The term ‘Social Licence’ is getting a lot of air play from activists, not just in the oil & gas sector, but in many sectors, even banking!

This official sounding term must be something official, as it is an ‘official licence’, isn’t it?

The Norwood Resource (TNR) have reviewed the term ‘Social Licence’ which seems to mean different things to different people, and can seemingly be interpreted any way one wishes to interpret it. It also seems illusionary since the term is so subjective, and as a consequence its meaning is uncertain and not defined and seems to vary from circumstance to circumstance, and one cohort to another, and even one time period to another!

The following is a review of this apparent mythical beast, by Tony Milnes and Bruce Holland from TNR.

SOCIAL LICENCE – MYTH or FACT?

So, what is the Social Licence and where do I get it?  What are the requirements? Is it enduring? Do I renew every year? Which Government Department issues it?

Since it is only Governments, through their respective Departments which issue licences the issuing of a Social Licence must come from them?

Let’s start by talking about minerals, coal, uranium, oil and gas resources (minerals and energy resources) which are a vital part of any community’s wealth and livelihood.

Apart from the USA, where minerals and energy resources are owned by the landholder, in many other countries, such as Australia and the UK, these commodities are the property of the Crown (Federal Government or respective State and Territory Governments), and hence the community at large.  That is, everyone in the community ‘owns’ the mineral and energy resources below the ground level. Mining or extraction of the mineral and energy resources is undertaken on behalf of the community at large by appropriately qualified companies or industries licenced and regulated by Government(s), which are elected by the community as a whole.

Insofar as licencing for exploration and development is concerned, there is a Department, Division or section of Government, in each jurisdiction that administers all activities relating to the initial finding of (exploration for) mineral ores and oil & gas accumulations and their subsequent development (extraction and processing).

For example, in South Australia, the Government Department of Energy & Mining (Government Departments change their name from time to time though) has responsibility for the review of applications and the subsequent issuing of Licence’s. This is clearly stated on its website:

In South Australia minerals are the property of the government and managed on behalf of all South Australians.

Any individual or company wishing to conduct exploration or mining activities in South Australia must first obtain the appropriate licences from the Mineral Resources Division within the Department of State Development.

The Mineral Resources Division is responsible for administering and regulating the state’s mineral resources industry and makes available a wealth of information and case management support to assist potential licence holders in their endeavours. 

Thus, any individual or company wishing to conduct exploration or mining activities must first obtain the appropriate licences from the Government. Those applicants which are successful in obtaining a licence are then regulated by the Government (through its relevant Department) to work on exploring for and possibly later extracting and processing the mineral and / or energy resources, all in accordance with the relevant Government Acts and Regulations which apply to the exploration and production of that resource.  All relevant guidelines (applicable Law and Regulations) and information necessary for proceeding are published and available to the community.

There is no mention in the Law or Regulations that an applicant must receive a Social Licence. The Social Licence requirement simply does not exist in Law or regulation.

There are however, clear requirements for applicants to consult widely within the local communities as they do proceed.  The objective here is to enable the local community to raise questions and concerns that they may have directly with the applicant, and for the applicant/s to impart their plans, and to understand the local issues, and modify their plans / activities to lessen community disruption and concerns where appropriate etc. One objective to is build trust and a ‘working relationship’ between the local community and the applicant. Further, should the project be successful, the applicant has the opportunity to outline any benefits which may flow to the local community from hosting these activities, such as jobs, new skills, increased local service functions from the local community, etc.

In Australia, there are not many examples of landowners sharing directly in a royalty stream that may be generated from mining or energy resource extraction from deposits underlying their property, unlike in the USA, and unlike the payment schemes that accompany the installation of wind ‘farms’ in Australia.  Perhaps there should be!

It should be noted, the SA Government did announce (in 2017) that for any new oil & gas discoveries in the South East of South Australia, the landowner would be entitled to a 10% share of the royalties which would flow to the SA Government from the production of any oil and gas from their landholding. This proposed sharing of the benefits from oil & gas production is in addition to the normal compensation paid by the companies to the landowners for disruption, loss of land use and other impacts from the exploration and production process.

The SA Government royalty is 10% of the well head value of any oil and gas produced. The royalty payable by operating companies varies from jurisdiction to jurisdiction and resource to resource. It is also worth noting that commercial renewable energy producers (wind farms and solar farm installations) do not pay any royalties to the relevant State Governments or Federal Government, perhaps they should!

In summary, in Australia the Government (Federal and relevant State and Territory, according to which jurisdiction the minerals and energy resources are located) manages the exploration for and the extraction of minerals and energy resources (eg coal, oil & gas) from areas of the continent where they are located (including offshore) on behalf and for the benefit of the relevant Australian community, which effectively ‘own’ the resources.  The community expects that the Government returns the financial benefits of these industries to the community, although this is not always a clear and transparent process.

In short, there is no such thing as a ‘social licence’ for Government(s) and industries to proceed in this endeavour – it is the way it is!

It might be that the payment of a royalty stream to the local landowner would assist in compensation for the disturbance of his land.  It might be that more foresight by Government(s) in ensuring that disturbed land is properly rehabilitated to some form of valued land use after mineral and energy resource extraction is completed would defray community concerns and reduce opposition to projects being initiated.  These are, although important, side issues in respect to this discussion on Social Licence.

The ‘Social Licence’ industry promoted by activists to mineral and energy resource development in Australia has grown beyond all reason, especially for an invented condition.

Many commentators and activists in particular, confuse social acceptance, or community acceptance or even their own personal view with the mythical, confusing, ill-defined term, of so called ‘Social Licence’!

Social Licence simply does not exist!

This invented term is confusing, it means different things to different people, and is an intangible concept, which may be said exists today, but be gone tomorrow, but may reappear the day after, depending upon a person’s perspective.

This invented, ill-defined term simply needs to be withdrawn from our common language.

T Milnes / B Holland – March 2019.