Compensation considerations for resources authorities in light of local government rates decision29 May 2020
Landowners may face the prospect of resource activities being carried out on their land through no act of their own, with compensation rightly paid to them by the resource authority holder for these activities. A recent case from the Land Appeal Court of Queensland highlights that local government rates may need to be considered when assessing the amount of compensation payable to the landowner.
In Western Downs Regional Council v Geldard  QLCA 1, the relevant property was subject to a petroleum authority. Gas extraction was being carried out on the property and operating gas wells and associated infrastructure remained on the property. The property had been owned by the petroleum authority holder, but it had subsequently been sold to the Respondent. The Respondent carried out grazing and cropping activities on the property while the petroleum authority holder continued to carry out gas extraction activities on the property, pursuant to the petroleum authority.
The local government had different rates categorisations for the land within its area. Some of these rates categorisations were expressed as applying to the land being used for petroleum activities, and those rates applied whether the petroleum activities were the predominant use or not. Other categorisations with lower rates applied to land that was being used for rural purposes. Also, there were separate rates applicable to petroleum leases and other resource authorities.
The issue in dispute in the appeal was the proper categorisation of the land for rates purposes, with the Respondent contending for the lower rural categorisation based on their use of the land and the Council asserting that the higher petroleum-related categorisation applied.
The Council’s primary argument was that the rate categorisation had to be determined based on what the land was being used for (whether by the owner or not) rather than the use the owner was making of the land.
The Respondent argued that the Council’s interpretation could result in capricious and unintended rating outcomes, using the example that if a small part of a large property were being used for petroleum purposes, the whole of the property would fall within the petroleum categorisation. The Respondent contended that the petroleum lease and the land should be rated separately, particularly as the Respondent landowner had no control over the petroleum authority holder’s activities.
The Land Appeal Court noted that a council may properly levy differentiated rates and may decide the rates categorisations. It further noted that rates are a tax on land, not on the owner of the land. It was also noted that it is the use of the land, not the principal activity of the owner of the land that determines the categorisation. The Land Appeal Court found that the property was correctly rated as being used for petroleum activities since those activities were being carried out on the land and as a result, the higher rating applied.
The Land Appeal Court said that a rate categorisation such as this is neither unfair nor unreasonable and that it is an appropriate exercise of a local government’s power to levy differential general rates on land within its area having regard to its use.
Implications for resource companies
A landowner within the area of a resource authority may find their rates dramatically increased as a result of the activities carried out pursuant to the resource authority. This increase to the rates will likely be recoverable as compensation from the resource authority holder as the increase is likely to be:
- a cost or loss “arising from the carrying out of activities under the resource authority on the land” within s 81(4)(a)(v) of the Mineral and Energy Resources (Common Provisions) Act 2014 (for resource authorities other than prospecting permits, mining claims and mining leases), and
- a loss or expense that arises as a consequence of the grant of a mining claim or a mining lease under s 85(5)(f) or s 281(3)(a)(vi) of the Mineral Resources Act 1989 (Qld).
Further, a change to a rate categorisation may well constitute a material change in circumstances to enable a review of compensation already agreed or determined.
Unlike some other elements of compensation, the amount of any increase in rates should be precisely calculable following any new categorisation of the land by the relevant local council. It will likely be the case that any increase will not be determinable at the time of grant of the resource authority or upon the commencement of resource activities, as it is only when the new rating category is applied that the calculation can be made. The amount will depend on the categorisation system adopted by the relevant council and it will likely differ from council to council and also depending on the particular activities being carried out by the resource authority holder.
Resource authority holders should, therefore, be prepared for claims for compensation to include amounts for changes to rates categorisations with the potential that these amounts may only be payable after a change to a rates categorisation has occurred. It is also not out of the question that the Land Court may make compensation for changes to rates categorisations a standard part of any compensation determination.