July 20

Prime agricultural land – who is responsible?

The question of mining on prime agricultural land has come on to the national agenda in recent times. A closely related issue is the foreign acquisition of such land. This raises constitutional and legal issues.

If prime agricultural land were to be protected, three steps would be necessary.

First, the land affected would obviously need to be identified. Second, a separate regulatory system would have to be established concerning foreign investment proposals affecting such land. (This would need to specify the role – if any – of state governments in the process.) Third, another regulatory system would need to be established concerning the approval of exploration and mining on such land, specifying both state and local involvement in that approval process.

It would be within the power of state parliaments to empower local communities to play a decisive role in these matters.  

 

…background…

The story broke with  2GB’s Alan Jones who then broadcast nationally from prime agricultural areas in Queensland.  Investigative reporting in The Australian and the Daily Telegraph followed.Prime agricultural land constitutes only about 4% of the land area of Australia and the argument is that such land  – and nearby towns -should be protected from mining.

Surely, it is asked, isn't there enough room in the rest of our enormous country? A recent piece by Heather Brown in The Australian (16/7) tells of the increasing opposition in the extraordinarily beautiful Darling Downs in Queensland.

Senator Bill Heffernan is probably the most prominent politician opposed to mining on such land. We are also seeing  something unusual in Australia, the beginnings of a civil disobedience movement. For example, the Lock the Gate Alliance counsels famers to deny entry to mining companies seeking to exercise exploration and mining rights on their land.

…constitutional context…

 

The constitutional and legal context is of course highly relevant. I am sometimes asked questions about this, perhaps because I wrote a book, Foreign Investment Law of Australia.

That was a long time ago, and five hundred page thick law books – with hundreds of footnotes – are not exactly best sellers. So there was not a second edition. But as they say in the universities, it looks good on your CV, althought the science academicians never understand why. 

…the issues…


 

There are six relevant issues. 

  • First, who is responsible for foreign investment?
  • Second, what is the law about foreign investment in prime agricultural land?
  • Third, who owns the minerals and petroleum under prime agricultural land?
  • Fourth, who is responsible for granting exploration rights and permission to mine prime agricultural land?
  • Fifth, is  privately owned minerals and petroleum protected from expropriation or nationalisation?
  • Sixth, how are  farmers to know who owns the minerals and petroleum under their land?

 

(Continued below)

 

1.Who is responsible for foreign investment?

 Is this a responsibility of the federal authorities alone? The answer is that  both the federal and state parliaments (and governments) are responsible. That said, the federal parliament has the primary responsibility on the entry of foreign investment.

The principal legislation is the Foreign Acquisitions and Takeovers Act, 1975. This has been enacted by the federal parliament relying on several powers set out in section 51 of the Constitution.

These powers are not exclusive to the federal parliament. This means that the states also have a role – provided that the federal parliament has not intended to cover the whole field of foreign investment. They haven’t.

The Act provides that Canberra did not intend to exclude  state or territorial laws.  The proviso is that the law is capable of operating concurrently.In the past states have controlled specific proposals concerning foreign investment but have tended not to have the general policies.

New South Wales was once an exception; the state used  to have deadlines on the mineral industry which required a minimum Australian equity participation of at least 51%.

 

2. What is the law about foreign investment in prime agricultural land?

It has long been the practice of federal governments to set out the details of its regulation in policy guidelines rather than in the Act itself. Under this, the Treasurer or his delegate – usually the Assistant Treasurer – reviews investment proposals to decide if they are contrary to Australia’s national interest.

The Treasurer can block proposals that are contrary to the national interest or apply conditions to the way proposals are implemented to ensure they are not contrary to the national interest. When making such decisions, the Treasurer relies on advice from the Foreign Investment Review Board.

Under  the existing policy foreign investors only need approval to buy an interest in a primary production business, such as a farm, where the total assets of the business exceed $231 million (or $1005 million for US investors).

They also need approval to buy into any existing mine or exploration right if it is on urban land or offshore. they need approval if its  its valued at $50 million or more and is on rural land.

 
3. Who owns the minerals and petroleum under prime agricultural land ?

 

Minerals and petroleum are reserved to the Crown, so everything depends on the original Crown grant, which a lawyer would always check when acting o na sale or purchase. ( This is subject to relevant native title considerations)

In relation to land in the states, the Crown in the right of the relevant state owned and probably but not always still owns the minerals and petroleum. The owner is certainly not the federal Crown, as lawyers say, the Crown in the right of the Commonwealth.

The political argument that minerals and petroleum belong to the people of Australia and therefore are to be managed by the federal government is not supported by legal analysis.

The result is that the  minerals and petroleum under a given piece of land would have been either reserved to the Crown, or transferred in the Crown grant.

 4. Who is responsible for granting exploration rights and permission to mine on  prime agricultural land?

Decisions on the authorisation of mining exploration and the undertaking of mining are a matter for  the states. (This could be supplemented at the federal level by a  provision in the foreign investment guidelines requiring approval for any foreign investment proposal relating to a mine or exploration under prime agricultural  land.)

As as most minerals and petroleum is owned by the Crown in the right of the state, it is state governments who are mainly responsible for the granting of exploration licences over prime agricultural land and permission to mining to take place there.

 5. Is the private ownership of minerals and petroleum protected from expropriation?

The private ownership of minerals and petroleum is not protected from expropriation by the state. State constitutions do not provide that expropriation can only take place on just terms, which is a requirement for the federal government under the federal Constitution.

In New South Wales, coal rights were sometimes granted with the land. In 1981 the Wran Labor government introduced legislation to nationalise these rights. The compensation provisions were significantly  inferior to that required by the Constitution in relation to acquisitions by the Commonwealth.

The Greiner Coalition government legislated to provide for restitution and more generous compensation in 1990. This was reversed, to some extent ,by legislation introduced by the Carr Labor government in 1997.

This unsatisfactory affair, in my view,  points to the need for entrenched rights to fair compensation in state constitutions.

6. How do farmers know whether they are entitled to the minerals and petroleum under their land?

 

 There were reports on the Alan Jones program on radio station 2GB that some farmers in the Darling Downs sold their properties to miners not knowing that they were entitled to the minerals and petroleum under the land.

The lack of knowledge about such rights apparently extends to MP’s. Interviewed by Ray Hadley on 2GB on 7 July, Tony Windsor MP  was asked about land which he had bought near Coonamble which is said to be subject to a mining exploration licence.

Asked why he had paid a high price for this and whether he knew about the mining exploration licence over it, Mr Windsor said he "wouldn't have a clue” about the mining licence. 

In 2010, Mr Windsor’s family sold their farm near Tamworth for a record $4.625 million to Werris Creek Coal.

As I have said above, lawyer examining the title to the land would be able to ascertain the ownership of such rights. Indeed, I would say that a lawyer would be under a duty to advise his or her client of these matters.  Whether the client remebers is another thing.

 

 

Conclusion


 

 If it were considered that prime agricultural land should be protected, three measures could be undertaken.  

The downside would be that governments would have to forgo lucrative revenues. But the argument in response to that is this would be in  the long term interests of the country, both to maintain strong local communities and to ensure the food security of the nation.

  • First, identification.

    Prime agricultural land could be identified objectively and then made subject to special regimes concerning foreign investment and mining. Most of it is of course obvious, but the determination of the borders of each tract would require a common sense approach.

  • Second, joint federal state approval to acquisitions.

    Specific provision could be made in the foreign investment guidelines concerning prime agricultural land. Any proposal for foreign investment in such land – no matter the value – would then require specific approval, with a requirement that the state government be consulted and that it also approve the proposal.

  • Third, community approval to mining.

    State governments could quarantine prime agricultural land from the granting of exploration licences and the right to mine. This could provide that approval only be granted with the support of the relevant local government council and the local community.

    To ensure the proposal is approved by the community, a proportion of local voters, say 4% or 5%, could have the right to petition for a binding vote by the electors of the relevant shire or other division on the proposal.  

 

 


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