By Martin Klapper, Partner and Gavin Batcheler, Senior Associate
Under legislation passed by the Queensland Parliament last week, an acquiring authority will be able to compulsorily acquire a resource interest (for example, a mining or petroleum tenement) without having to pay compensation that has regard to the value of the resource.
The compulsory acquisition of land will extinguish resources interests where the Minister is satisfied that they are incompatible with the purpose of the acquisition.
Here, partner Martin Klapper and senior associate Gavin Batcheler explain how the new legislation affects compensation for the compulsory acquisition of resources interests.
- The Mines Legislation (Streamlining) Amendment Bill 2012, passed on Wednesday 22 August, will become law when it receives assent - a step that is anticipated shortly.
- Under the legislation, resource interests will only be extinguished where the Minister is satisfied that they are incompatible with the purpose of the acquisition.
- Payment of compensation to resource tenure holders will exclude allowance for the known or inferred value of the resources in the land, and that cannot be recovered due to the extinguishment or effect on the resource interest.
- Acquired land may be re-granted to an applicant, which could be the resource holder or any other third party, if the Minister is satisfied that re-granting the land is compatible with the purpose for which the land is being used.
Under the Mines Legislation (Streamlining) Amendment Bill 2012, an acquiring authority can compulsorily acquire a resource interest without an obligation to pay compensation for the value of the resource.
The legislation does not of itself provide the power to resume. This right remains under existing resumption laws.
The legislation does, however, make it clear that compulsory acquisition of land will not necessarily extinguish resources interests (that is, rights under resource tenures and authorities). This will allow resource companies to proceed with the development of their resource interest, provided it is not incompatible with the purpose of the acquisition. If the Minister determines that the development is incompatible with the purpose of the acquisition, then the resource interest may not be developed and the acquisition can proceed.
Incompatible with the purpose of the acquisition
Resource interests may be extinguished to the extent that the relevant Minister determines that they are incompatible with the purpose of the acquisition. The Minister is given a broad discretion in this regard.
Extinguishment of all interests in the land will include the extinguishment of native title rights.
The payment of compensation to resource tenure holders is expected to include capital expenses incurred related to the resource interest including infrastructure, studies and preparatory work. Further clarification needs to be provided on how these compensation payments will be calculated and whether all capital works expenses are included.
Compensation will not include the value of the resource interest known, or supposed to be known, on or below the surface of the land. No claim can be made for the value of the resource or for any anticipated loss of profit or loss of opportunity. This substantially reduces the value of the compensation payment.
The Government has stated that the reason for this is that if resource tenure holders were permitted to claim compensation on the lost opportunity to develop the resource, it would potentially lead to state and local governments, and other infrastructure proponents, paying large amounts of compensation to acquire land where there is a resource tenure and identified resources (particularly under a production lease).
To balance this, the legislation also introduces a process for re-granting acquired resource land to an applicant, which may be the resource holder, if the Minister is satisfied that re-granting the land is compatible with the purpose for which the land is being used.
While the legislation does not outline any specific criteria upon which the land will be re-granted, the benefits of the development of the resource interest would be considered compared to the purpose and benefits of the acquisition.
As it is drafted, the legislation allows for any person to apply for the re-grant of the resource land. This means there is a possibility that the original owner may lose the resource land that is the subject of the resumption notice to another party through the re-grant process.
The acquiring authority cannot simply extinguish a resource interest at its discretion. It will need to clearly demonstrate that it is necessary to extinguish the resource interest for the purpose of the land acquisition due to an inherent conflict. In these cases, the resource interest holder would have the opportunity, as part of the formal compulsory acquisition process, to state its objection. The Minister will make a final decision in this regard, taking into account the circumstances and deciding whether the benefits of the development of the resource interest outweigh the purpose of the acquisition.
Application of the legislation
The legislation is intended to work both prospectively and retrospectively to manage the impacts on resource interest holders. Past compulsory acquisition of land that has been completed will not extinguish resource interests unless specific action has been taken to intentionally extinguish a resource interest.
More specifically, an acquisition of land in the area of a mining lease made for transport infrastructure under the Transport Infrastructure Act 1994 will still be subject to the new legislation, even if made before the commencement of the new legislation.
The legislation is consistent with similar legislation in the Northern Territory, but is not consistent with Western Australia, New South Wales and South Australia, where resource interests are extinguished by compulsory acquisition.
Concerns have been raised with the Government about the operation and impact of the new legislation. Parliament has decided to proceed with the legislation as drafted, and respond at a later stage with any amendments, if necessary, once it is operating in practice.
Resource company risk assessment
As a result of the new legislation, resource companies should now undertake a further risk assessment to assess the viability of a project. Beyond the obvious resumption of the resource, if there has been a resumption of land that bisects the resource, isolates the resource or prevents the resource from being developed, this will have a considerable impact on the project and could make it completely unviable.
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