Compensation key to land access

He released the previously unpublished document to Fairfax Agricultural Media with momentum gathering in Canberra around calls to strengthen farmers’ rights on land access arrangements.

This Friday, Federal Resources Minister Josh Frydenberg is due to meet with State counterparts at the COAG national forum, to address the white-hot issue of farmers being legally empowered to reject mining projects proceeding on their land.

Mr Ramsey’s discussion paper outlines a method of improving direct negotiations between farmers and mining agents, by accepting firstly that the State ultimately owns the valuable resources and miners have the upper hand legally, in bargaining.

It cites the recent approval for Rex Minerals to develop the Hillside copper project on the Yorke Peninsula, to illustrate conflicting policy issues around mining approvals in “prime” agricultural areas.

The document says the SA Chamber of Mines and Energy had stated it would take 21,000 years for agriculture to deliver the same volume of income - $700 million per year - as the proposed mining site is likely to provide.

“Even if were only to equate to 1000 or 2000 years of agricultural production, it is fairly obvious with those kind of rewards on offer governments and the population at large will enforce their rights to access the minerals,” he said.

But Mr Ramsey’s seven-page policy paper suggests new terms of engagement where landholders are granted a ‘Protected Minimum Offer’ (PMO) when dealing with mining companies on property access and compensation arrangements.

He says the PMO should specify that if a mining approval is granted over a property, to commence operations, the proponent must make a minimum offer of three times an independent valuation of the “whole contiguous property”.

“Three times face value is the author’s suggestion only - but the PMO should be of such a value that the average business would view the advent of mining on their property as an economic opportunity,” Mr Ramsey writes.

“By offering a PMO of three times the market value the landholder knows from day one that they will be forced to accede to the rights of the State, as is the case at the moment - but they will also know that their family farming business, wherever it is chooses to relocate, will be significantly enhanced.

“The reason for this may not be immediately obvious to all, but the market is a very good tool for measuring the productive capacity and profitability of any given property or region.”

While Mr Ramsey’s document focuses on current arrangements in SA, his solution could also embrace resolutions in other jurisdictions where States ultimately own the underground resources and landowners face tough negotiations with mining companies, fearing they have limited bargaining powers.

In highlighting current stresses for farmers when negotiating with mining companies, Mr Ramsey said landholders started from a position of “weakness” because the South Australian Mining Act does not allow “compulsory purchase”.

But he said the legal scenario does allow the mining licence holder to seek access to the materials if agreement between the parties can’t be reached.

“In practice this means the landholder has no real method of measuring their bargaining strength,” he said.

“Because these negotiations are almost always conducted under clauses of confidentiality, stress develops around not knowing what level of compensation the landholder’s neighbour is being offered, whether they are the weakest link in the chain and consequentially will receive the worst deal, or alternatively whether they are the unreasonable one, holding up a project with considerable community benefits.

“The negotiating process becomes a lawyer’s picnic and an expensive process for both the proponents of the mine and the landholders - there simply has to be a better way of dealing with this conflict.”

Mr Ramsey said reaching a situation – via the PMO - where landholders were at least willing, “if not enthusiastic” to relinquish their properties, “would take much of the heat out of the local arguments”.

He said underlying strength of his proposed approach was that it delivered certainty to both the landholder and the mining entity.

Landholders know they’ll be generously rewarded by a tripling of wealth and if the mining entity “passes every other test”, they have the right to purchase on those terms, he said.

“Both parties could then largely dispense with expensive negotiating and legal processes, farmers could continue to invest in their properties while miners developed a case for mining on the premise that if the project proceeds, for every dollar they have invested they will receive three,” he said.

Mr Ramsey said various alternatives remained for land management on any excess land purchases.

He said landholders may choose to remain, selling only the land directly required for mining but that seemed an unlikely circumstance given the potential for a high priced land sale.

“Another alternative may include the miner leasing out the unaffected parts of the property for agricultural purposes, possibly even to the original landholder, or they may even elect to sell those parts of the property with the new owners being fully aware that they would be accommodating a mining operation within the boundaries of the original leases,” he said.

For neighbouring farmers living alongside mining projects, Mr Ramsey suggested a policy of “minimum set-backs” of 1km from the mining activity.

Rather than the PMO, he said it was “a fair compromise” for the mining company to make a comparable minimum offer on the affected paddocks falling within the 1km radius.

“The cash injection would then open up a range of opportunities to the landholder including re-location, extra land purchase in the local area or even entering into an agreement to keep farming the same land, but they would be guaranteed that they need live and farm no closer than one kilometre to the mine and highly likely to be significantly further,” he said.

“In any case they would negotiate from a position of much greater strength.”

Mr Ramsey said the rural community was “quite rightly” concerned about potential “deleterious effects” on the environment, of any proposed mines, including the management of underground aquifers, dust, noise, surface run-off and visual amenity.

But he said concerns about unacceptable environmental damage should not be confused with the right to mine “in the eyes of the law”.

“It is important though that these environmental concerns are addressed as a separate issue to the right to mine,” he said.

“The mining companies must be properly policed to ensure none of the conditions are breached and if they are, the government has the power to cause mining to cease until the issues are addressed.

“It is also important that the mining entity be responsible for the remediation of any possible damage incurred by poor adherence to the conditions of mining.”