Legal development

Land Court provides guidance about compensation liability under MERCP Act

Insight Hero Image

    Compensation for productivity loss and opportunity cost for cattle

    The Land Court decision in Bowen Basin Coal Pty Ltd v Namrog Investments Pty Ltd [2020] QLC 23 provides useful guidance for future valuations and assessments of compensation, particularly relating to the gross value of productivity loss and opportunity cost for cattle.

    This matter related to compensation payable under a conduct and compensation agreement (CCA) for proposed exploration activities authorised by Bowen Basin Coal's Mineral Development Licences (MDLs).  The exploration program involved 35 exploration core drill holes, three seismic drill holes and approximately 12 kilometres of seismic lines.

    As Bowen Basin Coal and the landholder were unable to reach agreement on the terms of the CCA relating to compensation, the Land Court determined compensation in accordance with its jurisdiction under the Mineral and Energy Resources (Common Provisions) Act 2014 (MERCP Act).  The Land Court based its finding on the following approaches to calculating productivity loss and opportunity cost:

    • total productivity loss is calculated by multiplying the adult equivalent loss by the average daily weight gain, by 365 days, by the cost per kilogram; and
    • total opportunity cost is calculated by subtracting the cost of production (eg freight, selling costs and other expenses) from the value of the production loss.

    Based on the above, the Court determined that the compensation payable to the landholder totalled $107,300, which included $38,237 in productivity loss and $28,813 in opportunity cost with the difference being made up of other expenses such as fencing, labour and time.  This determined amount was approximately midway between the applicant's and landholder's original claims.  

    Compensation for exploration activities affecting grazing land 

    The Land Court's decision in Horizon Minerals Ltd & Anor v Stacey [2021] QLC 17 demonstrates the importance of landholders providing full and accurate records of land use when seeking an expert opinion in compensation matters.  The landholder sought $723,699.50 in compensation and the explorers offered between $56,825.50 and $112,265.50. 

    This matter related to compensation payable for the effects of exploration activities on land used to graze cattle.  The exploration program involved drilling 333 holes in six paddocks.  The vehicles used while drilling created new wheel tracks, impacting the grass.  The affected area made up 0.4% of the six paddocks.  The parties agreed the affected area needed to be rehabilitated, but disagreed on how rehabilitation should occur.  The parties agreed the Court would determine compensation based on the cost of the appropriate method of rehabilitation. 

    The issue in dispute between the parties was the extent of destocking needed to rehabilitate the land.  The landholder's expert opinion suggested the six paddocks should be completely destocked for two years on the assumption that the land held 600 head of cattle.  However, the landholder had not supplied stocking records and this assumption was not based on proven facts.  The Court therefore did not give any weight to the landholder's expert opinion. 

    The Court accepted the explorers' expert opinion on destocking.  This involved rotating stock through the six paddocks over six years, with some reduction in stock numbers.  As 0.4% of the land was affected, the Court considered a reduction of 0.4% of stock (2.4 head) each year was appropriate.  The compensation for destocking was therefore $8,868. 

    Based on the above, the Court determined that the compensation payable to the landholder totalled $56,825.50, the lower limit of the explorers' proposal.  The remaining compensation was made up of agreed amounts for drafting additional weaners consequent on the stock reduction, spot spraying, expert advice and the landholder's time.  The parties also agreed that $18,177.50 was payable for negotiation and preparation costs. 

    Author: Libby McKillop, Senior Associate

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


    Stay ahead with our business insights, updates and podcasts

    Sign-up to select your areas of interest