Opinion

Who owns coal seam gas in NSW?

Samantha Hepburn is an associate professor at the School of Law at Deakin University in Victoria. She lectures in environmental law and property law. This piece originally appeared at http://theconversation.edu

It has been reproduced with permission.

Marrickville City Council in suburban Sydney recently blocked an attempt to mine coal seam gas on privately owned land in the inner-city area of St Peters. The Council imposed a condition on the development application order for the land, purporting to ban the land being used for coal seam gas mining. This ban raises a number of important issues: who owns the CSG under private land, and what does the decision mean for other NSW councils opposed to CSG mining?

Dart Energy holds numerous exploration licences across Sydney (including at this St Peters site, where the land is owned by Dial-a-Dump). These licences have been granted in accordance with Part 3 of the Mining Act 1992 (NSW. The validity of the exploration licence and the power to carry out exploratory drills for coal seam gas is, in turn, premised on the notion that coal seam gas is a mineral that comes within the scope of this Act.

The development application and the subsequent condition was imposed by Marrickville City Council because of the power it has under Part 3 of the Environmental Planning and Assessment Act 1979 (NSW)(EPAA). This act authorises a council to issue development applications in accordance with local environment plans. But there are a number of reasons why a condition attached to a development application which purports to ban mining would be ineffective.

This condition is arguably outside the scope of the EPAA and the relevant local environment plan. Any such condition would be inconsistent with rights already conferred upon Dart Energy as part of its exploration licence (issued under the Mining Act 1992 (NSW)). The condition may result in the landowner, Dial-A-Dump, having limited powers to enter into a land access agreement with Dart Energy. But it could not in itself stop Dart Energy from exercising rights provided by its exploration licence.

The prominence of this dispute indicates the strong level of community concern regarding the proliferation of coal seam gas mining throughout New South Wales. It also raises more fundamental questions concerning the ownership of coal seam gas in New South Wales. These issues are not entirely straightforward.

The starting point for assessing ownership issues lies in the basic common law principle that ownership of private land extends up to the heavens and down to the centre of the earth (cuius est solum eius est usque ad coelom et usque ad inferos). This principle means that the private landowner has complete ownership over the physical land and the minerals contained within that land as well as the space above that land. The breadth of this concept is, however, subject to three qualifications.

First, the private owner has never owned what are known as the "royal minerals" of gold and silver. These are owned by the Crown.

Second, many states have introduced specific legislative provisions to give the state ownership of sub-surface minerals. This has occurred, for example, in Victoria, where legislation (s9 of the Minerals Resource (Sustainable Development) Act 1990), confers ownership of all minerals, other than exempt minerals, upon the State of Victoria. A similar vesting provision used to exist in New South Wales (s5 of the Coal Acquisition Act 1981 (NSW)). It also exists in section 6 of the Petroleum (Onshore) Act 1991 (NSW), a provision which also expressly sets out that no compensation is payable by the Crown for the effect of that vesting.

The Coal Acquisition Act 1981 (NSW) was introduced by the New South Wales Government at the time so that lucrative coal royalties could be collected from private landowners. Over the life of the scheme, these royalties amounted to approximately $10.5 billion.

Private land-owners affected by these vesting provisions could apply for compensation, and a Coal Compensation Board was set up to administer these payments. Over the life of the scheme the board paid millions of dollars in compensation. In 2007, these acts were repealed and any minerals which belonged to private landowners prior to the statutory re-vesting reverted back to those owners. The effect of this repeal was that any minerals which belonged to private landowners prior to the statutory re-vesting reverted back to those owners. No similar compensation regime was set up with respect to the Petroleum (Onshore) Act 1991.

The third qualification is that many land grants issued by the Crown in New South Wales are subject to reservations that prevent minerals in the land from passing with that land. Minerals which have been reserved by the Crown will never pass to the landowner. These are defined in the Mining Act 1992 (NSW) as "public minerals". Any sale, lease or other disposal of Crown land does not include any minerals contained in the lands.

The combined effect of the first and third qualification means that in New South Wales, most minerals may now be regarded as owned by the Crown. However, minerals which are not royal minerals or which have not been reserved by the Crown will continue to be owned by the landowner. To this extent, the common law right of a freeholder to minerals in his or her land has not been impaired.

The difficulty with coal seam gas is one of characterisation. The general assumption is that the Petroleum (Onshore) Act 1991(NSW) applies to vest ownership of coal seam gas in the Crown. Arguably, however, if coal seam gas is regarded as a constituent of the coal and if the absence of any explicit reference to CSG in the definition of petroleum under the Petroleum (Onshore) Act 1991 supports this argument, it is possible that some landowners may retain ownership of coal seam gas in NSW. This is because the Mining Act 1992 (NSW) does not vest ownership of coal in the Crown and, in the absence of a mineral reservation in the title, the landowner may rely upon the common law rule.

Cases in the United States have taken differing approaches to the characterisation of coal seam gas. Some have argued that coal seam gas is an inherent part of the coal, because it is absorbed onto the coal and the bond is so close that the two cannot be separated. Others have argued that the chemical composition of coal seam gas is nearly identical to that of natural gas, and therefore coal seam gas retains its independent identity as a gas rather than a solid mineral.

Both arguments have been supported by cases in the United States. In Carbon County v. Union Reserve Coal Co, the Montana Supreme Court overturned an earlier decision and concluded that coal bed methane gas "is separate from coal and is not a constituent part of the coal estate". By contrast, in Vines v. McKenzie Methane Corp. (1993) 619 So.2d 1305, the court concluded that the production of coal bed methane is 'inextricably intertwined' with coal mining and that the right of "all coal" signifies the ownership of the coal bed methane gas.

If coal seam gas is characterised as a constituent of coal, and if a land-owners title in New South Wales does not contain a mineral reservation, that landowner may claim ownership.


Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

Felix Riebl wants to be in your arms

TOURING NOW: Australian musician Felix Riebl is coming to the Northern Rivers in June.

Cat Empire frontman brings out his romantic side in solo show

Council ski jump vote 'small victory' for residents

CONTROVERSIAL: A digital image of the proposed Lake Ainsworth Olympic ski jump facility provided by the NSW Office of Sport.

Councillors vote 8-0 not to support development application

LGBQTI* community takes part in marriage equality action

VOTING FOR CHANGE: Maude Boate will be at the the marriage equality action at Lismore City Hall.

Lismore calls for awareness on marriage equality

Local Partners

Shot at the live shows slips through Sally's fingers

SUNSHINE Coast singer's dramatic elimination from The Voice nearly saw her form a duo with her battle round opponent.

Ben Stiller and Christine Taylor split after 17 years

They were married in May 2000 and have two children, who they said will remain their priority.

Ben Stiller and his wife Christine Taylor have called it a day

Why The Voice hasn't produced a star

Boy George responds to Brittania Clifford-Pugh's heart-warming message.

It's the industry, not the show, says Boy George

These actors hated their movies and didn’t mind admitting it

Channing Tatum and Marlon Wayans in a scene from GI Joe: The Rise of Cobra.

Every year, Hollywood blesses us with plenty of God awful movies.

Miranda Kerr and fiance hang up backyard tent for wedding

The decorators and caterers are arriving for the final preparations for the wedding of Miranda Kerr and Evan Spiegel. Pictures: Splash

Evan Spiegel and Miranda Kerr are set to marry today

Book review: Mia Freedman's book meets her critics head on

I appreciated Freedman's blunt honesty in the book

Man's amazing comeback from monster crisis

Pat O'Driscoll agents Penny Keating and Doug Webber sold 56 Agnes St, The Range at auction over the weekend.

NOT long ago, he sold his possessions to pay staff. Now he's back.

How Toowoomba house prices compare in Australia

For sale sign in front of home.

Here's what $700,000 will buy you in Toowoomba, Brisbane and Sydney

One of Maryborough's most historic homes is still for sale

FULL OF HISTORY: Trisha Moulds is owner of the historic Tinana state known as Rosehill. The beautiful home is currently for sale.

It has been the scene of both joy and tragedies over the years.

The face of the Sunshine Coast's overpriced rental crisis

Alyx Wilson had to rent a $385 unit in Currimundi because the market was too competitive for cheaper rental housing. She is now renting a room from friends who own a house in Currimundi, and says its much more affordable.

Young people feel the strain in competitive, expensive rental market

Ready to SELL your property?

Post Your Ad Here!