Australia's foreign investment legislation does not yet clearly address our evolving offshore wind licensing landscape, with offshore wind feasibility licences not neatly sitting within an existing category of actions in the current FIRB regime. However, FIRB has taken a consistent approach in approving recent applications, providing clarity for future foreign participants.
Snapshot
- Applicants will not be granted a feasibility licence (feasibility licence) under the Offshore Electricity Infrastructure Act 2021 (Cth) (OEI Act) if Foreign Investment Review Board (FIRB) approval is required but not obtained.
- While the application of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) to feasibility licences is somewhat unclear, FIRB is taking a consistent approach in categorising them as interests in vacant commercial land.
- The acquisition by a foreign person of a feasibility licence will therefore be a notifiable action requiring FIRB approval unless an exemption applies – which, based on our experience, appears unlikely in most circumstances.
What is FIRB's position?
Feasibility licences do not sit neatly within an existing category of actions under the FATA, yet the Offshore Infrastructure Registrar requires applicants to provide evidence of a FIRB decision (if required) before it will grant a feasibility licence.
There is no publicly available guidance as to how the FATA might apply to feasibility licences, meaning that to date applicants have had to form a view as to whether, for example, feasibility licences should be categorised as interests in 'vacant commercial land', or 'exploration tenements'. However, FIRB has confirmed as part of recent approval processes that it considers feasibility licences to be characterised as interests in vacant commercial land.
What is vacant commercial land?
FIRB's view is presumably based on:
- 'commercial land' under the FATA including 'the seabed of an offshore area', and commercial land being generally 'vacant' if there is no substantive permanent building; and
- 'interests in Australian land' including licences with terms of 5+ years (feasibility licences are to have terms of up to 7 years).
Given the monetary threshold for vacant commercial land acquisitions is $0, a foreign applicant will need FIRB approval unless an exemption applies.
Does an exemption apply?
FIRB approval is not required where an interest in Australian land is acquired from a government body (e.g., where a feasibility licence is granted by the Commonwealth).1
However, this exemption does not apply where telecommunications or other public infrastructure is located on the land. Based on feedback received from FIRB as part of recent application processes, it appears that there is telecommunications infrastructure, in particular broadband cables, under the seabed for much of the declared area off Gippsland, meaning that the exemption does not apply to that land.
Note that the exemption does not apply at all for foreign government investors.
Is the approval process more complex?
Our experience is that, for feasibility licences, the FIRB approval process itself is no less straightforward than the usual process for acquisitions of land in connection with renewables projects.
FIRB has also indicated that it will not impose any development conditions on approvals for feasibility licences (unlike most other approvals granted for vacant commercial land, where FIRB generally seeks to ensure that the land is put to productive use within a reasonable timeframe). Presumably FIRB considers that development conditions are not required in these circumstances on the basis that the risk of land banking is low.
What's next?
Given the practical difficulty in determining the presence of telecommunications or other public infrastructure, the prudent approach is to seek FIRB approval if you are applying for a feasibility licence in other processes.
If you are a non-foreign government investor and believe the exemption above might apply, you can submit this position to FIRB in your application. If FIRB agrees, you should be refunded your application fee.
Undertaking this process will also provide applicants with certainty when dealing with the Offshore Infrastructure Registrar, particularly as we expect that FIRB will take the same approach in other licence areas (such as the declared Hunter area and proposed Southern Ocean and Illawarra areas).
Footnote
1. Section 31 of the Foreign Acquisition and Takeovers Regulations 2015 (Cth).
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