Land Court determines compensation for CSG development

May 2017 | Energy & Resources

In QGC Pty Limited & Ors v Eugenehans Peter Vogt & Anor [2017] QLC 20, the Land Court has handed down its first compensation determination under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (P&G Act) in recent years, and importantly since the development of coal seam gas fields to underpin a liquefied natural gas export industry in Queensland.

QGC Pty Limited (QGC) applied for a determination of compensation payable under the P&G Act, in relation to the installation of six wells and associated tracks and flowlines on a rural property owned by Eugenehans and Elizabeth Vogt (landholders).

A copy of the decision can be found here.

The legislative regime

The court based its determination on the provisions of the P&G Act as in force at the commencement of the proceedings, though future proceedings of this type will be governed by the Mineral and Energy Resources (Common Provisions) Act 2014 (Qld) (MERCP Act).

Section 532 of the P&G Act, as it then was, provided that a petroleum authority holder owed a compensation liability to landholders for compensatable effects arising from the authority holder’s activities on the landholder’s property. Section 532(4) relevantly defined compensatable effects as including the following relating to the landholder’s land:

  1. Deprivation of possession of its surface;
  2. Diminution of its value;
  3. Diminution of the use made or that may be made of the land or any improvement on it;
  4. Severance of any part of the land from other parts of the land or from other land that the eligible claimants own;
  5. Any cost, damage, or loss arising from the carrying out of activities under the petroleum authority on the land; and
  6. Consequential damages incurred as a result of a matter mentioned in paragraphs (a) - (e).

In considering similar legislative provisions in the Mineral Resources Act 1989 (Qld), the court has held that a global approach should be used in determining compensation under these heads, rather than to perform a mathematical exercise of adding separately determined amounts for each limb of the compensation liability.

The evidence

QGC submitted a valuation report prepared by Taylor Byrne attesting to the impacts of QGC’s petroleum activities on the land.

It is important to note that neither of the landholders appeared at the hearing, or offered any material which contradicted the evidence offered by QGC for consideration by the court.

The valuation evidence offered by QGC indicated that the total area of QGC’s infrastructure on the land was approximately 11.4 ha, less than 3.4% of the total area of the property (being 337.5ha). According to the report, the highest and best use of the property is as a rural homesite.

The valuer used a ‘before and after’ approach to assess the impact of QGC’s infrastructure on the land. To calculate the ‘before’ value, the valuer engaged in a study of comparative sales data, and concluded that the true value of the landholder’s property (before taking into account the impact of the infrastructure) was $225,000.00 (or approximately $667 per hectare).

By applying a piecemeal valuation approach, the valuer concluded that the appropriate level of compensation for QGC’s activities was $30,000.00. Specifically, the valuer allowed:

  1. A 100% diminution in value in perpetuity of the area of land occupied by the wells (5.9883 ha for the six wells, for a total compensation liability of $3,994) and the access tracks (2.0038 ha, for a total compensation liability of $1,337);
  2. A 50% diminution in value in perpetuity for those parts of the land traversed by the buried flowlines (3.4291 ha, for a total compensation liability of $1,144); and
  3. A 10% diminution in value of the balance of land (326.0788 ha, for a total compensation liability of $21,479).

(The total allowance of $28,224 was rounded up by the valuer to $30,000.)

The court largely accepted this assessment without substantive comment, other than to recognise that the valuer had made a number of favourable assumptions to the landholder in determining the level of compensation. In particular, the court noted the valuer’s belief that an allowance of between 5% and 10% diminution of the balance land would be fair and reasonable.

However, the court also observed that the valuer had not made any allowance for disturbance during the construction phase of the infrastructure. The court found that it was required to make this determination even if the landholders weren’t occupying the land during the construction activities, based on the acceptance that the landholders had the right to be on the land if they chose.

While evidence was not led as to the duration of the construction phase, having regard to the extent of the infrastructure, the court assessed compensation for disturbance in the sum of $5,000.00, bringing the total one-off compensation liability to $35,000.00.

Conduct and Compensation Agreement (CCA)

The court also recognised that the P&G Act contemplates the entry by the parties into a CCA. The process employed by QGC in seeking a compensation determination in the court is available where the parties are unable to reach such agreement.

The court recognised that it was empowered by section 537DC of the P&G Act to impose ‘any condition it considers appropriate for the exercise of the parties’ rights’.

In this regard, QGC required the right to continue to enter the land for the maintenance and eventual decommissioning of the infrastructure and the rehabilitation of the land. The court accepted QGC’s request that the court order that the continuing relationship of the parties be governed by the standard CCA developed by the Queensland Government.

In this regard, the court accepted the 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.’1

It is important to note that s 537DC of the P&G Act has been replicated by s 99(1)(a) of the MERCP Act, which affords the Land Court the jurisdiction to impose a CCA upon parties who have otherwise failed to reach agreement.


Given the lack of recent compensation determinations for petroleum activities, this decision must be taken into account during compensation valuations and negotiations. Caution should be exercised, however, because of a number of factors particular to this decision, including:

  1. The fact that the highest and best use of the property in question is as a rural homesite, and that the landholders do not live on the property;
  2. The fact that the landholders did not participate in the proceedings, and did not lead any evidence contrary to the valuation offered by QGC; and
  3. The valuation methodologies adopted by QGC’s valuer in the circumstances, including generous multipliers and rounding.

It will also be interesting to monitor the impact of the court’s decision to make an allowance (equal to approximately 15% of the total compensation awarded) for disturbance in the absence of any evidence that the construction activities impacted the landholders in any real way, and even without an understanding of the duration of such impacts.

Finally, the decision of the court to impose a CCA on the parties in the form of the state template (which, in the case of many landholders and petroleum companies, is not the preferred form of CCA) may make it harder to convince the court to impose alternative conduct provisions in the future.

Companies and landholders engaged in compensation negotiations should now review their own valuation and conduct requirements.


1 QGC Pty Limited & Ors v Eugenhagens Peter Vogt & Anor [2017] QLC 20, at [33].

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