Shared Knowledge

Council Rates and CSG: Recent Land Court Decision

Geldard v Western Downs Regional Council [2019] QLC 17

A recent Land Court decision has provided guidance about how local government should deal with rating categorisation in the context of petroleum activities on rural properties.

In the case of Geldard v Western Downs Regional Council [2019] QLC 17, the appellant had purchased a property in the Western Downs Regional Council area. Prior to the appellant purchasing the property, it had been owned by Australian Pacific LNG Pty Ltd (APLNG) and primarily used to produce coal seam gas.

At the time the appellant purchased the property there were eight operational gas wells together with a further 14 gas wells which were not being used to extract gas.

The land had previously been categorised for rates purposes as “Petroleum Other” by Western Downs Regional (Council). The Council described this use as “Land other than a Petroleum Lease, with an area 400 Ha or greater, which is used or intended to be used, in whole or in part, and whether predominantly or not, for:

(a) gas and/or oil extraction; and/or

(b) processing of gas and/or oil; and/or

(c) transportation of gas and/or oil by pipeline; or

(d) for any purpose ancillary to or associated with (a) to (c), including water storage, compressor stations or block valves.

In response to receiving the rates notice based on the land being categorised as “Petroleum Other”, the appellant lodged a notice of objection against that categorisation, contending that the land should be categorised as being “Rural” for the purposes of rates notices. The Rural use is described by Council in its annual Revenue Statement as “Land used principally for rural purposes, which is not otherwise categorised, and has an area not less than 100 ha.

Council told the appellant that if a property was categorised as “Petroleum Other”, the appellant, as the purchaser, should assume that Council would continue to rate the property as “Petroleum Other”. This was despite Council admitting that it was aware of other similar properties that had been purchased from APLNG that were rated “Petroleum Other” and had since had their rate category changed to “Rural”.

Council overruled the appellant’s objection.  The appellant appealed to the Land Court. It was for the Court to decide whether Council had correctly categorised the land as “Petroleum Other” or whether it should be re-categorised as “Rural”.

Land Court decision

The Court decided to allow the appeal. It held that:

  1. Categorisations of land can be changed and are not ‘cast in stone’;
  2. It was possible to re-categorise land as “Rural” that had been previously owned by coal seam gas companies based on Council’s previous re-categorisation of other properties to “Rural”; and
  3. The assertion that previous ownership rather than predominant use is influential in determining the rating category attached to properties on which gas infrastructure exists  defies the assertion contained within Council’s Revenue Statement for 2017-18, which refers to the objective “to ensure the fair and equitable application of lawful rating and charging principles, without bias, taking account of all relevant considerations”.

The Court held that in determining the correct approach to categorising land the determining factor should be an examination as to what is the appropriate designation of the use of the land.

The Court looked at the activities in which the owner or occupier of the land is engaged to help provide an understanding of the nature of the use of the land. The fact that the land was being used by a commercial enterprise does not necessarily mean that the land is the land is being used for commercial purposes. It might often be a question of fact and degree whether the use is for a commercial purpose or some other purpose.

The land was subject to a Petroleum Lease. It was agreed that when APLNG owned the land its only function was for the exploration and production of natural gas.

The Court held that the granting of the petroleum leases and the existence of freehold land are not mutually exclusive, hence the need for conduct and compensation agreements in circumstances where the existence of a petroleum lease impacts upon the usual activities of a freehold title holder.

Council’s policy regarding land classification was deemed to be inflexible in that it denied a ratepayers entitlement to seek to have the categorisation of his or her property changed, without considering all the relevant facts and circumstances. This is a right afforded to all rate payers under the Local Government Regulation 2012 (Qld) (LGR).

Land Court Member Cochrane held that the appropriate and fair approach to any categorisation of land was not to start with the existing category of a parcel of land but rather to look at the categorisation as if the land had not yet been classified, before considering the provisions of the applicable Revenue Statement and the various differential categories that run with it.

The starting point in considering an application to change the categorisation of land should not be to begin with a preconception that the existing categorisation is the appropriate one.

Member Cochrane stated that the purpose of the rating structure is to impose reasonable burdens upon landowners according to the activities carried out on their land, whether that activity is carried out by them or some other party subject to a lease or licence.

Once the ownership of the land passed to the appellant it ceased to be predominantly used for the exploration and extraction of gas and became almost entirely used for rural activities, save for the presence of wells and pads and associated infrastructure which remained on the land.

Given that the landholder is responsible for paying the rates that attach to the land and not the occupier APLNG Member Cochrane held that the appropriate categorisation of the land was “Rural”.

Finally, Council’s argument that it applied differential general rates to recover funds to cover the cost of providing local government services for land deemed to be “high intensive use” did not apply, as there was no evidence to suggest that rural properties with gas wells constituted a more intensive use than other rural properties without gas wells.  Additionally, the gas wells did not require daily visits by APLNG employees, so could hardly be regarded as constituting an “intensive use”.

Considerations for Landowners

This case is a reminder to landowners with coal seam gas wells that the predominant use of their land is a determinative factor in rates categorisation. Local governments should refrain from applying policies rigidly so as to not deviate from their statutory responsibilities.

When negotiating a conduct and compensation agreement with a gas company, it is important to consider the impacts that a change in rating categorisation may have on the land and include terms that protect landholders against additional costs that may be incurred as a result of such change.