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Environment and Communications Legislation Committee - 28/07/2015 - Landholders’ Right to Refuse (Gas and Coal) Bill 2013

HEPBURN, Professor Samantha Jane, Director, Centre for Energy and Natural Resource Law and Director, EMI Partners Pty Ltd, Deakin University Law School

Evidence was taken via teleconference—

CHAIR: Welcome, Professor Hepburn. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. We have your submission. Thanks very much for that. Would you like to make a brief opening statement before we go to questions?

Prof. Hepburn : Yes. I would like to say that I think the bill is not consistent with the underlying land framework or the public resource framework that exist in Australia.

Senator WATERS: Thanks very much, Professor Hepburn, for your submission and for appearing before us today. Are you aware of the original genesis of this, which was a previous version of this bill in 2011?

Prof. Hepburn : No, I have not had a look at that.

Senator WATERS: I am not sure if it is worth going through it. Like you, I have a legal background. The reason for drafting the bill in this manner was a statement by Tony Abbott at the time. He said that he thought landholders should have the right to say no to coal seam gas. We opportunistically got it drafted as such to try to lock in that commitment. Unfortunately, Mr Abbott then retreated from that commitment some 24 hours later.

It has come up a little bit with some of the witnesses that this is not a panacea for all of the multiple issues with coal seam gas. I agree. It was by no means designed as a panacea. It was part of what could have been the solution, but the states have not in fact moved fast enough to properly regulate the industry or to give landholders the right to refuse. I thought many of your suggestions were sensible and I understand them. I simply wanted to convey that that was the reason for the way the bill has been drafted.

Prof. Hepburn : Okay.

Senator WATERS: I do not have any specific questions at this stage, but perhaps, Professor Hepburn, you would like to elaborate on some of the points in your submission that you wanted us to be particularly aware of.

Prof. Hepburn : I am happy to briefly go through it. I suppose there are a range of different principles—

CHAIR: Professor Hepburn, before we go there, we might let senators exhaust their questions. If at the end of it you still feel that there is something you would like to add then perhaps we will go there then. I will let Senator Urquhart and Senator Sinodinos ask their questions first.

Prof. Hepburn : Sure.

Senator URQUHART: Can you quickly summarise what you see as the issues that this bill presents for the established approach to mining rights.

Prof. Hepburn : Yes, I can. If we look at clause 10(1) of the bill, it is quite clear that it assumes an underlying right to refuse. The problem is that that does not exist in the way the existing framework operates. I have tried to explain that. I do not want to go through what I have already set out in reasonable detail in my submission.

Senator URQUHART: But if you could briefly summarise it for the committee that might be helpful.

Prof. Hepburn : In essence, private landholder authorisation cannot be constructed to impede resource development because that undermines the disaggregation of the resource from the land and it depletes the statutory ownership rights that the state has vested in those resources. There are a number of ways in which you could argue that the statutory right that the state has to petroleum and resources in the substrata carries with it either express statutory rights through the ancillary provisions or implied rights to access. One of the arguments that I make is that all ownership carries fundamental rights, and one of those fundamental rights is access. We know this just from easement rights. If your land is landlocked then adjoining land will necessarily be burdened by the right of way because you have to have access to the ownership. That would apply also to resources. Otherwise, there is no point having a public resource framework if the state cannot access it because the private landholder is refusing.

What is happening is that you are diminishing the rights of the private landholder, and I accept that. But the way in which the constitutional framework is set up is such that rights to compensation do not exist at the state level under the state constitutional framework. So this revesting has occurred. It probably occurred prior to the real evolution of unconventional gas and so it has become a big issue because unconventional gas has expanded into areas which are now amenable to private landholdings and agricultural land. The tension with that access interface has become much more apparent with the expansion of unconventional gas.

That does not necessarily mean that the underlying framework has changed. I think I said to you that the Western Australian provision is often referred to. I think it is section 16 of the geothermal legislation there. It is not a right of veto. It really is just saying that consent is required for particular types of land that clearly are very small—2,000 square metres or close to a cemetery or something like that. That is just providing a qualification for an access entitlement rather than conferring on the private landholder any right of veto. As I have said, you cannot have that.

To a certain extent, if we did not have the statutory vesting provisions, we would rely on the Common law framework. In the common law framework the landowner owns everything that exists within the substrata. That is a product of the Latin maxim. That is also a product of general accession principles. If you have something that is integrated into land or another type of object—fixtures are a good example—then it will become a part of that ownership right.

Common law would give the landowner those rights, but the statute has modified common law. An inevitable product of that modification is an access entitlement. What I hope my submission is saying that it is inappropriate to try to base the bill on rights of refusal. It is much more effective and progressive for both the landholder and the resource titleholder—and for the progression of both sectors, perhaps—to talk about controlled access and giving the landholder rights to be involved in the way in which access is carried out on the underlying assumption that access is going to be carried out because the resource is owned by the state.

Senator URQUHART: That is great, thank you. Given that the state has responsibility for mining regulation and land access issues, do you think that the state should be dealing with the matters addressed by this bill rather than the Commonwealth or—

Prof. Hepburn : Yes. I would say that categorically.

Senator URQUHART: So you do not see a role for Commonwealth intervention?

Prof. Hepburn : I do not, actually. Obviously the Commonwealth might have a role on broader sustainable economic and environmental objectives. You have the national environment legislation—the Environment Protection and Biodiversity Conservation Act. In that sense, the Commonwealth is overseeing activity, but the primary rights must reside with the state because the resource is vested in the state. We cannot ignore that fact. I think I have included a section from the Petroleum (Onshore Act) in New South Wales. That provision is so powerful. It makes it very clear that all petroleum existing in a natural state below the surface of any land is the property of the Crown and is taken to have always been so. It is actually retrospective.

The states have ownership and ownership carries responsibility. So the states should be responsible for implementing a coordinated access regime that supports and does not undermine private landholder rights and that engages private landholders effectively. I have talked about the conduct and compensation framework in Queensland in my submission a little bit. I think that that responsibility should not go to the Commonwealth because it would create a chaotic situation.

Senator URQUHART: I do not want to put words in your mouth, Professor Hepburn, but what I understand you to be saying is that the role should still be with the states but the Commonwealth might have an oversight role.

Prof. Hepburn : Exactly, yes.

Senator URQUHART: One of our submitters questioned whether landholders' rights need to be revised because mining is no longer a pick-and-shovel task but can involve machinery that is so massive that whole hills and small mountains are devoured within a couple of years. That is from a submission. Do you consider that there is merit in this argument or can laws that regulate access and compensation address those issues as well?

Prof. Hepburn : This is what I would call one of the big issues. What we are facing as we move forward in the future is that land is such a valuable commodity that we will have increasing tension between intersecting resources and conflicting resource exploitation and usage. The underlying assumptions of private landholders regarding exclusivity and control in a public ownership framework are being reduced because as mining and global energy demands expand the statutory provisions are being relied on. Do we say, 'Okay'? We also have overlapping issues to do with food security. We need to prioritise those conflicts. Do we prioritise mining? Do we prioritise agriculture? These sorts of issues are coming up a lot in the eastern states.

What I would say is that I think it is increasingly difficult, as we move forward in this environment, to try to hold onto that concept of absolute ownership, absolute rights to use and enjoy vast tracts of land when you have these expanding sectors. I do not want to bore everyone, but we have inherited a feudal framework. The Crown, not the private landholder, is the ultimate owner. All title is derived from the Crown; the Crown can reclaim it. Obviously there are compensation provisions at the Commonwealth level, but that is the land ownership framework that informs Australia. We therefore have the capacity to diminish private land grants from the Crown to accommodate mining and different sectors.

Do we want to do this? That is the big question. Obviously it comes down to looking at our needs economically and trying to achieve an appropriate balance between these different sectors, but I think there inevitably is going to be a reduction in the previous entitlements that landholders expected to have. Remember: they never really had them under a feudal framework, because it was always possible for the Crown to reclaim.

Senator URQUHART: Are you aware of any review or inquiry that has considered whether the established approach to mining rights is appropriate in light of the scale of modern onshore mining and petroleum activities?

Prof. Hepburn : There are a couple of reviews in the States, although the framework over there is different because they do not have a feudal system and the landholder owns everything and therefore creates a mineral estate. There has not been that much done—I think there might be one in Queensland—that has looked at access rights. I can certainly find that for you if you need it.

Senator URQUHART: It would be useful if you could forward that to the committee. Do you think there might be merit in the Australian Law Reform Commission actually having an inquiry into these matters?

Prof. Hepburn : Definitely. This is a huge issue. As I said before, you have big things happening. You have a massive expansion of unconventional gas in the eastern states. You have the acceleration of gas projects, with LNG becoming a global commodity. You have that impacting on food security in agricultural areas and then you have got landholders who have those farms, trying to assert their private ownership rights to resist that development. In effect, you sort of have the interface between the statutory ownership rights of the state in issuing resource titles and the private ownership rights of the farmers in saying, 'No, we own this land; you can't come on.'

The problem is that, because it is unclear what that interface is, the bill assumes that the landholders have that priority, but that is not supported by the feudal framework and certainly would not be supported by the public resource ownership framework which exists in a number of countries across the world.

Senator URQUHART: The bill as it is drafted only applies to constitutional corporations. We had New South Wales Young Lawyers question whether the entities involved in mining and CSG activities could restructure their operations and avoid being captured by the bill. Do you think that sort of action would be likely?

Prof. Hepburn : Yes, that is certainly what is going to happen. This bill will potentially create chaos. Then you are going to have issues of resource titles that have already been granted maybe not being amenable to the bill and future resource titles being amenable to the bill. In the future, mining companies are going to want to avoid the prospect of simply being unable to access the resource. At the moment, there are clearly impediments; for example, in Queensland you obviously have to go through the notification, conduct, compensation and all that negotiation process, but there is not that provision at the state level which allows the landholder to simply say, 'No, I don't consent' and have that upheld, because that would clearly create chaos for the issuance of the resource title. So what will happen is that companies will seek to avoid the application of the Commonwealth provisions. Yes, it is restricted to constitutional corporations. They will seek to recalibrate their organisations.

Senator URQUHART: Thanks very much.

Senator SINODINOS: I have a couple of questions based on your submission. On page 7 you say:

State governments retain control over resources within their jurisdiction because the vesting provisions give them ownership of the resource.

You have outlined that already.

Consequently, state governments retain the power to regulate resources that belong to them. It would appear to be beyond the constitutional mandate of the Federal government to expressly override state legislation that confers access entitlements upon the holders of resource titles.

To a layman, is that questioning the power of the Commonwealth to do something in this space?

Prof. Hepburn : Yes. I am happy to explore that further. What I am really looking at here is: if the state has the ownership right of the resource then, as I explained before, they should carry the responsibility of regulating those ownership rights and certainly regulating the access rights. Certainly this bill would seem to say, 'Sorry, your access rights can be overwhelmed by a Commonwealth bill that allows landholders to refuse consent.' That is going to undermine, for example, the access coding in Queensland—all of those provisions setting out the terms, conditions, aspirations and mandatory provisions are, effectively, undermined because at the Commonwealth level there is a provision saying landholders actually can say no if they want to. I would argue that that does not make sense with the division of constitutional powers in the resource space.

Senator SINODINOS: Are you saying that the Commonwealth could take that power over and make the state regimes redundant?

Prof. Hepburn : The Commonwealth cannot take the power over, because it does not have the resources vested in it. We have to rely on those statutory ownership rights here. It is one line. It is something that I would have to explore in greater detail. What I am saying is that, if the states own the resources, what power does the Commonwealth have to interfere with fundamental rights that connect to those ownership rights?

Senator SINODINOS: I do not want to get into this too much, but the Crown exists at the federal level and the Crown exists at the state level, as it were, in this particular situation. Is the Crown divisible for this purpose?

Prof. Hepburn : Yes—well, divisible in the sense that the vesting provisions operate at the state rather than Commonwealth level. We would have to say they are divisible because, of course, Queensland has control over resources that reside within its domain and New South Wales has control over resources that exist within its jurisdictional domain. So yes.

Senator SINODINOS: Given that the state, in effect, has ownership of the resources the state governments vested in them, how does the Commonwealth override them in this case?

Prof. Hepburn : That is what I am saying. I do not think the Commonwealth could override. I think that, potentially, you could argue that provisions in the bill interfere with what I have classified as fundamental rights that complement ownership of resources, and one of those rights is access. If you are, effectively, at the Commonwealth level saying, 'You can't access without the consent of the private landholder,' arguably you are undermining the ownership rights that have been constructed at the state level.

Senator SINODINOS: If you were a state government and this legislation were to pass—let's say you were Queensland—you might be minded to challenge the legislation.

Prof. Hepburn : You might be minded to challenge it, yes. As I said, I would have to go through a few different constitutional aspects to this which were a bit beyond the scope of my submission, but that is a possibility.

Senator SINODINOS: If a state is in a position where it is denied the capacity to dispose of the resources vested in it, does it have any claim against the Commonwealth?

Prof. Hepburn : That is another definite possibility. We need to consider very carefully what a vesting provision does. The provision that I have given to you from the New South Wales legislation on page 2 is extremely categorical. It is taken to have been so always. No compensation is payable by the crown for any petroleum et cetera. They are saying, 'We have it and we've always had it, and we don't have to pay any compensation for us taking it,' because that is the constitutional framework at the state level. That is a very powerful and quite absolute statutory ownership provision. To read the words carefully: any interference with that would undermine an ownership right. The ownership right is the highest form of right that exists in our legal framework, so it certainly could generate compensation issues. Once again, though, I would have to look more closely at that issue.

Senator SINODINOS: I do not want to complicate it further for you, but what about the interaction with native title legislation?

Prof. Hepburn : Yes, that is another extremely important issue. Native title exists outside of the framework, if you like. What happened in Mabo is the underlying title of the Crown was recalibrated radical title, if native title exists. So if we can say that native title exists and it has got statutory endorsements at the Commonwealth level and, obviously, the equivalent in different state jurisdictions, then it may well be that a bill setting out a right to refuse interferes with continuing customary traditions and rights. It does not properly cohere with the scope and nature of the recognition rights that exist in the native title space. I have not even included that within my submission, but that is a very interesting question.

Senator SINODINOS: Does this create a precedence, for example, for a landholder to object to land clearing legislation being applied to their property?

Prof. Hepburn : Yes, definitely. I suppose that is a possibility as well. What we are doing in this bill is almost saying: okay, we are going to create a new Commonwealth ownership framework; we are basically going to create rights that do not exist at the state level—ownership rights, if you like. We are going to change the ownership rights of the private landholders at the Commonwealth level, even though that is not how they relate to each other at the state level. So you then have to consider how all of the different jigsaw pieces, all the different pieces of legislation, are going to fit in. Native title is a very important one. Land clearing is another important one.

Senator SINODINOS: Sounds like a good candidate for the Law Reform Commission.

Prof. Hepburn : I think so, yes, because those two questions are difficult. I would have to go through all of the elements piece by piece, particularly of native title. I think that is actually a very important question. There is a significant concern that the bill does not even refer to native title rights and certainly does not deal with them comprehensively. That is another significant concern. So it is probably appropriate for the reform commission.

Senator SINODINOS: Thank you.

Senator WATERS: Thank you, Professor. I beg to differ with a few of the things that you have contended, and so I want to put some suggestions to you. The intention of this bill was not to change the ownership rights of the minerals whatsoever, as I set out—I hope, clearly—in the second reading speech. It was certainly not to seek to displace the normal operation of acquisition powers that exist at both the federal and the state level. Given that the corporations power is perfectly able to be used by the Commonwealth to regulate the conduct of constitutional corporations, which most coal seam gas and coal companies are, do your views alter in the knowledge that those seeking to rely on the corporations head of power and that those other acquisition rules would still remain in place and would not seek to cover the field or to overturn those rules?

Prof. Hepburn : I can see what you are saying. I just think the way that the provisions have been set out does not make that clear. Yes, there is obviously the corporations power under the Commonwealth Constitution, but in section 10(1) the provision effectively prevents states henceforth from issuing coal or gas licences to a constitutional corporation that authorises exploration and production activities in the absence of written authorisation by the landholder.

Senator WATERS: No, it prevents the feds not the states; that is an important distinction. It does not seek to regulate state behaviour, because it is a federal bill.

Prof. Hepburn : But if the landholder has the power and if they do not provide written authorisation to the corporation—okay, they would have to be a constitutional corporation—they still have the power to veto. Isn't that impacting upon the ownership rights that the state has?

Senator WATERS: That was not the intention, because of the continued operation of those acquisition of land provisions—both state and federal. I will take your advice, in the sense that it is not clear in the drafting. I live in hope that this bill has a greater chance of success than previous versions of it. That is a good reflection on what I thought was a clear intention in fact being unclear. I will seek to turn my mind to how we can phrase that in a way which will address your concerns, because I think that they can be met and satisfied. Perhaps it is just an expression in the drafting.

Prof. Hepburn : You do not want to have that in some of the issues that we were talking about before—state challenges and all of those sorts of concerns. The point that I was trying to make is that, whilst I do agree that there may be strong rights for landholders to be involved in the process, it might be better—and I think I said this toward the end of my submission—to use different types of language, language about 'controlled access' rather than 'refuse'. It should be a little bit like the native title framework. You are seeking to collaborate, to move forward in a framework where both parties can feel like they are able to get along. You are setting up a regulatory framework which progresses that rather than exacerbates perhaps existing concerns and problems. It might be better to use language that is empowering for landholders but does not necessarily undermine, or have the perception of undermining, ownership rights that are vested at the state level.

Senator WATERS: I will take the advice about the drafting on board to clarify that it is not meant to have an effect on the ownership of the mineral. Just to be clear: the intention of the bill is for landholders to be able to refuse. You referred to the regulatory framework in Queensland; I am across that. Unfortunately what we have heard from many of the landholders who have spoken to us is that the process has been entirely unsatisfactory. This is an attempt to overcome and fix many of the flaws in that system. As for residual acquisition powers, it does not seek to meddle with those.

Prof. Hepburn : Really my submission is saying that it has to be consistent with our land framework. We have a feudal system and we have a public resource framework. We cannot have a bill which is undermining that, because that is just going to generate challenges.

CHAIR: Thank you very much, Professor Hepburn, for your time and your consideration in your submission.