Brisbane Petroleum NL & Silverback Properties Pty Ltd, Re [2004] QLRT 145

LAND AND RESOURCES TRIBUNAL QUEENSLAND CITATION: Re Brisbane Petroleum NL & Silverback Properties Pty Ltd [2004] QLRT 145 PARTIES: Brisbane Petroleum NL (Applicant) and Silverback Properties Pty Ltd (Respondent) FILE NO: PGC125/04 PROCEEDING: Application to determine compensation (petroleum) DELIVERED ON: 26 November 2004 DELIVERED AT: Brisbane HEARING DATE: 22 November 2004 PRESIDING MEMBERS: Koppenol P ORDER/S: 1. Compensation payable by the Applicant to the Respondent determined at $783.46 per year. (at [10]) 2. The first payment is to be made within 14 days and annually thereafter for the period that the Applicant occupies that part of the Respondent’s land. (at [10]) CATCHWORDS: PETROLEUM LEASE — DETERMINATION OF COMPENSATION — Whether lump sum or annual payment appropriate Petroleum Act 1923, ss 87, 88(3), (4), 98(3), 99(1) Land and Resources Tribunal Act 1999, s. 65 Mineral Resources Act 1989, s. 281(3)(a) Uniform Civil Procedure Rules 1999, r 429J Sullivan v Oil Company of Australia Ltd (No 2) [2004] 2 QdR 105 (CA), applied COUNSEL: N/A SOLICITORS: G.J. McKimm (Sydney), for the Applicant D. Fahl (P & E Law, Maroochydore), for the Respondent AGENT/S: N/A -- 1 of 3 -- [1] This is an application under section 98(3) of the Petroleum Act 1923 (the Act) for the Tribunal to determine the amount of compensation to be paid by the petroleum lessee to the landowner. The parties had been unable to agree upon the amount payable. [2] The subject of the application concerns the Applicant lessee’s drilling of one new well (Yellowbank 4) on the Respondent landowner’s property approximately 50km north-east of St George. The property is a large unstocked sheep and cattle property which apparently is used by the landowner as a rural retreat. The lessee has 2 existing oil wells, together with a delivery point with settlement ponds, on the property. These wells are awaiting repair and are not producing at the moment. They are not the subject of this application. A typical well site is approximately 100m x 100m (1ha). The new well will include a flow line to a storage tank. The well head will be inspected every 3 to 5 days and the pump changed once a year. Oil will be collected by tanker every 4 weeks. It is thought that the well should produce economically for about 10 years or so. The lease has 20 years to run. [3] Section 88(3) and (4) of the Act, as recently interpreted by the Court of Appeal,1 requires a petroleum lessee to compensate the landowner “for the occupation of that part of the land used for mining and construction while the land was occupied.” Their Honours added that “[t]hat compensation is available for those matters referred to in s. 99(1)”. Section 99(1) provides as follows: “99 Measure of compensation (1) Save as is by this Act otherwise provided, the compensation to be made under this Act shall be compensation for— (a) deprivation of the possession of the surface or of any part of the surface; and (b) damage to the surface or any part thereof, and to any improvements thereon, which may arise from the carrying on of operations by the Minister or the permittee or lessee thereon or thereunder; and (c) severance of the land from other land of the owner or occupier; and (d) surface rights of way; and (e) all consequential damages.” [4] The Tribunal had the benefit of a report for section 99 purposes by Mr Russell Brown of Taylor Byrne Valuers. Mr Brown acted as a court appointed expert pursuant to an order of the Tribunal made under section 65 (Powers of tribunal) of the Land and Resources Tribunal Act 1999 and rule 429J (Expert appointed by court on court initiative) of the Uniform Civil Procedure Rules 1999. [5] Mr Brown assessed the relevant compensation in the alternative: $28,820 as a lump sum or $783.46 per year as an annual payment. He regarded the new well as impacting on the property in 3 ways: a small further loss of exclusive use of the land, a small additional loss of grazing and a small increase in management time to supervise the well infrastructure. Each party accepted Mr Brown’s assessment. So do I. [6] Mr McKimm (for the lessee) submitted that the annual payment assessment was appropriate because the well was unlikely to operate for any more than 10 years, 1 Sullivan v Oil Company of Australia Ltd (No 2) [2004] 2 QdR 105, 114 [27]. -- 2 of 3 -- given that it was impossible to say if petroleum would be produced for the life of the lease. For his part, Mr Fahl (for the landowner) submitted that the risk concerning the availability of the resource was one for the lessee and not the landowner and that the present value of the section 99 loss to the landowner was the assessed lump sum. [7] Whilst I acknowledge the force of each argument, the answer, I think, is contained in the passage from Sullivan quoted in paragraph [3]. The Court of Appeal said that the Act required the lessee to compensate the landowner for the occupation of that part of the land used for mining and construction while the land was occupied. Section 88(4) of the Act is the source of those words. It provides that: [emphasis added] “(4) Such compensation shall include reimbursement for the occupation of that portion of the land occupied by the holder, permittee, or lessee for mining and construction works during the period of such occupation.” [8] It is significant that reference was made to the period of the lessee’s occupation— and not to the period of the term of the lease. In many cases (and the present case may be one), a lessee’s occupation of the land will be for less than the period of the lease for the reason that payable deposits of petroleum may be produced for a limited period only and use of the well may then be discontinued and the well head plugged. That procedure is envisaged by section 87 (Abandonment of well) of the Act. If Parliament had intended a landowner to be compensated for the effect of the grant of the lease for the term concerned (as is provided in section 281(3)(a) of the Mineral Resources Act 1989 with respect to a mining lease) as opposed to being compensated for the period of the lessee’s occupation, it would have been simple to have so provided. That would have supported the lump sum argument. But that was not done. [9] In the circumstances, I accept Mr McKimm’s submissions and find that the appropriate payment methodology here is one where the lessee should make annual payments to the landowner during the period of the lessee’s occupation of that part of the landowner’s land as relates to the new well. For present purposes, I will assume that the lessee’s period of occupation has now commenced. [10] For those reasons, I determine compensation for Yellowbank 4 at $783.46 per year and order that the lessee pay such sum to the landowner within 14 days and annually thereafter for the period of the lessee’s occupation of that part of the landowner’s land. -- 3 of 3 --