What constitutes a material change in circumstances under Queensland’s Petroleum & Gas Act?

26 July 2013

To date, there have been no cases decided before the Land Court on the meaning of the words “material change in circumstances” in the context of their application under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (P&G Act). The term is not defined in the P&G Act or in any other relevant Queensland legislation.

Here we consider the meaning and provide some examples of situations where an activity may constitute a material change in circumstances.

The essential question is whether the parties would have negotiated or agreed a different amount of compensation if the new events or changes were known at the time the agreement was negotiated or the court determination made.

The word material was considered by the Land and Resources Tribunal (which preceded the Land Court) in the case of Hicks & Anor v Graham & Anor, Re [2004] QLRT 47 in the context of mining lease compensation review. In that case it was determined that a material change is a change that is pertinent to what compensation should be awarded.

If a pertinent change has been established, a Court or Tribunal has the opportunity to consider whether it is of such significance that any amendment to the original compensation is justified.

The case also considered the word ‘circumstance’, and in doing so, reference was made to the Macquarie Dictionary 3rd edition definition:

“... a condition, with respect to time, place, manner, agent etc., which accompanies, determines, or modifies a fact or event”.

In this particular instance, the Tribunal accepted that the area of land disturbed by mining operations was a ‘circumstance’ for the mining lease.

While a change in circumstances needs to be established, it is not clear from the P&G Act whose circumstances need to be subject to such a change.  It could be either the circumstances of the resource authority holder or of the eligible claimant for compensation, i.e. either the owner or occupier, or only the circumstances (being the conduct of activities) by the resource authority holder.  It could also be a combination of both.

Therefore, it appears that a substantial decrease or increase in the intensity, scale, quality or nature of an authorised activity by the resource authority holder the subject of the original compensation arrangement is likely to be sufficient to trigger the jurisdiction.

It is difficult to give any mandatory prescribed benchmark which indicates when there may be a material change (for example, an increase by 5% or 10% in the area affected or a similar increase in the number of gas wells to be constructed on a given parcel of land) as the trigger will depend on the circumstances of each case.

However, for example, an increase in the area of land that would be affected by the activities, from that indicated when the compensation was originally agreed, might be regarded as constituting a material change in circumstances.

Conversely, a reduction in the number of wells to be drilled or a reduction in the area of the property to be affected by activities or a reduction in the period over which those activities are to be conducted, could constitute a material change in circumstances.

A change in technical methods of drilling wells or in installing infrastructure or the use of different and potentially environmentally harmful chemicals or other substances, which could result in greater compensatable effects on the land, may also constitute a material change in circumstances.

Under section 537C(3) of the P&G Act, the Land Court can only review the original compensation agreed to the extent it is affected by the material change in circumstances.  If the amount of compensation originally agreed took into account the intensification or increase or change in the nature, quality or quantum of the relevant activity, the Land Court is unlikely to review the original compensation.

Similarly if the compensation was in respect of certain activities, then all effects of those activities are likely to be within the scope of the original compensation, whether those effects were foreseen at the time or not. 

It is more difficult to indicate whether a change in the circumstances of the landowner or occupier, such as a change in its use of the land, would be a material change in circumstances.

It is arguable that an action of a landowner may constitute a material change of circumstance, for example if a landowner changes the use of the land to a use which was not contemplated or could not reasonably have been expected to have been contemplated by the parties and this new use is adversely affected (to a greater degree than the prior use) by the activities of the resource authority holder (where those activities have not changed in their nature, intensity or duration). Having said that, it is equally arguable (if not more so) from the alternative perspective that:

  1. the principle of “caveat emptor” should apply, i.e. if a landowner makes a change knowing that the activities will be carried out or are being carried out and knowing that the change would be to their own detriment, the landowner should not be entitled to further compensation; and
  2. if compensation was originally assessed on the highest and best use of the land (as is often the case, particularly in the assessment of compensation relating to mining leases) then the impact of the activities on any other intended use could only be less and therefore the amount of compensation could not increase.

Ultimately the issue will be what the original compensation was for and whether it adequately covered the effects on all possible future uses of the land and all possible impacts of the activities.

However, merely because there is a greater impact does not necessarily mean that this will constitute a material change in circumstances. It will depend on the terms of the conduct and compensation agreement negotiated between the resource authority holder and the landowner.

Even if there is a material change in circumstances, the Court may not necessarily order a variation to the original compensation agreed between a landowner and resource authority. Relevant to this point is the recent decision of Slater & Anor v Appleton & Anor (No. 2) [2013] QLC 13 which related specifically to the Mineral Resources Act 1989 (Qld). Here the Court determined that a material change in circumstances existed but rejected the argument by the resource authority holder that the material change warranted a reduction in compensation.

See also Reviewing compensation for resources tenures – What’s done isn’t necessarily dusted

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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Daryl Clifford

Partner. Brisbane
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Paul Careless

Special Counsel. Brisbane
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Sarah Roettgers

Senior Associate. Brisbane
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