Agriculture should not forget to challenge the status quo on mining and gas

Landholders in resource-rich areas of Queensland have become accustomed to a long-standing but sub-standard statutory regime that allows resource authority holders to access private land without the landholder’s consent.

Mining and gas companies like to call it “co-existence”. It sounds pleasant.

In the interests of allowing resource authority holders to extract resources, generating royalties for the Queensland Government, the statutory regime for land access creates a window of opportunity for landholders and resource tenement holders to negotiate a mutually acceptable arrangement.

However, it also includes mechanisms that slam that window shut with tough consequences for landholders who hold out for too much, for too long. As a result, the regime unfairly prejudices landholders’ bargaining power in negotiations, right from the beginning.

As an industry, agriculture should be advocating for fairer laws.

 

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Landholders’ statutory position

In Queensland, resource authority holders are entitled to access private land subject to a statutory requirement to pay compensation for certain “compensatable effects” of their activities. The “compensatable effects” that a landholder can claim include “any cost, damage or loss arising from the carrying out of activities under the resource authority on the land”.

Additionally, resource authority holders are obliged to pay a landholder’s “negotiation and preparation costs” (defined to mean accounting costs, legal costs, valuation costs and the costs of an agronomist) necessarily and reasonably incurred in entering or seeking to enter into a Conduct and Compensation Agreement (CCA).

In summary, the statutory regime is designed to leave a landholder “no worse off” as a result of the resource authority holder’s access, not any better off.

Further, the onus is on the landholder to prove that a “compensatable effect” is not merely a risk or contingent liability. That is, a landholder cannot claim an allowance for the possibility of adverse effects (such as groundwater contamination or drawdown, or biosecurity hazards) but instead must negotiate to preserve a right to further compensation if such risks materialise. Nothing in the legislation requires a resource authority holder to provide security (for example, a bank guarantee or bond) to a landholder for such contingent liabilities.

 

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Statutory negotiation process

A resource authority holder is required to attempt to negotiate a CCA with the landholder prior to carrying out “advanced activities”. These “advanced activities” are activities that have more than a minor impact on the land or the landholder’s business activities.

The statutory process compels the landholder to negotiate. If agreement is not reached within 20 business days, the resource authority holder can instigate an alternative dispute resolution process. If agreement is still not reached within 30 business days after the alternative dispute resolution facilitator is appointed, the resource authority holder can apply to the Land Court for it to decide the amount of compensation and the other conditions of access. At that point, the resource authority holder becomes entitled to access the landholder’s land and commence the proposed activities, potentially long before the Land Court makes its decision about compensation and conduct rules.

Further, when parties are at a point where they are no longer “seeking to enter into a CCA”, such as when the matter is referred to the Land Court, the landholder ceases to have a right to recover legal, accounting, valuation and other professional costs.

To put this process in context, the resource authority’s aim is usually to obtain access as quickly as possible at the lowest possible cost. A landholder will generally want to minimise the potential disturbance (to business operations, health, safety and amenity), maximise the compensation and preserve rights to further compensation if something goes unexpectedly wrong.

Therefore, there is usually only a brief window in which the parties’ interests might align. It occurs at the beginning of the process, when a resource authority might be willing to pay a “premium” in exchange for access earlier than can be achieved through the statutory regime or without the relationship damage a heavy hand may cause.

It follows that there comes a point in negotiations when the landholder must choose between accepting what is on offer and pressing for more in the Land Court. However, much of it might vary from case to case or be stretched in any particular case.

It is not remarkable that the landholder must make such a choice. However, it is remarkable that the statutory regime encourages the landholder to settle by removing the commercial incentive for the resource authority holder to improve its offer (by granting it immediate access) and requiring the landholder to pay the landholder’s own costs beyond that point.

 

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Possible solutions

Ideally, from a landholder perspective, negotiations with resource companies would be voluntary: either the resource company entices the landholder with a mutually acceptable arrangement, or it stays away.

This might not solve the neighbouring landholders’ potential problems, but it is beyond the scope of this article to address possible improvements to separate planning and environmental laws.

Besides, the argument against a landholder’s “veto” power is that such a regime could deprive the other people of Queensland the right to benefit (via royalty or more directly) from the extraction of state-owned resources.

Another option might be to give the resource company, if it cannot reach an agreement with the landholder, the right to compulsorily acquire the landholder’s entire property at market value plus a statutory premium. Potentially, that right could be subject to an appropriate authority deciding that the resource project was not likely to have a significant impact on the broader area’s agricultural potential – for example, in an extension of principles contemplated by the Regional Planning Interests Act).

At the very least, the following two changes to the current statutory regime are necessary to bring more balance to the respective bargaining positions of landholders and resource companies:

  1. If a land access matter is referred to the Land Court, the resource authority holder should only be entitled to access the property after the Land Court has made its decision (on compensation and conduct rules), not before as is currently the case; and
  2. The resource authority holder should be obliged to pay the landholder’s legal, accounting, valuation and other professional costs for the entirety of the process, unless and until the Land Court determines that such costs are not being incurred in good faith.

 

In the meantime, Thynne + Macartney will continue to assist farmers and graziers to secure the best possible outcome in their negotiations with resource companies.

This information is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

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