Posted on June 30, 2020 by Elaine Yeo and Sue Puckeridge
Land Categorisation for Rating Purposes: When is the dominant use ‘mining’?
The Land and Environment Court has recently considered whether land surrounding an open cut mine and in the same ownership as the mine but used for grazing and cropping activities and as an offset for the coal mine was properly categorised as mining for rating purposes.
In Mangoola Coal Operations Pty Ltd v Muswellbrook Shire Council  NSWLEC 66, the Court determined that when all the activities on the land were considered, the dominant use of land was a mine, despite the particular parcels not actually being physically mined. The Court distinguished the facts from earlier decisions which indicated that land held for mining did not have the dominant purpose of mining. Consequently, it is a decision which could significantly raise the rating liability of mining companies that ‘hold’ land for mining purposes.
Under the Local Government Act 1993 (‘LG Act‘), all land must be categorised before any rates are levied. There are 4 rating categories: farmland, residential, business or mining: s514 of the LG Act.
The proceedings involved a challenge by Mangoola Coal Operations Pty Ltd (the ‘Applicant‘) in respect of the rating categorisation of two parcels of land owned by it, 18km to the west of Muswellbrook, for the 2016/17 rating year and the 2017/18 rating year.
These two parcels were:
- 727 ha for the 2016/2017 rating year and 578 ha for the 2017/18 rating year ( ‘Small Parcel‘), and
- approximately 6,617 ha for the 2016/17 rating year and 6,581 ha for the 2017/18 rating year (‘Large Parcel‘).
The Applicant had entered into an access licence agreement over both parcels of land with a company called Colinta Holdings Pty Ltd, a cattle grazing enterprise. The parent company to both entities is Glencore.
The issue before the court was whether each of the parcels should be categorised as ‘farmland’ or ‘mining’ during the 2016/17 and 2017/18 rating years. If, as the Applicant contended, the rating categorisation was ‘farmland’, a lower rate would apply.
Dominant Use of the Land under the LG Act
Under s515(1) of the LG Act, land is to be categorised as ‘farmland’, ‘…its dominant use is for farming (that is, the business or industry of grazing, …., the growing of crops of any kind, forestry or …a, or any combination of those businesses or industries) 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).
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‘ (s517(1) of the LG Act).
To determine the ‘dominant use’, the Court took the view that the analysis required was both quantitative and qualitative and adopted the following approach (at  – ):
- ‘dominant in its ordinary meaning connotes ruling, prevailing, or most influential. The statute’s reference to a dominant use presupposes that land may be used for more than one purpose and requires a determination of which use of the land is the main, chief or paramount use’: Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (2010) 79 NSWLR 724;  NSWSC 867, 
- dominant use ‘is a question of fact and degree that may, in the end, be determined as an objective matter of impression having regard to the facts’: Leda Manorstead , cited at  of the judgment,
- the task required by s517 is to identify the use of land for a purpose, in this case, ‘for a coal mine’. Similarly, s515 requires identification of the dominant use ‘for farming’. The word ‘for’ introduces a purposive element. It requires identification of the objective purpose of the existing activities on the land. It does not mean the purpose for which land has been acquired: Bayside Council v Karimbla Properties (No 3) Pty Ltd  NSWCA 257 at  (Emmett AJA with whom McColl JA agreed),
- use in the sense used in s517 and s515 requires the identification of the actual physical activities carried out on that land and characterisation of the use.
The Court then asked:
- what were the nature and extent of the uses on the relevant assessment parcels during each of the relevant years? and
- of those uses, which was the dominant one and what purpose was served by it?
The Court’s Decision
Justice Moore held that the dominant use of both parcels of land for both rating years was ‘mining’.
The Large Parcel was assessed as three different sections. In the 2017/18 year, farming was the dominant use in one of the three sections in the Large Parcel. However, when adding the uses in the other two sections of the Large Parcel for that year, the dominant use of the whole of the Large Parcel was for the purpose of the coal mine: see  and  of the judgment.
In determining the dominant use the following factors were significant:
- the existence of a pipeline easement and electricity supply line on both the Small Parcel and the Large Parcel, which supplied water and electricity to the coal mine. The electricity supply line, and the pumping station and water pipeline, were essential to permit the mine to function,
- grazing activities in accordance with the access licence agreement, were intermittent at best in some areas in the Small Parcel,
- there were no grazing activities in some areas of the Large Parcel due to drought,
- there were a number of environmental monitoring infrastructure items installed on both the Small Parcel and the Large Parcel, which operated constantly during the relevant years. This infrastructure was required to be located on the land pursuant to the project approval conditions for the coal mine. However, without this infrastructure, the mine could not operate in compliance with the project approval conditions. The Applicant’s own published reports indicated that the monitors formed part of the mining operations,
- mining personnel were required to access the mining monitoring infrastructure, and did so on both clearly marked tracks and across paddocks to the mining monitoring infrastructure, and
- both the Small Parcel and the Large Parcel included land that was held by the Applicant to offset the impacts of the parcel of land used as a coal mine. Some of these areas were fenced off from the areas available to be grazed under the access licence and grazing of livestock in these areas was only permitted with the prior written approval of the Applicant.
In relation to the final point, the Court considered at some length, Chief Justice Preston’s judgment in Peabody Pastoral Holdings Pty Limited v Mid-Western Regional Council  NSWLEC 86; (2013) 211 LGERA 337 (‘Peabody‘), noting that the Court of Appeal’s decision in that case was not antipathetic to Chief Justice Preston’s decision at first instance. In Peabody, the Chief Justice observed in , ‘land cannot have its dominant use for a coal mine or metalliferous mine if it is not used, but is only held, for a coal mine or metalliferous mine. This is a further indicator that land held for coal mine is not within the ambit of the concept of dominant use of land for a coalmine in section 517(1).’
In that case the Court was considering whether land which was not physically used for mining, but had been acquired under conditions of a project approval due to the impact of noise from the mine on the land, could be regarded as being used for mining purposes. Adverse impacts from a mine were not sufficient to result in land being used for that purpose.
Justice Moore applied Chief Justice Preston’s reasoning to the present case, but held that in this case the offset land was being used in an active sense, for purposes required of the coal mine and not merely held for a coal mine in a passive sense (see  and ). The purpose served by the offset land was to satisfy the conditions of the Applicant’s approval to operate the coal mine. For example, the approval required the creation and management of the biodiversity offset areas (see ), and the re-establishment of some plant species and plant communities on the offset land (see -).
Furthermore, Justice Moore distinguished his earlier decision in Ulan Coal Mines Pty Limited v Mid-Western Regional Council  NSWLEC 1167, where he held at  that ‘[areas]...that are… merely vegetated or have no active use on them, are to be disregarded‘ and that evidence of ‘some positive use’ will ‘displace any non-use‘. Unlike Ulan, ‘there is no other use on the offset land…The only relevant use of those lands is that which is mandated by the relevant conditions and incorporated documents from the Company’s consent to conduct its coal mine‘ (at ).
The purpose served by the use of the land to offset the impacts of the coal mines clearly characterised the land as being for the purpose of a coal mine, as the impacts of the coal mine would otherwise be unacceptable: ‘The purpose that those offset activities (uses) therefore serve is to permit the Company to undertake its mining activities, including activities that would otherwise have unacceptable impacts. The purpose served of the use (and only use) of the offset areas is, therefore, that of a coal mine (at ).
The ‘dominant use’ of the land is a question of fact and degree. Under s523 of the LG Act, a council may review a declaration that a parcel of land is within a particular category, if it has reason to believe that a parcel of land should be differently categorised. In light of the findings of this case, councils may wish to review the rating categorisation of land owned by mining operators and investigate whether land which has not previously been categorised as mining because it was considered to be ‘held’ for future mining purposes should be categorised as ‘mining ‘ because it is nevertheless being actively used to service a mine, including being used to satisfy project approval conditions.
To read the decision, click here.
To discuss this blog, please leave a comment or call Elaine Yeo on 02 8235 9712, or Sue Puckeridge on 02 8235 9702.