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Focus: Exploration licences and land access arrangements in NSW

12 March 2010

In brief: In a recent judgment, the Supreme Court of NSW considered the validity of land access arrangements where not all those with an interest in the property (in this case, the mortgagees) had been notified of the licence holder's intention to obtain access arrangements, nor were the mortgagees party to such arrangements. Partner David Maloney (view CV) and Senior Associate Georgina Cowdroy report.

How does it affect you?

  • The holder of an exploration licence under the Mining Act 1992 (NSW) (the licensee) must notify each landholder of its intention to obtain an access arrangement for a property proposed for prospecting. The term 'landholder' is defined broadly to include the registered proprietors, native title holders, mortgagees, lessees, and others who are registered as having an interest in the land.
  • All landholders and the licensee are required to enter into a single land access arrangement in respect of the property, either as a result of the successful negotiation of a land access agreement or as the result of arbitration.
  • While this decision focused on certain provisions of the Mining Act 1992 (NSW) (the Act), the interpretation of these provisions may be applied to equivalent provisions found in the Petroleum Onshore Act 1991 (NSW).
  • Representatives of both the mining and oil and gas industries have stated that the requirement to involve all landholders, particularly the banks as mortgagees, in the access arrangements will make the legislation unworkable.

Background

Coal Mines Australia Pty Ltd (the defendant) had been granted an exploration licence to prospect for coal in the Liverpool Plains region, near Gunnedah, New South Wales. The Browns and Alcorns (the plaintiffs) each owned a farming property within the area of the exploration licence. The defendant sought an access arrangement in respect of each of the plaintiffs' properties. Both properties were mortgaged.

Section 142 of the Act provides that a licensee may, by written notice served on each landholder of the land concerned, give notice of its intention to obtain an access arrangement in respect of the land. In this case, the defendant provided s142 notices to the plaintiffs, but omitted to provide s142 notices to the plaintiffs' mortgagees.

When the defendant and plaintiffs failed to reach any agreement regarding access arrangements for the properties, the defendant pursued land access through arbitration. The mortgagees were not involved in the arbitral proceedings.

The plaintiffs sought a review of the arbitrator's determination in the Warden's Court. The Mining Warden determined that the mortgagees were landholders and that the failure to serve notices on the mortgagees constituted a breach of s142 of the Act.

The plaintiffs also argued that the failure to serve the s142 notices on the mortgagees deprived the arbitrator and the Warden's Court of jurisdiction in the proceedings, as the Act contemplated that there could only be one access arrangement between a licensee and all landholders. Without addressing the question of whether the Act envisaged that there could be more than one access arrangement for a property, the Mining Warden decided that the Warden's Court had jurisdiction to determine the matter.

The plaintiffs disagreed with the Warden's Court decision on the issue of jurisdiction and appealed to the NSW Supreme Court.

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The court's decision

The court agreed with the plaintiffs that the Act envisaged that, in respect of a property, one access arrangement had to be agreed with every landholder, or determined by arbitration (and if necessary, by review before the Warden's Court), in proceedings in which every landholder was given an opportunity to participate.

The court held that the word 'each' in the relevant sections of the Act means 'every' and requires the licensee, initially, to notify every landholder of its intention to seek access to the land in accordance with s142 of the Act. If an access arrangement is not agreed to by all of the landholders, every landholder must be given notice of the arbitral process under s143 so that the issue of land access may be addressed in one process, in which all those interested in the question of access may participate. If no agreement is reached, arbitration may proceed.

The court accepted that the definition of landholder includes mortgagees. It also held that, on the basis that the Act contemplates that only one access arrangement is to be entered into for a property, the access arrangement could not properly be determined by the arbitrator without any notice to the mortgagees who had a legitimate interest in access to the land. Given that the mortgagees were not given the opportunity to participate in the arbitral process, procedural fairness issues arose. The court held that the failure to recognise the invalidity of the arbitral proceedings resulted in the Warden's failure to recognise that the Warden's Court had no jurisdiction to adjudge the review proceedings.

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Implications of the decision

The case highlights the dangers of failing to notify each landholder (including mortgagees) of a licensee's intention to obtain an access arrangement for land, and in entering into an access arrangement without the consent of all the relevant landholders.

In this instance, the defendant did not enter into a land access arrangement with either of the plaintiffs. Even if they had, the access arrangements would have been invalid, as the mortgagees had not been notified of the licensee's intention to access the relevant properties.

The case also emphasises the importance for licensees of complying strictly with the terms of the Act in agreeing land access arrangements (whether orally or in writing and whether before or after the prospecting title was granted) with landholders. In particular, where land is the subject of a mortgage, a licensee needs to notify every mortgagee of the property of its intention to obtain an access arrangement for that land. Such an access arrangement must be a single arrangement that is agreed to by all relevant landholders. Involving mortgagees in the negotiation of access arrangements, however, will be problematic.

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