Compensation: taking out the guesswork

Jamahl Waddington is a Director of Maloney Field Services and has been reviewing the recent decision made by the Land Court of Queensland in relation to explorer compensation liability to landholders for the loss of land value.

In the May 2012 case of Peabody West Burton Pty Ltd & Ors v Mason & Ors, Peabody was looking to gain property access using 6 km of access tracks to develop four exploratory drilling sites over a maximum period of 12 days.

“A negotiation process under the Mineral Resources Act (MRA) was undertaken and both parties obtained valuations to help determine appropriate compensation for the landholder,” Mr Waddington said.

“However, an impasse was reached when Peabody’s valuer came back with a compensation offer of $5,000, while the landholder sought $53,232, of which $50,000 was for diminution (loss) in value of the land.

“With no agreement able to be reached, the matter went to the Land Court of Queensland for determination. This was the first compensation determination under the new land access provisions for exploration under the Queensland Mineral Resources Act 1989.”

The Land Court disagreed with the opinion of the landholders’ valuer that there was diminution in value of the land and the risk identified was beyond the scope of an explorer’s general liability to compensate landholders under the MRA. As a result, no compensation for diminution of value was required.

Other key outcomes from the Land Court’s decision were:

  • There was a clear distinction between the provisions relating to the payment of compensation for the grant of a mining lease and compensation payable for advanced exploration activities under the MRA.
  • For exploration activities, the landholder must be compensated for the actual damage that the explorer does to the landholder’s property in carrying out the exploration activities.
  • The causative effect of any diminution in value of the land must be positively demonstrated to arise as a result of the exploration activities.

“While this case deals specifically with access for coal mining exploration, the issues identified and the outcomes achieved can be directly applied to not only the coal seam gas industry but also the pipeline industry,” said Mr Waddington.

“The Land Court’s decision and implications should help the resource industry when reaching agreement with landholders and ease any negotiation delays.”

This case demonstrates that achieving “˜fair and reasonable’ compensation can be a difficult issue and can cause delays for clients undertaking exploration activities in the upstream area along with development approvals for midstream projects.

“Achieving successful outcomes when dealing with individual properties can be a challenging process,” said Mr Waddington.

“Qualified, experienced and professional valuers are best placed to assess compensation.

“When coupled with high-quality land access professionals, resource companies are well placed to not only achieve timely access to land but also develop excellent working relationships with often the most important stakeholders, the landholders,” said Mr Waddington.

“Whether negotiations between parties reach a satisfactory outcome or end in dispute will often be determined by how the engagement and assessment process is handled from day one.

“No two situations are the same – while it is useful to look at what has been done in similar situations for consistency, each compensation arrangement must truly reflect the impact upon the landholder.

“By undertaking individual assessments companies can also assist to build trust, respect, and develop relationships with landholders by taking the time to understand the property and its operations,” Mr Waddington concluded.

Providing specialist valuation and land access, Maloney Field Services has been working successfully with resource, energy and communication companies assessing compensation for more than 42 years.
For further information call Jamahl Waddington at Maloney Field Services on (08) 8333 2722 or Corporate Conversation on (08) 8224 3535.

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