Land Court Mining Compensation Decision To Affect Local Government Landowners

Local governments in regional Queensland, particularly western Queensland, will have experience negotiating compensation agreements under the Mineral Resources Act 1989 (“MRA”) for the grant of mining development tenures such as Mining Leases over local government-controlled land, including freehold land held by the local government, reserve land, stock routes and roads.

A recent decision of the Land Court of Queensland in Kelly v Chelsea on the Park Pty Ltd [2020] QLC 36 takes a somewhat different approach to the assessment of compensation under the MRA than what other Land Court decisions before it have taken.

The decision will affect councils whose local government areas and Council-controlled land is heavily affected by mining development.

The Legislation

Section 281 of the MRA identifies the matters which must be considered by the Court when determining compensation.

Section 281(3)(a) provides that, in the granting or renewal of a mining lease, a landowner is entitled to compensation for:

  • deprivation of possession of the surface of land of the owner;
  • diminution of the value of the land of the owner or any improvements thereon;
  • diminution of the use made or which may be made of the land of the owner or any improvements thereon;
  • severance of any part of the land from other parts thereof or from other lands of the owner;
  • any surface rights of access; and
  • all losses or expenses that arise.

The Case

In the Chelsea on the Park case, Member Stilgoe begins by stating that “this case puts an end to the Struber precedents, where the issue of mining compensation was determined by reference to an arbitrary rate totally divorced from the landowner’s actual losses.”

The “Struber precedents” refers to a series of decisions made by the Land Court of Queensland in relation to the Palmerville Station, between various mining leaseholders and the property’s former owners.  Each of the decisions refers to the decision of Wills v Minerva Coal Pty Ltd [No. 2] (1998) 19 QLCR 297, which notes that section 281 merely identifies matters which should be taken into consideration when making an assessment rather than prescribing a method of valuation.  In the Struber precedents, it was determined that $10 per hectare per annum for the mining area and $5 per hectare per annum for the access area was appropriate compensation in the circumstances.

Member Stilgoe found that Chelsea would not be deprived of possession of the surface of the land, since the cattle would be able to roam the property freely and the management of their grazing operation would not be impacted. However, Member Stilgoe found that due to the use of the 15 hectares included in the mining lease by Chelsea, the value of the land would be diminished within the meaning of section 281.  Member Stilgoe valued the compensation at $86.70/ha based on the recent price, the valuation of the neighbouring property and market changes. Further, the Member accepted that the mining operation would diminish Chelsea’s use of the land by 20%.

Consistently with the landowner’s entitlement to be compensated for losses or expenses that arise as a consequence of the renewal of the lease, the Court also considered:

  • a compensation award for fencing. In concluding that no compensation was payable, the Court considered that the mining operator would bear the onus of fencing segments of the mining lease as necessary to ensure livestock were not exposed to danger. 
  • monitoring of access points. Again, the Court identified the necessity for the mining operator to install particular monitoring devices;
  • weed inspections. Compensation for a twice-yearly annual inspection was awarded, to be calculated each year rather than awarded as an upfront cost given the potentially changing cost of those inspections.

Since it was found that Chelsea will be compensated for their expenses on the production of an invoice rather than as a lump sum payment, the additional uplift amount to reflect compulsory acquisition will only be payable on the diminution of value of the land.

The Takeaway 

The takeaway from the Chelsea on the Park case is that compensation assessments under section 281 of the MRA are likely to be more “tailored” to the actual mining development and the evidence of how that development is expected to unfold. 

This differs than the previous approach, which tended to simply adopt the payment of a single lump-sum compensation amount, that often did not sufficiently accommodate the actual impost (including via application of human resources) that a mining development imposed on a landowner.

How This Affects Councils

Councils who own or otherwise hold land in areas that are the subject of mining tenures should ensure that when negotiating compensation with mining operators, any compensation agreement fully accommodates the actual, “on the ground” impacts on the mining tenure, rather than settles simply on payment of a sum of compensation.

Our Local Government Team acts for Councils throughout Queensland in negotiating compensation agreements and notifiable road use agreements between local governments and mining tenement holders. 

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