QGC Pty Limited v Vogt[2017] QLC 20

LAND COURT OF QUEENSLAND

Background

[1] West of Dalby and south of Chinchilla lies the respondents’ 337.5 ha freehold land. Below the surface is a resource of coal seam gas. The applicants have installed infrastructure to extract the gas. There are 6 wells, access tracks and buried pipes to collect the water and gas extracted and infrastructure to move it on to processing and transport.

[2]    Despite attempts to arrive at an agreement about the amount of compensation payable to the respondents, agreement has not been reached. The applicants have now come to the Court. They are seeking a determination of the amount of compensation payable to the respondents and an order imposing conditions on the parties to regulate their future relations in respect of the infrastructure on the land.

The positions of the parties

[3] The applicants, in their amended originating application, are seeking the following –

• The applicants apply to the Land Court under s 537B of the Act for it to decide the applicants’ compensation liability to the respondents for the activities. Further,  or alternatively,  the applicants  apply to the Land  Court  under s 537DB of the Act for it to decide the applicants’ compensation liability to the respondents in respect of the activities.
• Further, the applicants apply to the Land Court for an order under ss 537DB and 537DC of the Act that the Land Court impose conditions upon the parties:

• in the form of the draft Conduct and Compensation Agreement at exhibit DPB-12 to the affidavit of Daniel Paul Byrne sworn 2 November 2016 with Schedule 3 of the draft agreement to be varied so that it is consistent with the determination of the Land Court pursuant to order 1 above; or
• in the form the Court considers appropriate.

[4] The Act is the Petroleum and Gas (Production and Safety) Act 2004.

[5] The respondent Elizabeth Marie Vogt (Samad) has informed the Court, through her solicitors, that she will abide by the order of the Court and has not filed any material or appeared at the hearing.

[6]   The respondent Eugenehans Peter Vogt is in Switzerland. He has been made aware of the hearing but has not appeared or provided any material which contradicts the material provided on behalf of the applicants.

[7] The Court has been left to determine this matter on the basis of the uncontradicted material from the applicants.

The history of the matter

[8]  The applicants commenced this action in the Court on 3 July 2014. It was in abeyance for some time due to the illness of Mr Vogt and was heard on 21 February 2017.

The applicable legislation

[9]  The Mineral and Energy Resources (Common Provisions) Act 2014 commenced on 27 September 2016 and would be applicable to this matter if it had commenced after that date. Section 228 of that Act has the effect of requiring that the matter be continued under the 2004 Act which was in force when proceedings were commenced.

[10] Section 532 of the Act, the 2004 Act, sets out the general liability of someone in the position of the applicants to compensate someone in the position of the respondents.

[11] Section 532(4) sets out the categories of compensation. It provides as follows -

• In this section

compensatable effect means all or any of the following—

• all or any of the following relating to the eligible claimant’s land—

• deprivation of possession of its surface;
• diminution of its value;
• diminution of the use made or that may be made of the land or any improvement on it;
• severance of any part of the land from other parts of the land or from other land that the eligible claimant owns;
• any cost, damage or loss arising from the carrying out of activities under the petroleum authority on the land;

• accounting, legal or valuation costs the claimant necessarily and reasonably incurs to negotiate or prepare a conduct and compensation agreement, other than the costs of a person facilitating an ADR;

Examples of negotiation—

an ADR or conference

• consequential damages the eligible claimant incurs because of a matter mentioned in paragraph (a) or (b).

relevant authorised activities means authorised activities for the petroleum authority carried out by the holder or a person authorised by the holder.

[12] Under s 537DB of the Act, the Court may assess the compensation payable to the respondents. It does so under the categories provided in s 532(4). The Court has before it evidence on this aspect in exhibit 6, the report by Taylor Byrne, valuers. It was written by Mr Tito Lando a Certified Practising Valuer and Registered Valuer No 3331. The report was the subject of some clarification and minor correction on 2 March 2017.

[13]  This valuation report addresses the categories of compensation set by the Act and is the only evidence on the point which has been put before the Court. It is the evidence of an expert in the field and is uncontradicted.

[14]    Mr Lando reports that the respondents’ freehold property has an area of 337.5 ha and is located approximately 35 km south of Chinchilla. It is gently sloping, heavily timbered forest country. There are no buildings on it and its highest and best use is as a rural homesite. The infrastructure installed on the land relating to the compensation issue comprises 6 wells, access track and gathering and flow lines for what is extracted.

[15] The total area of the infrastructure is 11.4212 ha, which is less than 3.4% of the total area of the property.

[16] Mr Lando inspected the property on 21 October 2016. He valued the impact on the land, taking into account the categories of compensation provided by the Act, as $30,000.

[17] Mr Lando notes that the unimproved value of the land as at 30 June 2016 is $126,000. This is set by the Valuer-General and is used for the purposes of local authority rating and land tax. He has not accepted this for present purposes but has considered 6 sales of comparable properties and deduced from those sales that the correct value of the respondents’ property is $225,000. The method employed is appropriate and the conclusion reached is in favour of the respondents as it values the land much more highly than does the Valuer-General. The result will be to increase the compensation due to the respondents as the detriment to their land is a detriment to a more valuable property.

[18] The valuer notes that tree clearing restrictions will apply to 305 ha, which is about 90%, of the total land area. It is heavily timbered with ironbark, bulloak, cypress pine, gum and wattle. There are three small earth formed dams in the south corner of the land, which is only partly fenced.

[19] A before and after approach to valuation has been used by the valuer to arrive at an assessment of the adverse impact of the infrastructure on the land. The “before” value was arrived at by means of a direct comparison with six sales of properties which Mr Lando believes to be suitable for comparison. The method applied is a recognised one and is commonly applied by valuers. The choice of sales is a matter within the expertise of the valuer and there is no competing sales evidence suggested to the Court as being useful for present purposes.  There is no basis upon which the Court could do other than accept the method and sales used to support the “before” unimproved value of the respondents’ land at $225,000.

[20] The gas infrastructure comprises –

• 6 wells covering a total of 5.9883 ha;

• 2.0038 ha of access tracks;

• 3.4291 ha of gathering systems, such as buried pipes.

[21] Each well site is about 100 x 100 metres, which is 1 ha.  It is covered with gravel. The access tracks are around 10 m wide, partly covered with gravel. The pipes of the gathering systems will be buried and the ground above them rehabilitated. The valuer has allowed for monitoring and maintenance of the infrastructure while it is operational, and for its decommissioning and for rehabilitation of the land.

[22] The overall area of the infrastructure is 11.4212 ha, which is about 3.4% of the total area of the land.

[23]  The loss of use of the occupied land, restrictions on the use of the remaining land due, for instance, to the buried pipes, the visual impacts and co-usage of the land by the applicants have all been considered by the valuer under the categories of compensation provided in the Act.

[24] The valuer has made assumptions in favour of the respondents. The area of the gas wells has been valued as if lost in perpetuity, attracting a 100% loss in value of the land. The pipelines are assessed as a detriment of 50% to the value of the land which they occupy. The access tracks are assessed as a 100% loss as they may be disruptive to the property.

[25]  The most suitable house site is about 700 m from the nearest well, which is screened by the heavy vegetation. The house site is near to the dams. There are two gas wells about 400 m away on an adjoining property. They are also screened by heavy vegetation.

[26] The valuer has allowed for a 10% diminution of the value of the balance area. He has applied this figure as he is of the view that between 5% and 10% would be fair and reasonable, again applying the figure most favourable to the respondents.

[27] The valuation has been arrived at by the piecemeal approach, a valid method, [1]and is as follows:

[28] The valuer has not made an allowance for disturbance as he has not been provided with details of the actual impact on the respondents during the construction of the infrastructure. The Court has not been provided with a valuer’s estimate in relation to this but is under a duty to assess compensation which includes, under s 532(4)(a)(v) damage from carrying out activities on the land. What has been done is known and there was necessarily a construction phase during which there would have been workers and machinery on the land, noise and dust. The respondents may not have been on the land at that time but were entitled to be there if they chose. It would be appropriate to award compensation for this disturbance. The Court is an expert Court and must do its best to ensure proper compensation. The length of the construction period is not known with certainty but would have been significant in order to do all the things that were done. Doing the best that it can, the Court assesses $5,000 compensation in respect of this disturbance in what would otherwise be a quiet rural area.

[29] The Court accepts the expert valuation evidence and has done its best to fill in the acknowledged gap in that evidence.

Determination of compensation liability

[30] In accordance with s 532 and s 537B of the Act, the Court determines compensation liability in the sum of $35,000.

The application for the Court to impose conditions on the parties

[31] The Act contemplates that there will be a conduct and compensation agreement between the parties. The Court has been required to determine the compensation and is also being requested to, in effect, impose on the parties conditions to govern their future interactions.  Section 537DC of the Act allows the Court to do this. By s 537DC(1)(a), it may “impose any condition it considers appropriate for the exercise of the parties’ rights”. By s 537DC(b), the imposed condition is taken to be “an agreement between the parties”.

[32] The applicants propose to enter and re-enter the land as needed from time to time for maintenance of the infrastructure, and for its decommissioning and the rehabilitation of the land. They propose that the Court order be in the form of the standard conduct and compensation agreement which was developed by the Queensland Government in consultation with landholder groups and representatives of resource explorers and producers. It is submitted that the conditions would contribute to the safety of the respondents by allowing access to maintain the infrastructure.

[33] It is persuasive that the standard agreement be used so as to provide consistency between this case and an accepted standard. There are no submissions that the standard agreement ought to be departed from in this case. The Court accepts that there is a need to have a system of rules to regulate the future conduct of the parties in respect of this matter and that the standard agreement is suitable for the purpose in the present case.

[34]    In accordance with s 537DC of the Act, the Court imposes the conditions as set out in the Court’s Order as it considers them appropriate for the exercise of the parties’ rights. By s 537DC(3)(b) the imposed conditions are taken to be an agreement between the parties.

Orders:

• The applicants’ compensation liability to the respondents under s 537B of the Petroleum and Gas (Production and Safety) Act 2004 (Qld) is $35,000 (compensation amount).

• The applicants shall pay the compensation amount to the bank account nominated by the respondents (such account to be specified in a written communication to the applicants signed by the respondents), the applicants to make such payment by way of electronic funds transfer within 28 days of receipt of the written communication.

• The applicants will not be liable to pay any interest upon the compensation amount under statute or otherwise unless they fail to comply with paragraph 2 above.

• Pursuant to s 537DB and s 537DC of the Petroleum and Gas (Production and Safety) Act 2004 (Qld), the terms of the conduct and compensation agreement attached hereto and marked “A” are imposed as conditions between the parties.

WA ISDALE

MEMBER OF THE LAND COURT