

Note 2:     For when applications overlap, see section 4.

(3)    In considering the merit of an application for the purposes of paragraph (2)(a):

(a)    the Minister must have regard to:

(i)    the technical and financial capability that the applicant is likely to have, or to be able to arrange to have, to carry out the proposed commercial offshore infrastructure project; and

(ii)    the likely viability of the proposed commercial offshore infrastructure project; and

(iii)    the suitability of the applicant to hold the licence; and

(iv)    the national interest; and

(b)    the Minister may have regard to any of the matters set out in section 26; and

(c)    the Minister may have regard to any other matters the Minister considers relevant.

(4)    To avoid doubt, the Minister may make more than one determination under subsection (2) in relation to a particular invitation for applications for feasibility licences.

12    Registrar may invite applicants in overlapping application group to revise and resubmit applications

(1)    This section applies if the Minister determines that a group of 2 or more applications for feasibility licences forms an overlapping application group.

(2)    The Registrar must notify the applicants that the determination has been made, and invite the applicants to revise and resubmit their applications to remove the overlap.

(3)    The notice and invitation given to an applicant:

(a)    must be in writing; and

(b)    must set out, for each other applicant whose application overlaps the applicant’s application:

(i)    the area or areas of overlap; and

(ii)    the name of the other applicant; and

(iii)    the kind of project that the other applicant proposes to carry out; and

(c)    may include such other information as the Registrar considers reasonable about the applications mentioned in paragraph (b); and

(d)    may include such information as the Registrar considers reasonable about other applications that cover areas adjacent to, or nearby, the area covered by the applicant’s application; and

(e)    must specify the day on or before which an application, as revised, must be resubmitted; and

(f)    must inform the applicant that any revised application must be in accordance with section 13.

(4)    Subsections 10(2) to (4) apply to an application that is revised and resubmitted in accordance with this section, except that paragraph 10(2)(b) and subsection 10(3) apply as if a reference to the day specified in the invitation under paragraph 9(3)(b) were a reference to the day specified by the Registrar under paragraph (3)(e) of this section.

(5)    An applicant who revises an application in response to the invitation is not required to pay any additional fee for revising or resubmitting the application.

(6)    If an applicant revises and resubmits an application in response to the invitation on or before the day specified under paragraph (3)(e), and the revised application is in accordance with section 13, then, after that day:

(a)    the revised application replaces the original application; and

(b)    the original application is to be disregarded.

Note:    If the revised application is not in accordance with section 13, the original application remains in effect.

13 Requirements for revised applications

(1)    For the purposes of subsection 12(6), a revised application for a feasibility licence is in accordance with this section if the Registrar is satisfied that:

(a)    the revised application is, so far as is reasonably possible, substantially similar to the original application; and

(b)    the revised application does not overlap any other application for a feasibility licence made in response to the same invitation under section 9 (including other applications that are, or are not, in the same overlapping application group).

(2)    For the purposes of paragraph (1)(a), the Registrar may consider:

(a)    the location, shape and size of the licence areas proposed by the revised application and the original application; and

(b)    the details of the proposed commercial offshore infrastructure projects of the revised application and the original application; and

(c)    anything else the Registrar considers relevant.

(3)    If, for the purposes of paragraph (1)(b), the Registrar is comparing the licence area of the revised application to the licence area of another application that has also been revised and resubmitted, the Registrar must have regard only to the licence area of the other application as revised (and not to the licence area of the other application as originally made).

34    The provisions dealing with the determination of financial offer groups are regs 14-16:

14    Applications for feasibility licences that overlap after opportunity to revise and resubmit—Minister may determine financial offer groups

(1)    This section applies if:

(a)    the Registrar has invited 2 or more applicants from an overlapping application group to revise and resubmit their applications under subsection 12(2) (whether or not any of those applicants have done so); and

(b)    the day specified in the invitation under paragraph 12(3)(e) has passed.

(2)    The Minister may determine that a group of 2 or more of the applications forms a financial offer group if:

(a)    each application in the group overlaps at least one other application in the group; and

(b)    the licence areas proposed by all of the applications in the group (including parts of those areas that overlap, and parts that do not overlap) together form a continuous area; and

(c)    the Minister is satisfied that, if not for the overlap or overlaps, a feasibility licence could be offered in response to each of the applications in the group.

Note 1:    For example, if applications A and B overlap each other, and applications B and C overlap each other, applications A, B and C may be in a financial offer group even if applications A and C do not overlap.

Note 2:    For when applications overlap, see section 4.

(3)    If the Registrar has made more than one invitation under subsection 12(2) as a result of a particular invitation by the Minister under section 9, the Minister may make a determination under subsection (2) of this section only after the end of the latest day specified under paragraph 12(3)(e) in any of the invitations under subsection 12(2).

(4)    To avoid doubt, the Minister may make more than one determination under subsection (2) in relation to a particular invitation under subsection 12(2) for applicants from an overlapping application group to revise and resubmit their applications.

15 Financial offers for feasibility licences

(1)    This section applies if the Minister determines that a group of 2 or more applications for feasibility licences forms a financial offer group.

Financial offers for feasibility licences

(2)    The Minister may, in writing, invite the applicants to submit financial offers in relation to their applications.

(3)    The invitation to submit financial offers:

(a)    must:

(i)    include information on how the offers are to be made; and

(ii)    specify the day on or before which the offers must be made; and

(iii)    require the applicants to substantiate their ability to pay amounts offered; and

(iv)     set out the effect of section 16; and

(b)    may specify other requirements to be addressed in the submission of the financial offer.

(4)    A financial offer in relation to an application for a feasibility licence must:

(a)    be made in writing to the Registrar; and

(b)    be made on or before the day specified in the invitation under subparagraph (3)(a)(ii); and

(c)    address any other requirements specified in the invitation.

16 Procedure for dealing with financial offers

(1)    This section applies if the Minister invites, under subsection 15(2), the applicants whose applications are in a financial offer group to submit financial offers in relation to their applications.

Dealing with financial offers

(2)    The Minister may only offer to grant a feasibility licence to:

(a)    the applicant that has submitted the highest financial offer out of the applications in the financial offer group; or

(b)    if, as a result of the operation of subsection (5), there is only one application in the financial offer group—the applicant for that application.

(3)    If there is no single highest financial offer because 2 or more applicants (the tied applicants) have submitted equal financial offers, the Minister may do any of the following:

(a)    if a tied applicant’s application does not overlap any other tied applicant’s application—offer to grant a feasibility licence to that tied applicant;

(b)    for any tied applicants whose applications overlap each other—invite those tied applicants to submit increased financial offers;

(c)    if an invitation under paragraph (b) does not result in there being a single highest financial offer because the financial offers of 2 or more of the tied applicants are equal—offer to grant a feasibility licence to any of those tied applicants, as the Minister thinks fit.

(4)    Subsections 15(3) and (4) apply in relation to an invitation under subsection (3)(b) of this section, and any financial offer submitted in response to such an invitation, as if the invitation were an invitation under subsection 15(2).

(5)    If:

(a)    the Minister offers to grant a feasibility licence to an applicant whose application is in the financial offer group; and

(b)    any of the following occurs:

(i)    the feasibility licence is granted;

(ii)    the applicant withdraws the application;

(iii)    the application lapses;

(iv)    the feasibility licence is not granted for some other reason (including because the applicant does not pay a financial offer in relation to the application); and

(c)    after that occurrence, a feasibility licence could be offered in respect of at least one of the other applications in the financial offer group;

this section applies again to the remaining application or applications mentioned in paragraph (c) as if that application, or those applications, comprised a financial offer group.

Note:    For example, if applications A, B and C are in a financial offer group, and:

(a)    applications A and B overlap each other; and

(b)     applications B and C overlap each other; and

(c)    applications A and C do not overlap each other; and

(d)    the Minister invites each applicant to submit a financial offer; and

(e)    applicant A submits the highest offer;

then:

(f)    the Minister may only offer to grant a licence to applicant A; and

(g)    if applicant A accepts the offer, and the licence is granted—this section applies again, and the Minister may offer to grant a licence to applicant C; and

(h)    if applicant A does not accept the offer—this section applies again, and the Minister may offer to grant a licence to whichever of applicant B or C submitted a higher financial offer.

(6)    If an applicant for a feasibility licence submits a financial offer in relation to the application, the Minister may only grant the licence to the applicant if the amount of the financial offer has been paid to the Commonwealth.

Note:    The financial offer must be paid even if, at the time the licence would be granted, there are no overlapping applications (for example, because all other applicants have withdrawn their applications, or in the case mentioned in paragraph (g) of the note to subsection (5)).

Applicants that do not submit financial offers

(7)    For the purposes of subsections (2) and (3), treat an applicant that has not submitted a financial offer as having submitted a financial offer of nil. Subsection (6) does not prevent the Minister granting a feasibility licence to such an applicant.

The proper construction of s 33(1)

35    Seadragon submits that s 33(1) confers a discretionary power on the Minister to grant feasibility licences and that nothing in s 33(1)(a)-(f) expressly or impliedly prevents the Minister from granting a feasibility licence over a reduced area from that applied for. The Minister denies that this is the correct question. He submits that correct question is whether s 33(1) confers power on the Minister to grant a feasibility licence over a reduced area.

36    I agree with the Minister that this is indeed the correct question. However, the answer to this question is that s 33(1) plainly does confer such a power. The power in s 33(1) is a power in the Minister to grant a feasibility licence ‘in respect of an area’. The only requirements expressly imposed by s 33(1) on that area are (a) that at the time the licence is granted the area be, or be part of, a declared area (s 33(1)(b)); and (b) that the area meet the requirements in s 33(4): s 33(1)(d). In terms, the power conferred by the chapeau to s 33(1) extends to ‘an area’ – any area – which meets those requirements. A reduced area to that sought by an applicant is still ‘an area’ and it follows that the chapeau, if read literally, confers on the Minister the power he denies having.

37    The debate should therefore be framed in the manner suggested by Seadragon. Thus the question is not whether a power to grant a licence over a reduced area can be inferred from the Act (since it is expressly conferred for the reasons just given) but whether there is any reason to read that power as being constrained in the manner suggested by the Minister. In this respect the Minister marshals two broad contentions which centre on s 33(1)(a) and s 33(1)(f).

Section 33(1)(a)

38    As to s 33(1)(a), the Minister submits that the feasibility licence that is the subject of a grant under s 33(1) must be the licence applied for by the applicant. Section 33(1)(a) certainly imposes a requirement that an eligible person should apply for the licence under the licensing scheme. Thus, an application for a licence by an eligible person made other than under the licensing scheme would not meet the precondition to the Minister’s power in s 33(1)(a).

39    I have explained above that the licensing scheme in reg 10 imposes requirements on how an application is to be made. Read together with the approved form it means that, to comply with s 33(1)(a), an applicant must apply for a feasibility licence with respect to a particular and nominated area.

40    However, this is not a feature of the Act. It is true that s 30 contemplates that there shall be a licence area:

30 Purpose of a feasibility licence

The purpose of a feasibility licence is to provide for the licence holder to:

(a)    assess the feasibility of an offshore infrastructure project that the licence holder proposes to carry out in the licence area under a commercial licence (the proposed commercial offshore infrastructure project for the feasibility licence); and

(b)    apply for a commercial licence in relation to the proposed commercial offshore infrastructure project, if the licence holder chooses to do so.

41    But the ‘licence area’ of a feasibility licence (to which s 30(a) is clearly referring) is defined by s 33(2) to be the ‘area in respect of which that licence is granted’ rather than an area specified in the precipitating application.

42    It is also true that ss 33(3)(a) and 33(4) show that a licence must be granted with respect to an ‘area’. But these provisions are concerned with the power of the Minister to grant a licence and contain no mandate as to how an eligible applicant is to apply for a feasibility licence. The closest the Act comes to requiring an applicant to apply for a specific area is s 34(2), the text of which is above at paragraph 18.

43    No doubt, reg 10 gives effect to s 34(2) by requiring the applicant to define the area in respect of which the licence is sought. But reg 10 cannot affect the meaning of s 33(1)(a) (although it can in principle have an effect through s 33(1)(f) – I deal with this effect below). Section 34(2) itself imposes no obligation on an applicant for a feasibility licence to define the area in respect of which the licence is sought. At best, all that one can get from the terms of the Act is an assumption (arising from s 34(1)) that an applicant for a feasibility licence will have described ‘the proposed commercial offshore infrastructure project’. One way of doing so would be to describe the commercial offshore infrastructure project in terms of an area. But this does not itself appear to be a feature of the Act.

44    It is true that the areas in respect of which the Minister can grant a feasibility licence are constrained by s 33(4). However, there is nothing in the Act (as opposed to the licensing scheme) which would prevent an eligible applicant from, for example, applying in a non-specific way for a feasibility licence over any area up to 700 square kilometres located anywhere within the declared area.

45    Returning then to s 33(1)(a), the question becomes whether it is possible, from the terms of the Act, to infer that the Minister’s power to grant a licence with respect to an area is delimited by the area applied for by the Applicant. Since the Act does not require that an applicant apply for a licence with respect to an area, I do not accept that it is. I therefore read s 33(1)(a) in the manner suggested by Seadragon. An applicant must apply for the licence under the licensing scheme and may not apply to the Minister other than under that scheme.

The Regulations and s 33(1)(f)

46    The Minister’s second submission is that it is useful to read together the Regulations and the Act under which they were made in order to identify the nature of the legislative scheme which they comprise. The authority cited for this proposition is Master Education Services Pty Ltd v Ketchell [2008] HCA 38; 236 CLR 101 at 110 [19] per the Court (footnotes omitted):

… It may be useful to read together regulations and the Act with which they were made, in order to identify the nature of a legislative scheme which they comprise. That is not a warrant for the use of the [Franchising Code of Conduct] to construe, and expand, the terms of s 51AD [of the Trade Practices Act 1974 (Cth)], in particular by reference to the nature of the language of cl 11(1). Regulations are to be construed according to ordinary principles of construction. That requires that they be placed in their statutory context. In the case of regulations that includes the legislation under which they are enacted and with which they are required to be consistent.

47    As this paragraph shows, however, it is not permissible to construe s 33(1) by reference to the contents of the licensing scheme. It is true, as the Minister submits, that the licensing scheme deals in some detail with the process for revision and resubmission of overlapping applications of equal merit. However, I do not see how any of this can bear upon the proper construction of s 33(1) other than through s 33(1)(f).

48    Insofar as s 33(1)(f) is concerned, the short of the matter is that the licensing scheme does not deal with overlapping claims which are not of equal merit. As Seadragon correctly submits, there are no requirements prescribed by the licensing scheme which have not been met. If the licensing scheme had included provisions that dealt with the topic of overlapping claims of unequal merit, the answer might well be different. This may suggest that the problem in this case is that the licensing scheme contains a lacuna.

49    The Minister seeks to fill this lacuna in his submissions by practical examples of the consequences which would attend the operation of the Act if the power for which Seadragon contended were found to exist. These include the fact that equally meritorious overlapping applications which also overlap with an inferior application might be denied the opportunity to expand their applications into the area covered by the inferior application (if, as the Minister contends, that application had to be refused). However, equal problems may be constructed in the opposite direction. What good is served by refusing an entire application just because it overlaps to a small extent with a more meritorious application? The situation in the declared area is capable of giving rise to a variety of complex problems in two-dimensional geometry. I do not think that either party gains anything by pointing out the various problems and anomalies that may arise from the other’s construction. What they do demonstrate clearly, however, is that the topic of overlapping claims of unequal merit needs to be regulated.

Result

50    Seadragon is entitled to the relief it seeks in prayers 1 to 3 of its originating application. The Minister must pay Seadragon’s costs of the proceeding.

Associate:

Dated:    8 November 2024