High Court rules mining leases do not necessarily extinguish native title

On 12 March 2014 the High Court handed down a unanimous decision in Western Australia v Brown [2014] HCA 8 that mining leases granted pre-1975 do not extinguish native title if the lease does not grant exclusive possession.  The High Court confirmed that mining rights and native title rights can co-exist and, importantly, clarified when native title rights will be extinguished by statutory rights at common law.

Background

The State of Western Australia (WA) entered into an agreement in 1964 with joint venturers to grant two mineral leases to develop iron ore deposits at Mount Goldsworthy (State Agreement).  The State Agreement was made pursuant to section 4(1) Iron Ore (Mount Goldsworthy) Agreement Act 1964 (WA).   Two mineral leases were granted to the joint venturers on 17 February 1966. 

In accordance with the mining leases and the State Agreement, the mining and township infrastructure was built over one-third of the mineral lease area.  The mine was closed in December 1982.  The town was closed 10 years later.

The parties agreed that, subject to extinguishment, the Ngarla People held non-exclusive native title rights over the land (subject to the mineral leases) to access and camp on the land, to take flora, fauna, fish, water and other traditional resources (excluding minerals) from the land, to engage in ritual and ceremony on the land and to care for, maintain and protect from physical harm particular sites and areas of significance.

The State Agreement stipulated that the joint venturers would allow the State and third parties to have access over the mineral lease area provided that such access over shall not unduly prejudice or interfere with the operations.

The questions before the High Court were whether native title had been extinguished as a result of:

• the mineral leases conferring exclusive possession over the land
• the rights under the mineral leases being inconsistent with the native title rights and interests, or
• the joint venture parties exercising their rights to develop and construct mines, a town and associated infrastructure.

The Judgment and the effect of this decision

This High Court decision is relevant for statutory grants made pre-1975.  Leases granted after 1975 are dealt with in accordance with the Racial Discrimination Act 1975 (Cth) and the Native Title Act 1993 (Cth).  Leases granted before 1975 must refer to the common law to determine whether native title has been extinguished.  By addressing the three questions before the Court, this judgment has clarified the test for extinguishment.

Addressing the first of the three questions, the High Court determined that the rights provided under the mineral leases at the time of grant did not give the joint venturers exclusive possession of the land.   On the contrary, the State Agreement provided that both the State and third parties were entitled to access over the land the subject of the leases.  Neither the mineral leases nor the State Agreement expressly provided that the joint venturers were entitled to both possess the land and have the right to exclude any and everyone from the land for any reason or no reason at all. 

With respect to the second question, the High Court ruled that rights granted under the mineral leases were not inconsistent with native title rights.  The court considered whether the existence of the rights granted to the joint venturers necessarily implied that the claimed native title rights and interests could no longer exist.  

The mineral leases did not give the joint venturers a right of exclusive possession.  In this respect, the mineral leases were no different from the pastoral leases considered in Wik Peoples v The State of Queensland (Wik) the mining leases considered in Western Australia v Ward (Ward) or the Argyle mining lease also considered in Ward.  The joint venturers were given limited rights to carry out mining and associated works anywhere on the land without interference by others.  Those rights were not, and are not, inconsistent with the coexistence of the claimed native title rights and interests over the land.

The High Court reasoned that at the time of grant of the mineral leases the native title holders could have exercised all of the rights that are now still claimed on the land without breach of the rights granted to the joint venturers.  Accordingly, there was not then, and is not now, any inconsistency between the rights granted to the joint venturers and the native title rights and interests claimed.

With respect to the third and final question, the High Court overturned the decision of De Rose v South Australia [No 2] (2005) 145 FCR 290 (De Rose).  In the case of De Rose it was held that exercising the right to construct improvements on a pastoral lease was inconsistent with the native title rights and interests claimed.  The construction and improvements on the pastoral lease extinguished native title upon the improved land.  The High Court held that the case of De Rose should not be followed. 

The High Court clarified that although the joint venturers did not have exclusive possession of the land (for reasons discussed above), if the joint venturers were undertaking activities, such as building a house, that was inconsistent with the native title rights and interests, the mining lease rights took priority over the exercise of native title rights.  However, the construction of a house (or any other improvement) will not extinguish the native title rights and once the joint venturers cease to exercise their rights under the mining lease, the native title holders can continue to exercise their rights over the area. 

The extinguishment test

The High Court decision clarified that neither the grant of a mining lease itself nor the construction of improvements (including building houses and towns) on the lease extinguished native title rights.  The holder of the mining lease will need to consider the rights of the mining lease at the time it was granted to determine whether the rights granted extinguish any alleged native title rights and interests (and if so, to what extent).  The court has referred to this as an ‘objective inquiry involving the comparison of rights’.  A determination must be made at the time of grant as to what extent the mining lease rights are inconsistent with native title.  To the extent there is no inconsistency with the rights under the mining lease, the non-exclusive rights can co-exist.

What does this mean for mining companies and pastoralists?

The High Court did not distinguish the mineral leases discussed in this case from the pastoral leases considered in Wik and the mining leases and the Argyle mining lease considered in Ward.  Accordingly, this decision shares practical implications for both mining lease holders and pastoral lease holders. 

This decision has no ramifications for mining or pastoral leases where exclusive possession rights have been granted.  The leaseholder will have exclusive possession where the whole of the land the subject of the mineral lease grant or pastoral lease must be used in a way which would not permit any use of the land by native title holders. 

Importantly, where a mining or pastoral lease does not grant exclusive possession, the leaseholder cannot rely on exercising their rights under the lease as a means of extinguishing native title.  The leaseholders must consider the legal nature and content of the two sets of rights to determine whether they are inconsistent at the time of grant.  There cannot be degrees of inconsistency of rights.  The two sets of rights are either inconsistent or they are not.  To the extent of inconsistency, native title will be extinguished. 

Lyndal Hanrahan, Dominic McGann

ICAC recommends fundamental changes to exploration licence approval process

On 30 October 2013, the Independent Commission Against Corruption (ICAC) provided its report to Parliament titled ‘Reducing the opportunities and incentives for corruption in the State’s management of coal resources’.  The Commission’s report makes 26 recommendations to prevent and minimise the reoccurrence of corruption as identified in recent ICAC investigations into the granting of exploration licences (ELs) in NSW.

Key recommendations

The key recommendations made by ICAC include:

• the development of a set of predetermined factors to provide guidance in the release, allocation and development of NSW coal resources
• the establishment of a steering group chaired by the NSW Department of Planning and Infrastructure and made up of senior public servants from the Resources and Energy Division of the Department of Trade and Investment, Regional Infrastructure and Services, the Department of Planning and Infrastructure and the NSW Treasury to develop a protocol for the release and allocation of ELs
• the establishment of an assessment panel comprised of experts from the departments identified above to provide further technical information and analysis to the steering committee and to provide a triple bottom line assessment of the environment, social and economic factors of allocating an EL in a particular area
• the assessment panel should conduct technical analysis of preferred companies to determine if each company has the technical expertise to undertake the exploration activities and analysis of their financial position for their capacity to fund exploration work
• the  Government’s decisions on the release of mature areas for ELs and the auction of those ELs should be linked to the likelihood of approval to mine
• the auction method should be the preferred approach to allocating the State’s coal resources and this auction process should be overseen by the New South Wales Treasury.  Where direct allocation is appropriate, it should be the subject of oversight by an assessment panel comprised of practitioners with relevant expertise from the key departments
• the current renewal of ELs should be replaced by exponentially escalating lease rent, allowing commercial decisions to be made in an environment of certainty, removing the incentives to renew ELs repeatedly without progressing to mining, and
• the development of a transitional regime for moving all existing ELs to this rent based arrangement.

Implications for current tenement holders

The following significant implications arise as a result of these recommendations:

• the renewal of ELs in the future may be subject to exponentially increasing rent arrangement whereby the tenement holder is required to increase payments to the NSW Government each time the EL is renewed
• the existing practice of sitting on tenements for extended periods of time without meaningful steps being taken to develop the resource is unlikely to be possible under the proposed regime
• an auction process may be applied to grant the majority of ELs which means that the company with the highest cash bid or highest exploration work program will be awarded the EL
• if preliminary exploration in a particular area does not fall within the strategic assessment areas recommended by the NSW Department of Planning and Infrastructure, there is potential that future ELs will not be granted over the area, and
• there will be a more stringent analysis of the technical and financial capabilities of a preferred company to carry out and fund the exploration activities before an EL is granted.

Direct allocation

Importantly, ICAC recognises that in some situations direct allocations will continue to be necessary but there should be greater oversight of the direct allocation system.  Specifically, the ICAC recommends the assessment panel adopts a ‘triple bottom line’ approach when advising on direct allocations.  Potential arguments identified in the ICAC report for direct allocation applications include when the applicant mining company:

• is seeking an EL in close proximity to its existing operations
• is the only mining company interested in the resource, or
• can better serve the wider interests of the government by the innovative work programs they are proposing.

On this basis, mining companies may still be able to obtain ELs through direct allocation but any new regime for granting ELs is likely to place significant constraints on this allocation process.

Next stage

The recommendations will be provided to the relevant public authorities for consideration, with a response required within three months prior to any plan of action being implemented. 

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain

Mining lease conditions slashed and application processing times reduced

On 17 October 2013, the NSW Resources and Energy Minister, Chris Hartcher announced significant amendments to the standard conditions for exploration licences and mining leases which will result in the removal of conditions that are already covered by obligations under the Mining Act and other mine safety legislation.

The amendments also involve the deletion of conditions relating to matters that are already regulated by other government departments, such as the Department of Planning as well as other outdated and redundant conditions.

The removal of the duplications will cut the number of conditions for future standard coal mining leases in NSW from 24 conditions to nine. The standard ‘Mining Lease Conditions (Coal) 2013’ now relate to the following limited matters:

• landholder notification following the grant or renewal of the lease
• satisfactory rehabilitation of disturbance following the completion of activities
• the preparation of approved Mining Operations Plans, an annual rehabilitation report and annual compliance report
• notification to the Department in the event of an environmental incident which breaches the mining lease, the Mining Act 1992 (NSW)or the Protection of the Environment Operations Act 1997 (NSW)
• the preparation of ‘eligible subsidence management plans’ which will dictate the level of subsidence that is permitted to be caused by underground mining operations
• optimisation of resource recovery of the minerals that are the subject of the mining lease
• the payment of a security deposit for the fulfillment of obligations under the mining lease, and
• making every reasonable attempt to enter into cooperation agreements with overlapping title holders.

The purpose of these amendments is to minimise the costs of doing business in NSW and boost investment certainty. Significant obligations which have now been deleted from the standard conditions relate to environmental harm, working requirements (i.e. minimum number of personnel), blasting, safety, prevention of soil erosion and pollution, roads and tracks, trees and vegetation and indemnities.

This means that if your mining lease is granted or renewed after 17 October 2013 you can expect significantly reduced obligations to be imposed under the new mining lease conditions. All mining leases granted or renewed prior to this date will continue to operate under the previous conditions that were issued.

Assessment timeframes reduced

The Government has also committed to reducing the times for assessing coal exploration licences and mining leases will be cut from 150 days to 95 days, while times for processing renewal applications will be reduced from 100 days to 55. These changes came into effect on 1 July 2013.

Samantha Daly, Patrick Holland, Brendan Tobin, Kate Swain