Regulation of coal and onshore gas activities
The bill responds to the tension that can exist between private land
tenure and Crown ownership of petroleum resources (the extraction of which is
licenced by the Crown to petroleum companies). The bill also responds to
concern in some sections of the community regarding the practice of hydraulic
fracturing (commonly referred to as 'fracking').
This chapter introduces these issues by outlining some of the evidence
the committee received from landholders about their experiences living near
coal mining and unconventional gas extraction activities and how they deal with
the companies that undertake these activities. As explained in Chapter 1,
however, the Senate has not asked the committee to conduct a wide-ranging
inquiry into issues associated with coal mining and onshore gas extraction.
Rather, the committee has examined a specific legislative proposal. Although
the committee acknowledges the evidence it has received that expressed concern
about coal mining and unconventional gas operations, the committee's
deliberations depend on whether the bill can fit within Australia's legal
framework and be implemented effectively.
The remaining sections of this chapter examine the current framework of
property and mineral rights in Australia, to the extent relevant to the bill,
and the role of the Commonwealth in land access issues and the regulation of
onshore minerals and petroleum exploration and production.
Experiences living near coal mining and unconventional gas extraction
During this inquiry, the committee heard how resource activities on
farmland can present challenges for landholders when going about their ordinary
business, and the risks or damage to their property that can result. For
example, ditches dug for pipe construction can make it difficult for farmers to
traverse their property and can lead to livestock injuries.
The opening and closing of farm gates is also an issue.
Landholders explained how they have encountered difficulties when dealing with
the petroleum companies, such as instances of a disrespectful approach taken to
accessing and traversing their land.
Concern was also expressed about:
competing water use—the committee received evidence that farmers
face restrictions on their water use while petroleum companies enjoy
air pollution and noise from mining and unconventional gas
extraction, such as the noise and pollution from the increased number of diesel
trucks in the area, and noise from compressor stations and flaring;
concern that contamination near food production areas would
prevent farmers from supplying national vendor declarations, which would
jeopardise their access to local and export markets;
the inability to manage risk associated with damage caused by
contamination related to coal seam gas (CSG) extraction on neighbouring
properties, particularly as insurance companies do not insure against this risk.
Evidence was also received about the implications of coal and gas
activity for the lifestyles of people who live in rural communities. Mrs Sally
Hunter, who is the president of the organisation People for the Plains, told
You go to be in the agriculture industry because a lot of
times that is the type of environment that you want for your children growing
up et cetera. It is then as if you have been placed into an industrial
zone outside a town. You are no longer in a rural zoning; you are in an
industrial estate and you really have no choice about that. You are not
prepared for that and you are not used to that. If you buy a block in an
industrial estate, at least you know what you are in for and you get some
advantages out of it. When it comes to your doorstep, it is a totally different
kettle of fish.
Many submissions referred to potential environmental and health effects
related to unconventional gas extraction. Submitters argued that there is
concern internationally about various potential risks to the environment and
health caused by hydraulic fracturing and unconventional gas activities more
generally. Among other things, these risks include drinking water being
affected as a result of underground migration of methane and/or fracking
chemicals associated with faulty well construction, surface spills that could
result in soil and water contamination, and inadequate wastewater treatment
leading to surface water contamination.
The potential health effects associated with unconventional gas
extraction particularly attracted comment. The committee heard reports of
residents with various symptoms, such as bleeding noses, nausea and headaches,
who had not experienced these symptoms before unconventional gas activities
commenced in their area.
However, QGC, a gas company, argued that no links have been drawn between
health issues and CSG production, despite a 'number of substantial bodies of
work undertaken in response to these claims'.
Other concerns expressed about hydraulic fracturing and unconventional
gas extraction more generally included:
the 'substantial amount of water required in unconventional gas
extraction', which No Fracking WAy submitted may be up to 20 million
litres of fresh water per fracked well (including up to 4000 litres of
proppants and up to 200,000 litres of chemicals)—No Fracking WAy argued that
the 'unconventional gas and coal industries compete with the water needs of
agriculture, of urban and regional populations, and of the sustainability of
our natural environment';
that although accidents can happen in all regulated industries, accidents
related to hydraulic fracturing could present more widespread problems as the
movement of water between aquifers could mean that any contamination would not
be contained to one aquifer;
the integrity and permeability of old, inactive wells—No Fracking
WAy argued that the cement and steel could deteriorate over time, posing a
Property and mineral rights in Australia
The tension that can exist between landholders and resource companies is
a consequence of Australia's system of mineral rights. Landownership in
Australia 'is subject to an inherited feudal tenure framework'; meaning that the
state, in right of the Crown, is 'the ultimate owner of all land and may
exercise sovereign power over all of its inhabitants'.
Ms Kate Galloway, a senior lecturer at James Cook University's
College of Business, Law and Governance, explained that interests in land may
generally be held as freehold, native title or state tenures (leasehold). Ms
Galloway commented that freehold 'can be held either as a legal interest
(registered title) or an equitable interest (broadly speaking, unregistered but
still recognised by law)'. Ms Galloway added that interests in land
'extend beyond freehold estates, to easements, mortgages and leases—all of
which can be either legal or equitable'.
As Ms Kate Galloway observed in her submission, however, 'when the Crown
in the right of the state grants an interest in land, it reserves mineral
rights to the Crown'.
Professor Samantha Hepburn of Deakin Law School explained:
The common law scope of private land ownership has been modified
by legislation enacted in each state and territory which purports to vest the
ownership of minerals and resources back to the state. Indeed, all Australian
states and the Northern Territory have legislatively declared that petroleum in
situ is owned, without exception, by the Crown regardless of when the land
containing the petroleum passed into private ownership.
Professor Hepburn noted that the ownership of resources by the Crown
'is grounded in the core assumption that the state is the appropriate owner
of the resources because it has the capacity to ensure that those resources are
properly utilized for the common benefit of all citizens'.
Professor Hepburn submitted that when the state 'issues a resource title
to a mining or petroleum proponent, it authorizes the holder to exercise
ownership rights it has statutorily reclaimed'. Such action 'necessarily
diminishes the scope of the ownership entitlements of a private landholder'.
Professor Hepburn stated that under the current legal framework:
...the rights of the resource title holder may be accompanied
by an express or implied access entitlement to access the resource by crossing
the land. The private landholder is bound to uphold this entitlement and cannot
deny the rights of the state in this context. The state is the absolute owner
of the land. The state has reclaimed ownership of the resource. The tenure
framework gives the state the power to disaggregate those resources and reclaim
them. Access to the resource is a necessary consequence of resource ownership.
Access entitlements may be constructed as a[n] express requirement of the
resource title or, pursuant to expressly conferred ancillary rights or, as a
right which is implied and necessary.
Similarly, Ms Galloway noted that although the mineral rights
granted by the state are less extensive than 'the bundle of rights comprising
the concept of ownership of land' and attach only to the minerals, they 'have
implicit rights of access and to lay waste to the land itself'.
Ms Galloway provided a useful overview of how the tensions between
interests in land and mineral rights can be concerning to landholders. Ms
Galloway stated that the current framework 'affects both the object and the
extent of [the landholders'] ownership' for two reasons:
First, the activity of mining and some lesser mineral rights,
lawfully undertaken, consume the land itself. The activities destroy the object
of landholders' ownership, even though ownership rights continue. Even
fulfilment of remediation requirements cannot reinstate the landholder's land.
Compensation equalises the respective values of the interests at stake, but the
exercise of the mineral rights alters what might be called the property itself.
Secondly, while ostensibly a narrower bundle of rights, the mineral rights
operate despite the landholder's rights, affecting the extent of their
Some submitters expressed concern about the current framework of
competing property and mineral rights. An example is as follows:
It is ridiculous when freehold
land is paid for and owned, that it can be so severely affected by others
rights which a landowner is obliged to defer to. Those third parties have not
purchased the land, do not pay rates on the land, however, when they come onto
it, they treat it as their own, abuse it, disregard landowners rights (fencing,
gates, stock etc) and complain about landowners trying to fight to protect what
they have purchased.
Mr Ken Grundy argued that 'both
the extent of mining and methods of extraction employed today, bring into
question, whether the landholder's rights need revision'. He submitted:
When the 'right to mine' laws were established, mining was
very low key. It was a pick and shovel task, often digging horizontal
tunnels into the side of stony hillsides. The arrival of crude mechanisation
enabled considerable expansion and delivered more 'product' per man hour but it
was quite meagre compared to the modern scene.
In the 21st century, the machinery is so massive that whole
hills and small mountains are devoured within a couple of years. A regular 6
foot man is dwarfed by the machines, many of which are 'driven' from a computer
in a city office. New techniques of extraction are employed with potential
detrimental side-effects to the environment.
Existing state frameworks for access and compensation
Although the states retain mineral rights and permit companies to
extract the resource, various state legislatures have recognised, and attempted
to address, certain issues related to land access. In South Australia, for example,
under the Mining Act 1971 and Petroleum and Geothermal Act
2000, where a company has a license or lease to explore and extract natural
resources the landholders are required to be consulted at the application and
approval stages. There are also provisions that address compensation. The South
Australian Chamber of Mines and Energy (SACOME) explained that under this
framework, the landholder must be notified of the intention to enter the land
by a notice of entry 21 days before access is required. After receiving a
notice of entry:
...the landholder has the right to object to the entry
requirements as defined in the relevant sections of the Acts fourteen days to
three months after service of the notice. Once the objection is lodged the
company can accept the objection and move to a different area or proceed to
negotiate access through the Wardens or Environment, Resources and Development
courts where applicable. These courts upon determining whether substantial
hardship or damage to the land has or can occur can set areas not to be used or
what conditions they can be accessed by. Furthermore the courts can determine
compensation for the landholder where access has been allowed under specific
In Queensland, the Petroleum and Gas (Production and Safety) Act 2004
requires 'that resource companies enter into access agreements or "Conduct
and Compensation Agreements"...with owners and occupiers of private land,
prior to carrying out "advanced activities" (e.g. construction of
wells and other infrastructure) on their land (subject to a range of
The Water Act 2000 (Qld) also imposes a 'make good obligation' on
petroleum tenure holders if an existing water bore owned by the landholder has
an impaired capacity as a result of the extraction of underground water
associated with petroleum operations.
EDO New South Wales submitted that the laws in New South Wales generally
allow exploration for, and production of, CSG and coal without landholder
consent. Dr Emma Carmody, a solicitor at EDO New South Wales, added:
In relation to exploration, access agreements have to be
signed before exploration can take place, but ultimately the landholder is
compelled to enter into an access requirement. Really, the best they can do is
make sure the terms of the agreement are as favourable as possible. There are
some exceptions. For example, in relation to exploration activities consent is
required within 200 metres of a dwelling house that is a principal place of
residence. In relation to production activities, similarly consent is required
for activities within 200 metres of a dwelling house. However, we would argue
that, for a large open-cut coalmine, 200 metres is an insignificant distance.
We can speak most authoritatively about New South Wales but, having conferred
with our colleagues, in other states and territories the laws are similarly
weighted in terms of mining and petroleum companies.
Further, Dr Carmody commented that New South Wales landholders are
entitled to compensation 'if the surface of their land is "injuriously
affected" by CSG activity'. Dr Carmody noted, however, that this does not
apply to damage to aquifers given they are below the surface of the land, and
that 'it is difficult to demonstrate the cause of harm on the basis of limited
It was also made clear to the committee that state legislation does not
support the right of a private landholder to ultimately veto access to land.
For example, Professor Hepburn explained that although it 'is often claimed'
that the relevant [Western Australian] legislation
confers a right to veto access, the legislation only 'imposes a qualified
obligation to obtain consent from landholders where the land fits particular
Nevertheless, the state legislation provides a framework within which
resource activities are to be conducted and also include various protections.
The following table was provided by the Australian Petroleum Production
and Exploration Association (APPEA), which it advised is based on information
contained in a 2013 report of the Productivity Commission. The table compares
the various state legislative arrangements that provide protection to
landholders when land is accessed.
Table 2.1: Comparison of state protections for access to
private land for exploration
Land access arrangement agreed to with land holder before the
explorer can access land
Compensation available to land holder for loss or damage arising from
Compensation for legal costs incurred by land holders in negotiating
Compensation for other costs associated with negotiating access agreements
Exploration prohibited within specific distances of buildings and
Landholder veto over exploration on agricultural land
Note: The Northern Territory is
not included as most private land is restricted to cities and towns. Outside of
the urban areas, around half of all land is Aboriginal land and the other half
is Crown land under pastoral lease.
~ Authorisation to enter
private land can be provided through the written consent of the land holder or
by serving the land holder a statutory form (Notice of entry on land) under the
Mining Act 1971 (SA).
# No formal agreement is
required between the landholder and the explorer before exploration commences.
However, where exploration involves ground disturbance, officers from the
Department of Infrastructure, Energy and Resources are generally involved in
the oversight of exploration activities to ensure that these activities adhere
to the work plan.
^ Although there is no specific
reference to compensation for legal, or other, costs incurred by land holders
in negotiations with explorers, the legislation does not 'rule out' the
provision of such compensation.
* The Queensland Land Access
Code provides for the compensation of reasonable accounting and land valuation
costs incurred by the landholder.
** The Mining Act 1978
(WA) provides for reasonable legal or other costs of negotiation for
private land under cultivation.
*** The South Australian
guidelines make specific reference to compensation for legal costs and the Mining
Act 1971 (SA) provides for the reasonable costs incurred by the landholder
in connection with negotiations.
^^ The Minister can have
agricultural land excised from the licence where the economic benefit of
continuing to use that land for agricultural purposes is greater than the work
proposed in the licence.
^^^ This applies to mineral
tenements, but not to oil and gas tenements.
+ Exploration on cultivated
land requires landholder consent. Where agreement cannot be reached, the
explorer has the option of seeking a determination through the courts.
Source: APPEA, Submission 21,
p. 9; adapted from Productivity Commission, Mineral and Energy Resource
Exploration, Report no. 65, September 2013.
Various states have reviewed aspects of their land access and
improvements to these frameworks are expected to result. For example, the New
South Wales Farmers Association (NSW Farmers) noted that the New South Wales
Government commissioned Mr Bret Walker SC to conduct a review of arbitration
arrangements. Ms Danica Leys from NSW Farmers advised that 'a number of
good recommendations' were made by the Walker review, including ensuring that
landholders can have legal representation at the negotiation table and to
provide some compensation for legal costs and time spent at arbitration. Ms
Leys noted that these recommendations have not yet been implemented, 'but they
are coming in the near future'.
Mr Charlies Thomas from the National Farmers' Federation (NFF) added:
Queensland went through a fairly comprehensive review of
their land access arrangements probably four or five years ago now. I think
Victoria are looking at doing a similar process now, given that onshore gas is starting
to take place in that state. Other states have not been through comprehensive
Issues with the state frameworks
The principal problem that submitters identified with the state access
and compensation arrangements is that they do not address the imbalance in
bargaining positions between petroleum companies and individual landholders.
Mr Leslie Manning from p&e Law stated the lack of bargaining power
for landholders is 'very evident'. He explained that it 'comes from a lack of
ability by many farmers to actually understand the information that is being
put before them and the quantity of information that is being put before them'.
Mr Manning provided the following example:
Recently, in a matter that is going through court at present,
we sought disclosure from the Department of Environment and Heritage Protection
in relation to an environmental impact statement, various rehabilitation plans
and other documents that were required to form part of the environmental
authority, and we were delivered a disc with over 3,000 pages on it to review.
So, the extent of the paperwork that a farmer has to get to grips with and
understand is quite immense.
Mr Manning added:
The clients get left in the position that they have to trawl
through these documents to try to work out what information is there, what is
relevant to their land, without the expertise that the companies have. If you
put yourself into the position of a farmer, he is running a business; his
business is operating his farm. He is given this material, and the party on the
other side has myriad experts to assist, facilitate and explain. That is a
significant imbalance of power. There is a real difference between the
knowledge of the companies and the knowledge of the farmers, and that is one of
the things we tried to rectify in the early days of trying to negotiate conduct
and compensation agreements. We attempted to put clauses into agreements that
said that the company guarantees that the client—the farmer—has all the
necessary documents from which to make a decision and if there is a failure to
produce any of those documents then the agreement can be set aside. None of
those clauses have been taken up. We have not been able to get them into any
agreements. But that is just an example of the sort of imbalance of power that
starts with a lack of information
Inadequate payments and broad conditions used in contracts were also
highlighted. An example was provided of a gas company offering a landholder
$265 to develop wells and 'associated petroleum infrastructure'. The
landholder observed that:
No-one knows what 'associated petroleum infrastructure' is.
It could mean anything. To allow them on for $265 was absolutely stupid.
Ms Laura Hogarth from Creevey Russell Lawyers, told the committee that
landholders use all reasonable endeavours to enter into a conduct and
compensation agreement, as they are required to under Queensland law. However,
she added that, over time, the landholder discovers that they have no option
other than to enter into the agreement that the petroleum company seeks:
As time goes on and they realise how inflexible the company
is about the location and intensity of their activities and the amount of
compensation on offer, they realise that there is not going to be a good
outcome for the landholder and, by that time, they have costs for accounting,
legal and valuation and possibly other environmental experts such as dust or
overland flow of water experts that are required by the valuer. So they may be
out of pocket by a significant amount for months or years and the only way they
can cover those expenses is to sign a [conduct and compensation agreement], as
bad as it is. So that is a serious concern.
The imbalance in bargaining position under the current state laws was
also noted by the NFF, which stated that:
The NFF's view is that a forced negotiation, where the
landholder does not have the option to refuse an agreement, is not an equal or
fair negotiation. Fixed outcome negotiation provides an unfair advantage to
well-resourced mining and gas companies, which employ skilled professionals to
negotiate these types of agreements on a regular basis.
Another issue that concerned some submitters is that the current
frameworks are based on the principle of 'coexistence'. Mr Drew Hutton, the President
of the Lock the Gate Alliance, commented that coexistence is 'nonsense'. He
The more remote the land, obviously the more likely it is
that coexistence can occur. In a great many areas in southern Queensland
intensive agricultural pursuits are carried out. The more intensive those
pursuits, the less that coexistence as possible. We have got coalmining and
coal seam gas occurring in a lot of areas in the Darling Downs for example,
where there is intensive cropping and other forms of intensive agriculture in
fairly closely settled areas.
Miss Nicholson from the Basin Sustainability Alliance argued that
coexistence has only emerged as an issue recently because of the rapid growth
in the industry, compared to the activity that had previously been carried out
The fact is: until recently, all CSG, and the majority of
coalmining, was undertaken for Australia's domestic supply and was not
comparable to the tsunami being rolled out across the country now to feed an
export market. In fact, I do not even know—and I have been on the land for 40
or 50 years—where those original CSG wells were. I was a lawyer some time
ago, and we never looked at the Resource Industry Act. I do not even know where
those CSG wells were. There were no problems because there were so
few—similarly with coalmining.
Representatives of APPEA, however, argued that coexistence can, and
does, occur. APPEA's chief technical officer, Mr Rick Wilkinson,
referred to overseas examples to demonstrate this point:
An overseas example is Texas, which is smaller than New South
Wales, smaller than Queensland, which has an agricultural output rate greater
than either of those states. Texas has 218,000 onshore wells on agricultural
land. The industry has been there for more than a century. Clearly that example
from overseas shows that that is the case. Canada is similar to Australia, with
the same crown law and so forth. It has exactly the same arrangements.
Returning to Australia, Mr Wilkinson noted that there are 6,700 CSG
wells located near Roma, Chinchilla and Miles in Queensland. Mr Wilkinson
argued that these wells are located in 'some of the best agricultural area in
Australia' and are 'operating in a very positive way'.
Mr Ian Thompson from the Department of Agriculture noted that although coexistence
does not apply for projects such as open-cut coalmines, the application of the
principle is evident in parts of Queensland and New South Wales 'depending on
how coal seam gas operations are undertaken and the relationship they have with
the farmers involved and the regional community'. He described the overall situation
as being a 'mixed picture':
There are certainly case studies of agriculture flourishing
in conjunction with coal seam gas and, I think, there are some examples where
the farm sector is saying it has been to its detriment. I think the mining
industry has also said that the concerns about accessing land also have impacts
on their reputation and possibly the approval processes affect the investments
that they can bring into the country.
Role of the Commonwealth in land access issues and unconventional gas
The Commonwealth's direct role in issues related to coal mining and the
extraction of unconventional gas is limited. As the Department of Industry and
Science explained, 'state and territory governments have primary responsibility
for regulating onshore minerals and petroleum exploration and production,
including onshore gas and coal land access arrangements'.
Mr Dean Knudson, Department of the Environment, added that land use matters are
'managed principally by the states and territories', with issues around land
access 'managed by the individual companies, who will do outreach on the ground
with landowners in an area where they wish to develop a resource'.
A direct role for the Commonwealth, however, arises under environmental
legislation. Under the Environment Protection and Biodiversity Conservation
Act 1999 (EPBC Act), a person must not take an action that has, will have,
or is likely to have a significant impact on any matter of national
environmental significance (as defined by the Act) without the approval of
the minister administering that Act. The minister may decide that an
is a controlled action because it is likely to have a significant
is not a controlled action if undertaken in a manner specified;
is not a controlled action and therefore does not require
Included in the nine matters of national environmental significance
protected under the EPBC Act are water resources, in relation to coal seam gas
and large coal mine developments.
Following amendments to the EPBC Act made in 2013, a constitutional
corporation, the Commonwealth or a Commonwealth agency commits a criminal
offence if they take an action involving coal seam gas or large coal mining
development that has, will have, or is likely to have a significant impact on a
water resource without an approval or exemption from obtaining an approval
under the EPBC Act. Offences also apply to persons who, for the purposes of
trade or commerce, engage in this conduct.
Mr Knudson explained that in regulating water-related impacts from coal
or coal seam gas projects, the Department of the Environment:
...work[s] extensively with states and territories to ensure
that any potential impacts on matters of environmental significance are managed
in a way that their impacts are limited to those that would be deemed
acceptable by the decision maker.
Mr Knudsen added that expert advice is relied upon during the decision‑making
process, including from the Independent Expert Scientific Committee on Coal
Seam Gas and Large Coal Mining Development (IESC). The IESC was formed in
2012 and provides advice to federal and state regulators 'on what appropriate
measures should be put in place to manage either areas where there is
uncertainty or residual risk associated with the project'.
The Australian Government has also taken a leadership role in energy
policy, by chairing the COAG Energy Council
and by developing and promoting various policies, such as the 2015 Energy White
Paper and the Domestic Gas Strategy.
The Domestic Gas Strategy, which was released in April 2015, articulates
the Australian Government's role, and its expectations of state and territory
governments, and industry, in developing unconventional gas.
The Strategy contains the following statement:
The States are primarily responsible for the regulation of
onshore gas resources in their jurisdictions, and the Australian Government
expects the States to support the development of the unconventional gas
industry using strong scientific evidence to underpin any decision.
The benefits of developing a stronger unconventional gas
sector should be balanced with managing impacts upon communities, other
industries, and the environment and be supported by an evidence-based
understanding of risks (for example, impacts on water quality, or trade-offs
for land usage).
The Strategy also outlines the Australian Government's three principles
for the development of CSG, which are as follows:
'that access to agricultural land should only be done with the
farmer's agreement and farmers should be fairly compensated';
'there must be no long-term damage to water resources used for
agriculture and local communities'; and
'that prime agricultural land and quality water resources must
not be compromised for future generations'.
The committee received evidence regarding the work undertaken by the
COAG Energy Council in response to, among other things, challenges presented by
land use conflicts. Of relevance to the bill being examined by the committee
are the Multiple Land Use Framework and the National Harmonised Regulatory
Framework for Natural Gas and Coal Seams.
Ms Margaret Sewell, Department of Industry and Science, also advised that in
December 2014, the COAG Energy Council committed to working with the industry
and science agencies:
...to develop a set of specific actions to promote community
confidence and engagement in resources development, with a very strong focus
on, in particular, improving local community engagement including through the
promotion of leading practice approaches.
The report returns to issues such as the role of the Commonwealth in the
next chapter, where the evidence received about how this bill interacts with matters
traditionally considered to be state responsibilities is outlined. The next
chapter also examines the evidence received by the committee about the specific
proposals in the bill.
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