Mangoola Coal Operations Pty Ltd v Muswellbrook Shire Council [2020] NSWLEC 66

Planning & Environment Partner Jim Griffiths acted for Muswellbrook Shire Council in this significant NSW Land and Environment Court matter. The judgment found in favour of our client and explains and expands the Court’s position on classification of land for rating under the ‘farmland’ and ‘mining’ categorisations.

The case involved two parallel Land and Environment Court of NSW (the Court) actions. Both challenged council rate assessments by Muswellbrook Shire Council (Council) over two parcels of land (together the Assessment Areas) surrounding the Mangoola open cut coal mine (Mine) for the rating years beginning 1 July 2016 and 1 July 2017 (Relevant Years).

The decision represents a further step in the Court’s development of the methodology for categorisation of farmland and mining land for municipal rating purposes established in the earlier cases:

  • Peabody Pastoral Holdings Pty Limited v Mid-Western Regional Council [2013] NSWLEC 86 and Mid-Western Regional Council v Peabody Pastoral Holdings Pty Ltd [2013] NSWCA 322 (Peabody), and
  • Ulan Coal Mines Pty Limited v Mid-Western Regional Council [2013] NSWLEC 1167 (Ulan).

Background to the case

Mangoola Coal Operations Pty Ltd (Mangoola), the owner of the Mine and the Assessment Areas, sought declarations that the Assessment Areas be categorised as ‘farmland’ rather than ‘mining’ under s526 of the Local Government Act 1993 (NSW) (LGA).

Sections 514 and 521 of the LGA require councils to declare all rateable land in their local government areas into one of four categories:

  • Farmland
  • Residential
  • Mining, or
  • Business

Prior to 1 July 2016, the Assessment Areas were categorised as ‘farmland’ for rating purposes. On 4 August 2017, the Council declared both the Assessment Areas to be within the ‘mining’ categorisation with effect from 1 July 2016.

On 30 May 2018, Mangoola lodged an Application for Change in Category of Land pursuant to s525 of the LGA. The Council did not determine that application within the prescribed 40 days and was deemed to have declared the Assessment Areas to be within their existing category; namely, ‘mining’ under s525(6). Mangoola appealed that deemed determination under s526.

Local Government Act

Section 515(1) of the LGA provides that:

515 Categorisation as farmland

(1) Land is to be categorised as:

“farmland” if it is a parcel of rateable land valued as one assessment and its dominant use is for farming … which:

a) has a significant and substantial commercial purpose or character, and

b) is engaged in for the purpose of profit on a continuous or repetitive basis (whether or not a profit is actually made).

Section 517(1) of the LGA relevantly provides:

(2)    Categorisation as mining

a) Land is to be categorised as:

“mining” if it is a parcel of rateable land valued as one assessment and its dominant use is for a coal mine or metalliferous mine.

[Underline added]

‘Dominant use’

The outcome of the proceedings turned on which of two uses – mining or farmland – was the ‘dominant use’ of each of the Assessment Areas during each of the Relevant Years.

One of the Assessment Areas (the Larger Assessment Area) comprised approximately 6617 hectares in the 2016/17 assessment year and approximately 6581 hectares during the 2017/18 assessment year.

The other Assessment Area (the Smaller Assessment Area) comprised approximately 727 hectares in the 2016/17 assessment year and 578 hectares in the 2017/18 assessment year.

The differences in area for each of the Assessment Areas between the two assessment years resulted from a boundary adjustment between the two areas.

Although neither party contended that the dominant use of either parcel of land was for residential or business purposes, Moore J, who heard the case, confirmed with both parties during the trial that if he was ultimately not satisfied that either of the Assessment Areas fell within either the mining or farmland categories, it was open to him under the LGA to find that the relevant parcel should be categorised as ‘business’, being the default category where no other category applies.

Both parties agreed that there were both agricultural and mining uses being carried out on the Assessment Areas during the Relevant Years. It was also agreed that during the Relevant Years there was cattle grazing and some irrigated areas used to grow crops. There was an area in the Larger Assessment Area to the north of the Mine on which exploration work took place during the Relevant Years.

A large number of monitors used for recording noise, dust, vibration and surface and groundwater impacts arising from the activities at the neighbouring Mine were situated on the two Assessment Areas as well as fauna boxes and similar. These items were dictated by project approval and the various plans of management regulating the Mine.

Where the parties materially differed was in interpreting the importance of each of the elements of the use of the Assessment Areas in establishing the dominant use for rating purposes.

Peabody and Ulan

Both parties, and ultimately the Court, accepted and applied the basic structure for establishing the dominant use of land for rating purposes as outlined in the Court’s decision in Peabody and applied in Ulan.

The case put by both parties in the Mangoola case relied on very detailed expert evidence in a number of disciplines, and sought to address the specific methodology for categorising land as set out in Peabody.

In this way, the Council’s case in Mangoola differed markedly from the approach taken by Mid-Western Regional Council in both the Peabody and Ulan cases. For example, the Council’s case in Mangoola did not rely on the purpose for which the Assessment Areas were acquired or held or on any impacts of the neighbouring Mine on the Assessment Areas as a basis for the mining categorisation. The Council instead sought to demonstrate that items of mining equipment and infrastructure situated on the Assessment Areas, including offset areas, and other items required under the Mine’s mining approvals, either established the necessary mining use (where there was no competing farming use) or that the mining use was the dominant of the competing uses (where there was also a farming use).

Assessment areas

The presence of mining infrastructure and mining use were demonstrated during an on-site visit by His Honour, by detailed mapping of items such as environmental monitors and environmental offsets and by references to approval documents and various reports and plans of management made by Mangoola in relation to the Mine.

Mangoola asserted that, from an impressionistic point of view, the Assessment Areas appeared as rural lands used mainly for cattle grazing, surrounded by mining areas. Parts of the Assessment Areas were the subject of an agricultural licence (Colinta Licence) between Mangoola, as landowner, and Colinta Holdings Pty Ltd, another subsidiary within Mangoola’s corporate group. Mangoola relied heavily on the existence of this licence and the grazing and other permitted uses under it as evidence of a dominant farmland use.

The Council sought to satisfy the Court that the majority of the Assessment Areas were not used as farmland during the Relevant Years due to large areas being used as environmental, agricultural and Aboriginal offsets, the presence of numerous environmental monitoring stations dictated by the Mine’s enabling documents, areas to the north of the existing Mine being subject to exploration work preparatory to a proposed mine extension and further areas being heavily treed or otherwise unfit for grazing or cropping.

The Council highlighted matters such as:

  • The presence of large numbers of environmental monitors and fauna protection items across the Assessment Areas as required by the Mine’s approvals
  • The detailed requirements of the Mine’s approval and plans of management in relation to provision and maintenance of offsets as well as inspection and maintenance of monitors and the like
  • The fact that much of the land subject to the Colinta Licence was in fact not used for either grazing or cropping during the Relevant Years
  • An extensive weed eradication program undertaken by Mangoola on the Assessment Areas (again referenced back to the Mine’s enabling documentation)
  • The priority allowed to the mining operation over the agricultural activities in respect of permitted water allocations from the Hunter River

As all establishing mining as the Assessment Areas’ dominant use.

Valuation of Land Act

An important argument mounted by Mangoola in respect of only the Smaller Assessment Area was that that Assessment Area, which contained active mining as well as grazing during the Relevant Years, was required to be categorised under the LGA as farmland due to the operation of s4F(3) of the Valuation of Land Act 1916 (NSW) (VLA) which provides that land which is ‘part of a mine’ that is separately occupied for a purpose other than a mine (in this case as farmland) is to be valued and rated accordingly.

Mangoola saw the words ‘is to be valued and rated accordingly’ to mean the Council’s (and, in the proceedings, the Court’s) statutory obligation under s514 of the LGA to categorise land was overridden by the terms of s14 F(3) of the VLA to require a farmland categorisation regardless of the land’s actual use. That is, as the Valuer-General had valued the land under s14F(3) as agricultural land, the Council and the Court should be bound to categorise the land as farmland under the LGA.

The Council’s opposing position was that s14F(3) operates so that if the Valuer-General has determined to value land separately, it must also be rated separately by the rating authority under the LGA in accordance with Chapter 15, Part 3 of the LGA.

In the Council’s view, the Valuer-General had no power to make the declaration under s514 of the LGA, and s14F(3) was enacted to address the possibility of unwarranted inflation of the valuation of a parcel merely because it was part of a mine where it was ‘separately’ occupied for a purpose other than mining. The Council’s function under Chapter 15 Part 3, LGA was seen to be able to determine, make and levy the ordinary and special rates to fund council activities with the two statutes serving different functions.

The outcome – decision in favour of the Council

In the final event, His Honour found in favour of the Council, dismissing Mangoola’s appeals in respect of both Assessment Areas for both Relevant Years. Having considered the uses of both Assessment Areas, His Honour found the dominant use of both Assessment Areas to have been mining during the Relevant Years.

On the argument put forward by Mangoola that the operation of s14F(3) of the VLA required that the Smaller Assessment Area be categorised by the Council (and the Court) as farmland for rating purposes, His Honour found that, although the Valuer-General’s valuation and its underlying process were not the subject of the proceedings, the application of s14F(3) of the VLA, even if undertaken on the basis that the Smaller Assessment Area was agricultural land, merely provided a base monetary figure upon which the appropriate rate should be applied once Council had gone through a separate categorisation process under the LGA. Having disposed of the s14F(3) argument, His Honour proceeded to consider the position of both the Smaller Assessment Area and the Larger Assessment Area using the same “dominant use” methodology.

His Honour saw that there was a definite nexus between the environmental monitoring equipment and activities and the requirements of the Mine’s project approval. His Honour further saw that this necessitated that environmental monitoring on the Assessment Areas be seen as mining activity and therefore given weight in determining the dominant use of each Assessment Area.

Where His Honour identified areas that were subject to the Colinta Licence which were not used for agriculture during the Relevant Years, but were used for location and maintenance of monitoring equipment, he was prepared to find that those areas were used for mining purposes.

On the evidence presented by both parties’ mining experts, His Honour was satisfied that electricity and water supply infrastructure and the associated easement situated on the Assessment Areas constituted essential services for the operation of the Mine and therefore should be given great weight in determination of what was the use of the relevant parcel.

In summary on this point, His Honour said:

“Put simply, without the use of the easement for the coal mine purposes of supplying water and electricity to the mine, there would be no mine.”

Noting that the various offset areas situated within both the Assessment Areas were established as requirements of the Mine’s project approval, maintained in line with the Mine’s various plans of management, and not used for farming by Colinta, His Honour declined to accept Mangoola’s proposition that these areas be seen as ‘neutral’ in his consideration of the correct categorisation. He instead saw the offset areas as requirements of the project approval and locations of environmental monitoring equipment, leading to a determination that they had been used in an active sense for mining.

Peabody

The activities undertaken by Mangoola on the offset areas were seen as sufficient to satisfy the test for dominant purpose put forward in Peabody as an intended purpose of use must be manifested by some physical activity on the land for it to be seen as a use of the land within the meaning of the LGA – (see paragraph 72 of Preston CJ’s judgment in Peabody).

Ulan

His Honour saw that, unlike the position of the offset areas in Ulan, there was no evidence of any use by Mangoola or Colinta of the offset lands other than as locations of electricity or water infrastructure and monitoring sites and their use to offset the impacts of the Mine’s activities. In the absence of any other competing use, the Court was prepared to see the use (and only use) of the offset areas as that of a coal mine.

Although Mangoola had sought to distinguish mining use from exploration work undertaken on part of the Larger Assessment Area to the north of the existing Mine, His Honour saw that, although the absence of grazing and the presence of various monitoring activities carried out on the exploration area were in themselves sufficient to support a mining categorization of the area, the exploration activities there in early 2017 were for the Mine and mining use. This finding was made even though it was established that the exploration activity moved across the relevant exploration area throughout the Relevant Years with the drilling equipment only occupying a particular physical location for a period of weeks or months at a time.

Impact of this case for NSW local councils

This case represents an important expression of legal principles established in Peabody and applied in Ulan. In his judgment, His Honour has further detailed the Court’s approach to assessment of the nature and degree of use required to establish mining use on lands utilised as environmental buffers to active mines.

Of particular interest in this case is the weight given to environmental offset areas in the absence of competing farming uses, the approach taken to activities which were transitional or localised to a particular land area, such as exploration work, and the way that environmental monitoring activities were addressed.

Jim Griffiths, Partner of Moray & Agnew acted for Muswellbrook Shire Council in the above matter.