Most Read Contributor in Australia, September 2016
We recently raised the topic of the potential for coal seam gas
(CSG) exploration and production activities
progressing in Queensland and the issue of landowner
consent1. That article outlined the statutory process in
Queensland for agreeing compensation with a resource company or,
where such an agreement cannot be struck, the mechanisms for
determining landowner compensation. This article considers the
equivalent regime in Victoria.
The Victorian State government has implemented a moratorium on
fracking (a process required for CSG extraction) which is to remain
in place until at least July 20152. Victoria's
abundant conventional gas resources are likely to be in high demand
as liquefied natural gas (LNG) export facilities
come online in other States in coming years. It is expected that
resulting increases in gas prices will in turn result in increasing
pressure to turn to unconventional gas extraction methods, such as
CSG, as a source of additional gas supply within the State.
In Victoria, licences for the exploration and production of CSG
are governed under the Mineral Resources (Sustainable
Development) Act 1990 (Vic) (Mineral
Resources Act). It may come as a surprise to many rural
landowners and occupiers in Victoria to learn that, as in
Queensland, landowners must grant access to a licensee that has
been granted a licence in respect of that landowner's or
occupier's land. There is a right to compensation payments for
a range of factors including loss of possession of the land
affected, damage to the land or improvements on the land, severance
of the land from other land of the owner or occupier, loss of
amenity, including of recreation and conservation values, and any
decrease in market value of the owner's or occupier's
interest in the land3.
If it is necessary for the owner or occupier to obtain
replacement land, the compensation payable must take into account
incidental expenses incurred by the landowner or occupier in
obtaining and moving to that land. This would be expected to cover
any real estate agent's fees, stamp duty payable and legal
costs incurred by the landowner or occupier.
When it comes to negotiating the quantum of compensation, there
is very little guidance under the Mineral Resources Act regarding
the quantum of compensation payable by licensees, other than a cap
of $10,000 for compensation payable in respect of "loss of
amenity"4. This lack of clarity is of concern.
There is also a provision providing for a "solatium"
payment of up to 10% of overall compensation payable to owners and
occupiers, to compensate them for "intangible and
non-pecuniary disadvantages that are not otherwise
compensable"5. This means that, for any land
affected, landowners or occupiers are able to seek payment for
Whilst it is not a requirement for the licensee to do so, it
would be uncommon for the licensee not to attempt to enter into a
written compensation agreement with the landowner or occupier, and
to do so much in advance of proceeding with any exploration or
extraction activities on an owner or occupier's land. If
agreement cannot be reached between the parties, this does not
prevent the licensee from accessing the land or conducting its
activities. The licensee will be able to proceed with its proposed
activities in accordance with the terms of its licence and the
Mineral Resources Act whilst the terms of compensation payable are
settled in the Victorian Civil and Administrative Tribunal
(VCAT). It is unlikely that a licensee would
proceed to have the terms of compensation settled by VCAT unless
the licensee was confident that it had already offered the owner or
occupier compensation that, at the very least, met all of the
requirements of the Mineral Resources Act. Parties should note that
in the absence of agreement, VCAT may impose terms.
If you have been approached by a resource company, are currently
engaged in negotiations or require advice about a grant of tenure
over an area encompassing your property, please contact the Holding
Redlich Agribusiness & Rural Industries Group.
The article examines the regulation of the oil and gas industry and breaks down the regulatory process state by state.
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