Land Court looks closely at impacts of mining lease to determine compensation

In brief

The case of Valantine v Henry [2018] QLC 21 concerned an application to the Queensland Land Court for compensation to the relevant landowner for the grant of a mining lease. 

The land in question, known colloquially as 'Flat Creek Station', is located approximately 28km south, south-west of Georgetown. The property is 13,800 hectares and is predominantly used for grazing, cattle breeding and fattening, and eco-tourism. The mining lease is located on the land over a total area of 58.16 hectares. It was sought for a period of 20 years.

The Court considered the following when determining the amount of compensation payable to the landowner:

• the value of the land;
• the total area of the mining lease;
• the changes to the Respondent's access to the land and overall land use; and
• the Respondent's right of entry and access to the mining lease area and whether that right may be excluded by the mining lease.

The Applicant argued that compensation should be paid over only a limited area of the mining lease area. However, the Applicant's submissions included an offer of compensation for the whole mining lease area, payable per hectare. The Court noted inconsistencies in the Applicant's position.  

The Court stated that, but for the submissions of the Applicant, a lower payment of compensation may have been awarded to the Respondent. Subsequently, the Court determined compensation payable in the amount of $20,000, by way of yearly instalments of $1,000 over the 20 year term of the mining lease.

Consideration of principles under the Mineral Resources Act 1989 

The Court had regard to sections 281(3) and 281(4) of the Mineral Resources Act 1989 (MRA) which state the relevant issues to be considered. Under these sections, the Court relevantly considered the deprivation of the Respondent's possession of the surface of the land constituting the mining lease area, diminution in the value of the Respondent's land and any loss and expense arising as a result of the mining lease. 

The Court made note that while the MRA sets out such matters to be considered, it fails to define any method of assessment. The Court therefore applied the overriding principle of equivalence, as stated in the case of Richardson v Barrett [2001] QLRT 89, which seeks to ensure that, so far as money can do it, landholders are to be placed in the same position as if the mining lease was not granted.

Submissions regarding compensation 

The Applicant submitted that only five hectares of the Respondent's land would be disturbed at any one time, even though the relevant Environmental Authority allowed for disturbance over 10 hectares. On this basis, it was submitted that the Respondent would have access to 99.9959% of the total land for grazing and other business activities. Other relevant submissions included the rehabilitation of the mining lease land and evidence that the value of the land had increased as a result of past mining activities.

The Applicant's Compensation Statement proposed a total payment of $14,141.60 for the term of the mining lease; payable in equal annual instalments. The submission contemplated 20 years of compensation at $707.08 per year. This total included a payment of $11.45 per hectare plus 10% pursuant to an assessment under section 281(4)(e) of the MRA. 

However, the proposed order also sought to pay the total payment of $14,141.60 in equal yearly instalments once mining commenced. The Court found this to be inconsistent with the Compensation Statement which would allow, if mining did not commence for 10 years, for the yearly payment to be $1,414.16.

The Respondent submitted that the impacts on cattle grazing, farm infrastructure and the diminution in value of the land, amongst other considerations, were relevant to the award of compensation. The Compensation Statement calculated the total amount of compensation payable to be $38,451.60. This was based off a higher base rate per hectare of the mining lease, as well as an additional charge for access to and from the mining lease area. 

The Applicant's right to exclude the Respondent from the mining lease area

The Court considered sections 235 and 403 of the MRA which had been the subject of a number of similar judicial decisions. Section 235 relates to the general entitlements of the holder of a mining lease while section 403 provides for offences regarding land subject to a mining claim or mining lease. The right to exclusion was deemed relevant in the circumstances of this case. 

In determining the applicability of the relevant sections, the Court relied on observations from  President MacDonald in Barrett v Weir and Gregcarbil Pty Ltd [2009] QLC 182 (at [26]) who relevantly found as follows:

"the lessee is entitled to go on to and remain on the mining lease area for purposes connected with mining only. The mining lessee is not given a right to exclusive possession of the lease area."

In this case, compensation was determined having regard to the fact that the Respondent's cattle could continue to graze on the undisturbed area of the mining lease area. The Court determined that the Applicant's entitlement to compensation was in respect of the loss of carrying capacity or agistment for the whole of the mining lease area.

The Court relied upon sections 235 and 403 of the MRA to conclude that the mining lease would not grant the Applicant a right of exclusive possession. The Court concluded that the Respondent would only be awarded compensation for nuisance as a result of the mining activities on under 20% of the total mining lease area, the "blot on title" and diminution in the value of the land. 

Determination of compensation

The Court noted the discrepancy between the Applicant's intention to compensate for a limited area of the mining lease area and its submission that compensation was payable for the whole area. The Court determined that the Respondent is entitled to compensation from the date of the grant of the mining lease.

In conclusion, the Court applied the principles of ERO v Henry [2015] QLC 22 and applied an amount of $17 per hectare for compensation for the area capable of being significantly disturbed by the mining lease. For the remaining area under the mining lease, the Court accepted the Applicant's submission that compensation be calculated based on $11.45 per hectare. It was noted that, but for the submissions of the Applicant, a determination less than $11.45 per hectare may have been awarded. 

Conclusion

The Court therefore ordered that compensation in the total amount of $20,000 be paid in equal yearly instalments for a period of 20 years, with the first instalment payable within one month of the grant of the mining lease.