On Wednesday 29 April 2021, judgment was handed down in the Land Court in the case of Horizon Minerals Ltd & Anor v Stacey  QLC 17. HopgoodGanim Lawyers acted for the exploration companies (Applicants) in the proceedings which determined the compensation payable to a landowner for mineral exploration activities. The landowner submitted that compensation should be assessed at $723,699.50 and the Applicants submitted that compensation should be assessed at $56,825.50. The judgment considers the calculation of compensation under Mineral and Energy Resources (Common Provisions) Act 2014.
The Applicants are the holders of an exploration permit for minerals which overlaps part of the landowner’s property in Richmond, Queensland.
The landowner operates a business of breeding, backgrounding and fattening cattle. The part of the land on which the exploration activities were undertaken is divided into six paddocks which are operated on a rotational grazing basis so that the grass may recover from the pressure of grazing.
This case concerned the compensation payable by the Applicants to the landowner in relation to an exploration program.
The exploration activities
Under the Mineral and Energy Resources (Common Provisions) Act 2014 (MERCPA), exploration companies are required to undertake a series of steps to attempt to negotiate the amount of compensation payable to a landowner before undertaking exploration work. However, if compensation cannot be agreed, the matter can be referred to the Land Court and the exploration work can be completed whilst compensation is later determined by the court.
The exploration program in this matter was undertaken on the Land from July to August 2019, and involved the drilling of 333 holes of 10–15cm diameter to a depth of 20–30m. Approximately 20km of existing tracks were used. In order to drill the holes, the Applicants needed to depart from the existing tracks, and the vehicles drove across the downs, leaving tracks between the drill holes. Ultimately, the court found that only 0.4% of the land was impacted by the Applicants’ activities.
The issues to be determined
Following completion of the exploration program, the main issues in dispute in the proceedings concerned:
- whether the rehabilitation of the land required the complete de-stocking of the land for a period of 24 months;
- the extent of the land adversely impacted by wheel tracks;
- whether the loss of productivity is limited to losses in carrying capacity of cattle for a period during which the rehabilitation occurs or includes the costs of de-stocking;
- the extent of the rehabilitation period as a result of the impact of the activities; and
- the extent of the reduction in the carrying capacity as a result of the impact of the activities.
Diminution in the value of the land was not a point of contention, provided the affected area was rehabilitated. The main issue in dispute concerned how rehabilitation was to be carried out and the costs that flowed from this.
The landowner submitted that the compensation payable to it was $723,699.50 which included a payment of $654,625 for loss of productivity on the basis the land needed to be completely de-stocked for 24 months.
The Applicants submitted that the total compensation to be payable to the landowner was $56,825.50. This amount was made up of amounts for loss of productivity (based on the size of the affected area), labour for drafting cattle, spot spraying, expert evidence to monitor pasture conditions, landowner’s time prior to and during activities, landowner’s time during rehabilitation, and negotiation costs.
In considering the compensation payable, the Land Court considered the matters set out in section 81 of MERCPA which link any compensation payable to loss or expense arising from the Applicants’ use of the land. The court was required to consider what was necessary in order to rehabilitate the disturbed area. The court found that it is necessary to consider its size and shape and whether or not the disturbed, affected area can be rehabilitated without removing stock from the whole of the land area for two wet seasons.
An agronomist appointed by the Applicants provided evidence that the affected area can be rehabilitated without completely de-stocking the land, by using the existing system of rotation of stock through the six paddocks into which the land is divided for grazing purposes with some reduction in stock numbers.
The area affected by the Applicants’ activities was determined to be the length of the wheel tracks created multiplied by the width of the disturbed area, plus the area of the disturbance due to the 333 drill holes. The court determined that the total area of the land directly affected could not be more than 0.4% of the land requiring a reduction in cattle numbers of 2.4 head, resulting in foregone income of $1,478 per annum.
On this basis, the court accepted the Applicants’ assessment of compensation and ordered that the compensation payable to the landowner was $56,825.50 consisting of:
- the sum of $38,648 compensation payable pursuant to section 81 of MERCPA; and
- the sum of $18,177.50 for costs pursuant to sections 91 and 96B of MERCPA.
This decision is a good result for the exploration industry in Queensland with the Land Court affirming the position that compensatable effects under MERCP are referable to actual losses suffered as a result of the activities and focussing its assessment on the area of land actually affected by the activities.