The Peabody case provides the first judicial guidance on the land access regime, but doesn't resolve all of the uncertainty.

The Land Court has recently handed down its first decision on compensation under the new land access regime (Peabody West Burton Pty Ltd v Mason [2012] QLC 0023). This case concerned the proposed undertaking of advanced activities, being four drill pads, 3km of main tracks and 3km of minor tracks, on an exploration permit for coal under the Mineral Resources Act 1989 (Qld) (MRA). The total drill program was expected to be of 12 days duration.

This case provides the first judicial guidance on the land access regime. However, the case does not resolve all of the uncertainty in the way the legislation operates and will be applied. This article will examine what the case means and, perhaps more importantly, what the case does not mean for future land access negotiations and agreements.

Diminution in value of the land

The Land Court looked at each head of compensation in the definition of compensable effect under section 13 of Schedule 1 of the MRA separately. The key issue in dispute by the parties in this case was in relation to whether or not the proposed exploration activities would result in diminution in value of the land.

The Land Court said that "in simple terms, under Schedule 1 [of the MRA] the landholder is compensated for the actual damage that the explorer does to the landholder's property in actually carrying out the exploration activities". The Land Court found in this case that diminution in value of the land did not include diminution in value of the land arising from:

  • the grant or mere existence of the exploration permit on or over the land;
  • the risk of the grant of a mining lease or the carrying out of activities under a mining lease in the future;
  • the current "coal boom of unprecedented proportions"; and
  • the aversion in the rural property market to the risk of mining.

This decision is consistent with the position that arises if multiple sets of exploration activities are undertaken over time by the holder of a mining or petroleum tenement during its term on a single block of land. If the landowner's arguments had been accepted in this case then it would have followed that each time the same tenement holder sought to carry out a different set of activities on the same land, the landowner would have received compensation for the grant or existence of the exploration permit or the other matters ultimately rejected by the Land Court. This would have resulted in the landowner "double dipping" on compensation as they would be compensated for the same matters (which were unrelated to the specific activities to be carried out) each time a new set of activities were to be carried out.

The Land Court did acknowledge that in some circumstances, exploration activities may cause a diminution in value of the land for which the landowner could be entitled to compensation. The example given by the Land Court was if the exploration activities caused a fracture in an aquifer that was the main source of water for the land and the capacity of that water was severely diminished as a result.

What it means: Diminution in value of the land must arise from the carrying out of the activities. It will require evidence that the specific activities will have an ongoing effect which diminishes the value of the land in order for such a claim for compensation to be awarded under this head.

What it does not mean: It does not mean that diminution of value of the land from advanced activities can never occur. If demonstrated by the evidence, the Land Court may be prepared to award an amount for diminution in the value of the land.

Deprivation of possession of the surface land

The parties agreed an amount of $380 for compensation for deprivation of possession of the surface of the land. The Land Court awarded the amount agreed.

What it means: The Land Court saw no reason to look behind or go against an agreement reached between the parties in relation to deprivation of possession of the surface land.

What it does not mean: It does not mean that compensation for deprivation of possession of the surface in all cases will be as low as that determined by the Land Court in this case. The issues that will be relevant to determination of compensation for deprivation of the possession of the surface of the land will likely depend primarily on the duration of activities proposed to be undertaken.

Diminution in the use that may be made of the land

The Land Court recognised that the land used by the resource company would not be available for use by the landholder during the period that the exploration activities were being undertaken. The Land Court adopted a method of assessment used by one of the expert valuers in this case to determine the compensation for diminution in use. In summary, the method adopted was to assess the impact by reference to the area affected multiplied by the loss of revenue earning capacity for that affected area multiplied by the duration of the disturbance.

However, while accepting this methodology, the Land Court took a conservative approach and increased the area assessed by the valuer to allow for areas that may be affected by dust deposition from the exploration activities.

What it means: This methodology determines compensation based primarily on the area to be disturbed and the duration of the disturbance rather than merely on the nature of the activity to be carried out. Using this methodology has resulted in a determination of compensation under this head which appears to be significantly less than the amounts being sought by some landowners in commercial negotiations. This decision may result in a re-evaluation by the negotiating parties of their expectations of the quantum of compensation that the Land Court is prepared to order which should flow through into negotiations preceding any Land Court action.

What it does not mean: It does not mean that all determinations of compensation for diminution in the use that may be made of the land will necessarily be as low as that determined by the Land Court in this case. Diminution in use will depend on the nature of the activities proposed to be undertaken, the duration of those activities and how they will effect the use of the land. Where those activities, their duration and their impacts warrant a higher amount of compensation, the Land Court will likely make a correspondingly higher determination.

Landowner time

The parties agreed an amount to be paid for the landowner's time. As the amount was agreed by the parties, the Land Court included such an amount in its assessment of other costs along with valuation costs agreed by the parties. As the parties agreed an amount, the Land Court did not question whether compensation should properly include landowner time nor whether the rate was reasonable.

What it means: In relation to landowner time, this case means that the Land Court saw no reason to look behind or go against an agreement reached between the parties.

What it does not mean: As the Land Court was not called upon to make a ruling as to whether landowner time falls within the ambit of compensation, this case should not be taken as a given that landowners will receive an amount for their time. Further if landowner time was within the ambit of compensation, the hourly rate for the landowner has also not received any judicial comment.

Costs

The landowner's valuer attended the mediation conference ordered by the Land Court (as distinct from the mediation conference during the negotiation phase prior to the commencement of the Land Court proceedings) as well as the Land Court hearing, including the site inspection.

The Land Court considered the scope of costs recoverable under section 13(4)(b) and (c) of Schedule 1 of the MRA and recognised that once matters progress to the Land Court, the scheme of negotiation under Schedule 1 of the MRA ceases to apply. Any costs incurred in that part of the process are not recoverable as compensation under Schedule 1 (but may be recoverable in accordance with section 34 of the Land Court Act 2000 (Qld)).

The Land Court determined that the valuer's costs of attending the Land Court ordered mediation and the Land Court hearing where not within the scope of compensation recoverable by the landowner under Schedule 1 of the MRA. Such costs may be recoverable in accordance with the costs provisions of the Land Court Act 2000 (Qld). However, the Land Court did order that that the valuation fees of the landowner's valuer (which were agreed by the parties) were part of the compensation payable to the landowner.

The Land Court did not make any order in relation to the costs of the Land Court proceedings.

What it means: The amount payable by way of compensation under the MRA for the accounting, legal and valuation costs reasonably and necessarily incurred by the landowner only continues until the commencement of Land Court proceedings. Costs incurred after that time are to be determined in accordance with the Land Court Rules.

What it means: Not all costs incurred by a landowner for valuer costs (and potentially also for accounting and legal costs) may be recoverable by way of compensation. The costs must be necessarily and reasonably incurred and must arise prior to the commencement of the Land Court proceedings.

Quantum of compensation

The Land Court ordered compensation in the amount of $3,220.

What it means: As discussed in the context of the individual heads of compensation, the amount of compensation ordered by the Land Court appears to be considerably less than amounts that have been sought by landowners in negotiations for conduct and compensation agreements. This amount should mould future expectations of the amount of compensation that Land Court is likely to award which should in turn influence the negotiations for conduct and compensation agreements.

What it does not mean: Each case will turn on its facts, which will depend on the nature, extent and duration of activities proposed to be carried out as well as the particular qualities of the land on which they are to be carried out. It is not necessarily the case that all future awards of compensation will be in the same order of magnitude as this case. In other words, while this case provides some guidance of the amount of compensation that may be payable in future, but the merits of each case will need to be determined when assessing compensation.

Conduct and compensation agreement conditions

The resource company sought an order that access to the land be permitted in accordance with the terms of a conduct and compensation agreement which had been submitted by the resource company to the Land Court. The terms of the conduct and compensation agreement appear were the subject of negotiation by the parties but were not finally agreed by the parties.

The Land Court made the order sought by the resource company pursuant to section 363 of the MRA (which sets out the substantive jurisdiction of the Land Court) in relation to the terms of access on the basis that the order was not controversial and had not been opposed by the landowner.

What it means: The decision of the Land Court in Endocoal Limited v EMIN Pastoral Company Pty Ltd [2012] QLC 0011 left open the issue of whether the Land Court could only make a determination about compensation or whether its jurisdiction also enabled it to make orders in relation to access to the land as well as compensation. The Land Court's reference to section 363 of the MRA in this latest case suggests that the Land Court considers that it has power to make orders in relation to access as well as compensation.

What it does not mean: However, as the order was unopposed, the scope of the Land Court's ability to make orders as to access has not been tested in the Land Court. It remains to be seen whether there are limitations on the Land Court's ability to impose conditions on access under the land access regime.

Conclusion

While the decision in this case provides some much needed certainty in relation to the operation of the land access regime, there are a number of issues which are left open. These uncertain elements will continue to exist and test the parties in negotiations until further cases are heard in the Land Court.

Resources companies operating in this space may take some comfort that the quantum of compensation may be less than that being sought by some landowners. But they should also be cognizant that each case will be decided on its merits and necessary regard must be had to the character of the land on which the activities are to be carried out as well as the nature, duration and extent of the proposed activities.

It is also worth noting that the LNP Government is considering the findings of the Land Access Review Panel's Report, and that if the legislation is changed, the certainty created by this case may be lost until new decisions under any or amended new legislation are handed down.