Reviewing compensation for a material change in circumstance in Queensland08 December 2015
When changing the nature, scope or extent of operations in any resources project in Queensland (whether coal, metals, petroleum, gas or otherwise), resource companies may cause a "material change in circumstance" to occur, which would allow compensation to be reviewed under Queensland legislation.
A material change in circumstance could arise from attempts to improve productivity or to minimise costs, or as part of a restart or expansion of activities in anticipation of a return to better economic conditions.
Potential effects of a material change in circumstance
Where there is material change in circumstance, compensation, whether agreed by the parties or determined by the Land Court and whether paid or not yet paid, is able to be reviewed. Either party can apply to the Land Court for a review of the compensation. In practice, the parties will most likely seek to negotiate any changes to compensation before referring the matter to the Land Court.
Where compensation is reviewed, it can either be increased or decreased or held the same, depending on whether the material change in circumstance causes greater or less impact than or has the same impact as previously. If the compensation is reduced and has already been paid, a landowner would be required to repay compensation by the amount by which it is reduced.
What is a material change in circumstance?
The Land and Resources Tribunal found that a change in circumstance is "material" if it is "pertinent or essential" to the compensation that should be awarded. It does not need to be "of substantial import or of much consequence". It is the "type" of change in circumstance that is more relevant than the degree of "impact" of the change in circumstance.
A number of cases provide instructive examples of and comments about a material change in circumstance.
- The Land and Resources Tribunal noted that breaches of undertakings as to future conduct given by a miner would amount to a material change in circumstance.
- The extension of the term of a mining lease after the expiry of the original term of the mining lease until a renewal application was withdrawn was a material change in circumstance.
- The Land and Resources Tribunal found that each of a change in the area of land disturbed by mining operations and a change in the conditions imposed on mining activities could be a change in circumstance.
- After determining compensation for diminution of value of land when the full extent of the area that may be used for mining and the full impact of the mining operations were not known (but were assessed on a particular basis set out in the judgement), in obiter comments, the Land Court said that if the area used and the impacts that arose were not those used in the basis for assessment, then a review for a material change in circumstance would be available.
- The partial surrender of a mining lease (before the expiry of the term) so that it no longer extended over a particular parcel of land was found to be a material change in circumstance because the length of time that the land was impacted by the mining lease was substantially reduced.
- Where a landowner who hadn't submitted any material at the original compensation determination hearing sought to have compensation re-opened, the Land Court found that it was not a material change in circumstance to have failed to make submissions. Also, merely listing alleged impacts on the land also did not amount to a material change in circumstance.
- The Land Court made a comment that an alteration from small scale mining with a significant disturbance at any one time of no more than 10ha to open cut mining of the whole area would be a material change in circumstance.
- The amalgamation of three environmental authorities for three mining leases into a single environmental authority so that instead of allowing 10ha of disturbance on each mining lease now allowed 10ha of disturbance in total was found to be a material change in circumstance.
- After determining compensation in a matter, the Land Court declined to index the amount of compensation in the event that there was a lengthy delay between the compensation determination and the grant of the mining lease (and therefore the payment of compensation). The Land Court stated that if there was a lengthy delay such that the value of the award of compensation was eroded by inflation, the landowners could seek a review in the Land Court on the basis of a material change in circumstance.
- The Land Appeal Court observed that the explanatory memorandum to the legislation introducing the material change in circumstance provision into the Mineral Resources Act 1989 (Qld) identified "operational change" as a circumstance that would make an adjustment to compensation appropriate. This, in turn, suggested that the review provisions are not made applicable simply because of a change in market value over time. The Land Appeal Court also said that there is real reason to doubt that a review for a material change in circumstance would become available simply because of a movement in the market for land between the date of the determination and the date when compensation is paid.
- Most recently, the Land Appeal Court found that the construction of a fence across a formed roadway surface used by the public thus preventing access by the landowner, as well as the mining of the roadway and other land (when the mining company had previously said that it wouldn't be needing that land for mining purposes), constituted a material change in circumstance.
The Mineral Resources Act 1989 (Qld) also contains an example of a material change in circumstance for mining leases, which is "a different mining method that changes the impact of mining operations under the lease."
What this means for industry
If you are the proponent of a resources project in Queensland and are either seeking to:
- change your project for productivity gains or to reduce costs
- scale back your operations until economic conditions improve, or
- scale up your operations in anticipation of better market conditions.
then, depending on how you are changing your operations, there may be a material change in circumstance that could trigger a review of compensation by either party. If your changes are going to have a greater impact, then you may be required to pay additional compensation to any affected landowners. If your changes are going to have a lesser impact, you may be entitled to recover amounts of compensation already paid.
You will need to give some consideration of the potential impacts of any changes that you may make so that you can make provision for changes to compensation and be prepared to initiate negotiations with affected landowners. You may also need to be prepared for court proceedings, especially if a landowner believes that the change will warrant additional compensation to be paid.