Land and Environment Court New South Wales Medium Neutral Citation: Hunter Environment Lobby Inc v Minister for Planning and Infrastructure (No 3) [2014] NSWLEC 130 Hearing dates: Directions 10 March 2014, further submissions and directions 20 March 2014, directions 10 April 2014, directions 16 May 2014, written submissions 30 May, 17 June, 26 June and 2 July 2014 Decision date: 27 August 2014 Jurisdiction: Class 1 Before: Pain J Decision: See paragraph 42 Catchwords: APPEAL - whether additional conditions of consent appropriate Legislation Cited: Land Acquisition (Just Terms Compensation) Act 1991 Cases Cited: Hub Action Group Inc v Minister for Planning [2008] NSWLEC 116; (2008) 161 LGERA 136 Hunter Environment Lobby Inc v Minister for Planning and Infrastructure (No 2) [2014] NSWLEC 129 Taralga Landscape Guardians Inc v Minister for Planning [2007] NSWLEC 59; (2007) 161 LGERA 1 Category: Consequential orders Parties: parties Representation: Mr R D White with Ms C Novak (Applicant) Mr S Free with Mr N Kelly (First Respondent) Mr A Galasso SC with Mr C Ireland (Second Respondent) File Number(s): 11154 of 2012 Judgment Additional compensation condition 1Following the substantive hearing I asked further questions of the parties, firstly, in relation to the enforcement of conditions of project approval and, secondly, whether compensation for Mr Alistair Bowman (owner of property 130) to enable him to continue his dairy farm during mining on the SEOC project site was feasible. Property 130 will be adversely affected by the SEOC project. Dairy no 1 and dairy no 2 are located on property 130. Dairy no 3 is located on property 182. 2The first question was addressed by written submissions dated 12 March 2014 (the Minister), 13 March 2014 (Ashton) and 19 March 2014 (the Applicant). 3The parties filed and read further affidavits in relation to the second issue. The affidavit of Mr Alistair Bowman dated 15 May 2013 and of Mrs Maytom farm manager dated 15 May 2013 are referred to in Hunter Environment Lobby Inc v Minister for Planning and Infrastructure (No 2) [2014] NSWLEC 129 at [476]-[484]. The Applicant read the affidavit of Mr Scott Barnett affirmed 30 May 2014. Mr Barnett is an agricultural scientist and an expert in agricultural production and business management (par 1). Mr Barnett attaches an expert report he prepared as annexure A (par 4). Mr Barnett outlines the recent history of the Upper Hunter dairy industry, noting that increased confidence in recent years has resulted in processor competition for milk from NSW (Hunter) dairy farmers including five year supply contracts for the first time (par 16). 4Mr Barnett concludes that the SEOC project will not interfere physically with or reduce the productive capacity of property 130 (par 6). Mr Barnett is not able to quantify a level of impact of dust, lighting, vibration and blasting on infrastructure, plant and equipment from the SEOC project. His qualitative opinion is that the potential for mine generated dust to impact upon milk quality by entering the milking plant is remote (par 55). The predicted dust deposition rates will have nil to minimal impact on the productivity of pasture on Mr Bowman's land (par 60). Mr Barnett concludes that it is not anticipated that the SEOC project will impact on the biological potential (crops and animals) of Mr Bowman's business to continue or expand (par 67). 5Mr Barnett states that the operation of the SEOC project will affect Mr Bowman's ability to attract and retain quality management staff due to the perceived loss of living and working amenity due to noise, dust and light from the SEOC project (par 6). It is usual for housing to be included in a salary package for a farm employee/manager and often it is that inclusion above the salary that attracts staff to work on a farm (par 22). Mr Barnett states in his experience the amenity of the living and workplace is an important aspect of why dairy employees choose to work in the industry as it is perceived there is little separation between the workplace and living place, with a clean outdoor environment critical to this amenity (par 8, 28). In Mr Barnett's opinion the present manager's (Mrs Maytom) negative perceptions of the SEOC project would be shared by many other dairy employees within and outside the Hunter Valley (par 9). Mr Barnett is unable to comment on the validity of such perceptions (par 7). It is imperative on a dairy farm to have at least one responsible and skilled employee on the farm at all times due to the nature of dairy work (par 30). 6The greatest potential limitation on the future operation of Mr Bowman's enterprise is whether his current management team is willing to remain at dairy no 1 while the SEOC project operates. Based on Mrs Maytom's affidavit and the likely amenity impacts, it cannot be presumed that they will. If they do leave it will be difficult for Mr Bowman to find replacement management as most potential employees will seek to contact Mrs Maytom and her partner to ascertain why they left (par 68). 7Mr Barnett concludes that Mr Bowman will have trouble retaining farm managers over time because of the amenity impacts (par 31). The dairy operation would not be viable if there is a constant turnover of managers. It takes around 18 months to 2 years for a farm manager to get to know the farm (par 32). Management planning on a dairy farm is a medium to long term process with productivity and profitability jeopardised if management is changed frequently (par 33). 8The land could be converted from dairy production to increase Mr Bowman's beef enterprise. This would decrease Mr Bowman's gross income by a substantial amount per annum ongoing (par 11). This would require relatively minor capital investment in fixed assets and changing the dairy herd for beef cattle or breeding out the dairy herd to beef cattle (par 79). Mr Bowman (in conjunction with Ms Elizabeth Bowman) have been offered a multi-year contract to supply the Dairy Farmers Milk Co-operative (DFMC). The contract combines the production of dairy no 1 and dairy no 3 for calculation of the productivity bonus (an incremental increase in milk price based on the volume of milk produced). The removal of production from dairy no 1 would result in production from dairy no 3 being below the threshold required for a productivity bonus to be paid (par 83). 9Mr Barnett's opinion is that Mr Bowman would be unable to recommence dairying at property 130 at the cessation of the SEOC project without considerable capital expense. While presently of a quality to maintain its dairy licence with the NSW Food Authority, after seven years the dairy would not be of a standard to be granted a new operating licence (par 88). After seven years of non-supply Mr Bowman would no longer be a shareholder of the DFMC. To recommence supplying the DFMC, the DFMC would have to consider a new application assessed at the time on a "need for milk" basis (par 89). 10The Applicant read the affidavit of Mr Alistair Bowman affirmed on 23 May 2014. Mr Bowman's sister, Ms Elizabeth Bowman owns adjoining land to the south of property 130. Property 130 and Ms Bowman's land is referred to as the Bowman holding (par 4). Historically the Bowman holding was made up of properties 130, 134, 135 and 182. Property 135 and portions of properties 130 and 182 are no longer part of the Bowman holding because the land was purchased by the Bloomfield Group as part of the Rix's Creek Mine (par 7). Mr Bowman maintains that he will not apply for acquisition if the SEOC project is approved (par 10). Mr Bowman's family has long standing connections with the land and there is special significance attached to his family's land and their presence in the Upper Hunter by the farming community (par 13-17). 11The house at dairy no 2 is occupied by the eldest daughter and son of the managers at property 130 who rent the house from Mr Bowman (par 30). In June 2014 Mr Bowman and Ms Bowman expected to enter a dairy supply contract with the DFMC for increased production at the Bowman holding. This required an upgrade of the milk vat and the dairy shed at dairy no 1 which was undertaken at a cost of $150,000. Dairy no 1 will produce at least two thirds of the contracted volume (par 31-33). 12Mr Bowman reviewed a draft of the report prepared by Mr Barnett. The option of converting to beef farming is undesirable to Mr Bowman as it underutilises the land, is a diminished operation and reduces his diversification across sectors. This option is viable under his current business structure despite it leading to a significant reduction in his income (par 36). Mr Bowman would choose this option if he is forced to select (par 37). If the SEOC project is not approved Mr Bowman intends to continue his business indefinitely (par 38). 13Ashton read the affidavit of Mr Wayne Brorson affirmed on 12 June 2014. Mr Brorson is a registered real estate valuer specialising in rural property primarily in the Hunter Valley. His principal areas of expertise are in the areas of compulsory acquisition and purchases by mining companies. He has extensive experience in rural budgeting and farm financial analysis (par 1). Mr Brorson attaches the expert report he prepared as annexure WB-A (par 3). 14Mr Brorson states that it is feasible for alternative accommodation for dairy managers to be provided at the cottage on dairy no 2 on the opposite side of Glennies Creek. Access to this cottage is periodically cut when Glennies Creek rises. Temporary alternative accommodation such as in Camberwell village would be necessary. If this is considered it may be appropriate to provide dairy managers with an additional financial incentive of about $20,000 per annum for the inconvenience (p 5). 15Mr Brorson also estimates a net loss of gross income per annum similar to Mr Barnett if conversion to beef cattle occurs. Taking into account Mr Bowman's likely existing overheads and the current net income from dairy and beef with the projected net income from beef alone, the projected loss in net income to Mr Bowman during the life of the SEOC project if he converts to a beef only operation is estimated to be under $50,000 per annum (p 11). 16The one-off costs of converting Mr Bowman's current dairy farming operation to a beef cattle operation would not require significant expenditure. The one-off costs to Mr Bowman of reconverting to a dairy farming operation from beef cattle when coal production ceases under the project approval, estimated to be 31 December 2022, are estimated by Mr Brorson if occurring today as $116,000 (p 14-15). Applicant's submissions 17The Applicant submitted that the dairy operations of Mr Bowman's dairy no 1 on property 130 and his sister's property where dairy no 3 is located are integrated. Mr Bowman's property has a special relationship with the neighbouring land not present in another location. Mr Barnett's report states that dairy no 1 cannot continue while mining is ongoing because of the difficulty of retaining management staff on site. Staff living on site are crucial to the long term and successful operation of a dairy, for security reasons and for being as close as possible to the operation. The impact of the SEOC project will be devastating given the importance attributed to amenity of the living and working rural environment for dairy employees and their families as stated in Mr Barnett's report at par 28. This is confirmed by the evidence of Mrs Maytom who has lived and worked at the dairy since 1998 (par 18 and 19). 18There are sound public interest grounds why the continuation of a sustainably managed dairy business operating for over 100 years is of greater public and economic benefit to the Upper Hunter and NSW than a seven year mining operation. The Hunter Regional Plan 2012-2022 September 2012 at page 20 identifies the need for diversification of industry in the region. The dairy industry in the Upper Hunter is growing and identifies increasing competition and demand for milk produced in the Hunter Valley. The size, location, longevity and continuing prosperity of Mr Bowman's agricultural business, which generates an annual income of over $750,000 per year, employs five people directly as well as supporting many contractors and local suppliers, should not be subsumed by a seven year mine expansion. 19In the alternative, if the SEOC project is approved, according to Mr Barnett's report Mr Bowman can either operate dairy no 1 or restructure the business to an expanded beef operation. Both options involve a significant change to the operation of Mr Bowman's dairy business and the integrated agricultural business at the Bowman holding. Neither option is attractive to Mr Bowman as this represents a substantial change to the current predominantly dairying operation at property 130 with associated decline in annual income. Mr Bowman must be adequately compensated for losses associated with the closure of his dairy business and/or the restructure of the businesses which operate on the Bowman holding both during and after the mining of the SEOC project. The Applicant proposed: (i)A new condition 2B Sch 3, compensation for losses associated with impact on dairy business on properties 130, 134 and 182 (the Bowman holding); (ii)The proposed land acquisition condition (condition 7 Sch 4) must take into account comprehensively the unique circumstances of the Bowman holding as proposed in an amended condition 7. The Applicant prefers that the matter be referred to an independent arbiter qualified in dispute resolution, that all categories of compensable loss under the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act) form the basis of any offer by Ashton including special value of the property given the joint use of properties with his sister and family partnership. 20The Applicant proposed new or amended conditions in relation to two other issues as follows: (i)New condition 2A Sch 3, Ashton must not carry out development work until land listed in table 2 is acquired; (ii)An amendment of the blasting condition to require 72 hours notice by Ashton of any blasting within 500 m of any land not owned by the proponent with agreement with any landowner or residents also required, an amendment said to be supported by Mr Barnett's report at par 44. Ashton's submissions 21On the Applicant's further evidence and Mr Brorson's filed by Ashton, a compensation package is feasible for Mr Bowman which allows him to continue his business during and after mining of the SEOC project as a practical alternative to him electing to pursue the voluntary acquisition of his property pursuant to the conditions of project approval. The land used for dairy no 1 can be converted to a productive beef cattle operation during the mining of the SEOC project with a reversion to normal dairying subsequent to that time should Mr Bowman wish to do so. That conversion is a consequence of the need to relocate the manager due to the mining operation rather than the agricultural use itself. The compensation condition proposed by the Applicant should be restricted to property 130, the only property owned by Mr Bowman. Property 134 owned by a partnership does not have acquisition rights under proposed condition 1, Sch 3. Property 182 owned by Ms Bowman does have acquisition rights but is not the subject of the Court's question which related to Mr Bowman. 22As is clear from the report of Mr Barnett, the only issue is the management perception for staff on property 130 and the need to find a suitable location for the manager to live. A contrary view to Mr Barnett's view that dairying will not be viable is open. If a future management team has different perceptions or is remunerated appropriately Mr Bowman will be able to retain management of dairy no 1. The Applicant's evidence does not demonstrate that this is impossible or even improbable. 23Mr Brorson's evidence informs Ashton's proposed compensation condition for property 130 in relation to the relocation of the residence at dairy no 1: that relocation of dairy no 1 to dairy no 3 is not practical; the loss of income if dairy operations were converted to beef cattle; the cost of $2.5 million to upgrade dairy no 3 for a combined dairying operation; Mr Barnett's estimate of costs of converting the land owned by Mr Bowman from dairy production to beef only production as a decrease in gross income of $204,833; the difference in net income per annum if dairy operations are converted to beef production; the likelihood of Mr Bowman being able to restart the dairy operation; the costs of converting the current dairy farm to a beef cattle operation; and the costs of reconverting to dairy farming from a beef cattle operation once mining ceases as estimated in December 2022. Ashton agreed that some compensation is payable for losses associated with the dairy business and/or the restructure of the business on the Bowman holding during and after mining of the SEOC project. The amount of compensation does not need to be determined now and should be left to negotiation or the independent valuer appointed by the Director-General. Special value and solatium are not based on any precedent and are unnecessary. 24The Applicant's proposed condition 2A should be rejected as it essentially seeks to give landholders a power of veto over the mining operation. The Applicant's proposed blasting condition is more onerous than the present condition 18 Sch 3. Minister's submissions 25A bespoke condition which relates specifically to property 130 is warranted. The evidence filed confirms that Mr Bowman can continue to use property 130 as a dairy business during mining of the SEOC project. The SEOC project will not have any adverse impact on the land or animals on property 130 as a dairy. The likelihood of dust entering the milk is remote as stated in Mr Barnett's report at par 55. The main disruptive factor is the impact on the ability to attract and retain managerial staff to operate the dairy. If Mr Bowman can attract a manager he can continue the dairy operation. Mr Brorson refers to the incentivisation of staff. With appropriate incentives and accommodation arrangements there are good prospects for an appropriate farm manager to be engaged and retained. 26One option is to use the existing dwelling near dairy no 1. To the extent that is affected by the SEOC project, proposed condition 3 Sch 3 requires Ashton to implement noise and dust mitigation measures at the dwelling if requested by Mr Bowman. That provides Mr Bowman with one option of maximising finding a manager. Alternative on-farm accommodation is available at dairy no 2 on the opposite side of Glennies Creek. That house is periodically cut off by flood waters. Mr Brorson suggested that one way of dealing with the risk of flood impacts on access to the house is to provide temporary alternative accommodation such as in Camberwell village. That can be facilitated by an appropriate condition and this would significantly increase the likely prospect of finding a farm manager for dairy no 1. 27As submitted by Ashton, the evidence suggests that it is viable for Mr Bowman to convert the use of property 130 to a beef cattle business, with the option of reverting to a dairy business at the end of the SEOC project. The Minister does not support a condition that gives effect to this option at the request of Mr Bowman at the cost of Ashton. The evidence does not establish that the imposition of such a condition is necessary so as to make acceptable environmental impacts that might otherwise be considered unacceptable. It is unnecessary because the Court should be satisfied that the environmental impact of the SEOC project on the dairy business on property 130 is acceptable, provided that conditions are imposed which appropriately ameliorate impacts or otherwise deal with the consequences of adverse impacts on the residence. The primary method for dealing with the adverse affectation is to impose the acquisition upon request condition (condition 1 Sch 3). If Mr Bowman does not wish to take up the acquisition option, his stated position, it would be feasible for Mr Bowman to continue using property 130 as a dairy business. The only proposed additional condition necessary is the provision of alternative accommodation in Camberwell for use by the farm manager. Mr Bowman will then be in the position of choosing between selling his property and continuing the dairy business. In Taralga Landscape Guardians Inc v Minister for Planning [2007] NSWLEC 59; (2007) 161 LGERA 1 Preston J concluded in relation to properties that were sufficiently adversely impacted the appropriate response was to require the proponent to purchase the properties (if the owners elected to sell) at [159]. 28Proposed condition 2B Sch 3 is unnecessary. Mr Bowman has acquisition rights pursuant to condition 1 Sch 3 due to the predicted air quality and noise impacts on the residence located on property 130, not on the basis that the SEOC project would have unacceptable impacts on the dairying operation at property 130. The benefit of acquisition should not extend to other properties owned by other parties not adversely affected by the mining operations in any direct way. There should be no requirement to compensate for adverse impacts of approved developments per Taralga at [159]-[160]. That closure of dairy no 1 may affect the productivity bonus which relates to Mr Bowman's sister's dairy no 3 is the only impact referred to in Mr Barnett's report and does not fairly and reasonably relate to the SEOC project and may not be a valid exercise of the power to impose conditions as a result per Hub Action Group Inc v Minister for Planning [2008] NSWLEC 116; (2008) 161 LGERA 136 at [125]. 29In relation to Ashton's proposed condition for compensation arrangements for property 130, a(i) should be in the Statement of Commitments. Subparagraph a(ii) is acceptable and should have words added (including the provision of temporary accommodation to be used in combination with a dwelling on property 130). The conditions of approval already render some of the criteria referred to in subparagraph G inapplicable to property 130. 30No amendment is required to the general provisions governing acquisition rights (condition 7 Sch 4) regarding the feasibility of a compensation package specifically for Mr Bowman. A bespoke condition in addition to the otherwise general conditions is inappropriate. There are several difficulties with the amended condition, set out in par 24-25 of the Minister's written submissions dated 26 June 2014. 31The Applicant's proposed condition 2A Sch 3 is opposed as it provides a right of veto over the SEOC project on the individual property owners listed in the condition. The Applicant's proposed blasting condition is also opposed. It does not properly arise from the Court's question, is unnecessary and unjustified, and would effectively confer a right of veto on landowners and residents within 500 m of proposed blasting areas. The Minister's proposed condition 18 Sch 3 adequately governs the circumstances in which blasting may occur within 500 m of a residence or land not owned by Ashton, including where Ashton has a written agreement with any residents on the land and the relevant landowner. There is also provision for notification through the Blast Management Plan. Applicant in reply 32A constant turnover of managers will render the dairy non viable, and accommodating managers off dairy no 1 is not feasible as it is a seven days a week, 24 hour job. Mr Brorson is a real estate agent and valuer. Mr Barnett is an agricultural scientist and expert in agricultural production and business management. The option of temporary accommodation in Camberwell is unrealistic. 33The closure of dairy no 1 will be permanent as Mr Bowman will not be able to restructure his business out of dairying in seven years time assuming he decided that he would convert to a beef operation during the life of the mine. According to Mr Barnett the dairy equipment cannot just be maintained when unused for seven years and is also dependent on market conditions at the time, and whether or not a contract of supply would be obtained. The condition of the market in seven years is uncertain. 34Alternatively, if consent is granted, compensation for either of two options is essential, whether closure of the business permanently or the costs of converting his dairy business into a new operation. Mr Bowman should not be locked into a single position and it is difficult to know what the best options are at this stage. The circumstances considered in Taralga were entirely different to this matter, relating to a proposal for the right for compensation for a collective group of individual non-associated properties in the vicinity of a wind farm. That is not what is being proposed here. Finding on proposed conditions concerning properties 130, 182 35I have determined that conditional approval should be granted but consider Mr Bowman's wish to remain farming, preferably dairy farming, on property 130 should be supported. Based on the reports of Mr Barnett and Mr Brorson concerning options for Mr Bowman a suitable compensation condition can be provided. The retention of a farm manager will determine whether his dairy farming can continue. A viable albeit less profitable approach is to change to a beef cattle operation. I consider a condition which facilitates these options and provides compensation for economic impacts is warranted. As properties 130 and 182 are both in Table 1, and their use for dairy farming is related, they should receive the same treatment if possible. There is no legal basis to similarly compensate property 134 given that there are no predicted unacceptable impacts on that property from the SEOC project, a precondition to the imposition of a condition. 36The Minister's position that the preferred method for dealing with adverse affectation is to require acquisition of land by Ashton upon request fails to consider the desirability of maintaining a rural farming community once mining ceases in this area. Mr Bowman's evidence is that his strong preference is to stay on his land and operate his dairy farm and this should be supported as having an economic and social benefit to the local and regional areas once mining ceases. Taralga, relied on by the Minister, rejected conditions which provided for compensation to be payable for blight on properties, meaning those that were said to suffer amenity impacts from the visual impact of wind farm turbines. Taralga was considering quite different circumstances, being a merits appeal in relation to a large wind farm, which had entirely different economic, social and environmental issues. I consider that payment to maintain viable economic activity on neighbouring land which will be directly adversely impacted by the proposed mine is a matter that can be compensated for in conditions where feasible as is the case here. The importance of maintaining a mixed economy in the Hunter region as identified in the Hunter Regional Plan 2012-2022 referred to by the Applicant means that non-mining economic land uses should be maintained wherever possible. New compensation condition warranted 37Any new condition must allow Mr Bowman (and by implication Ms Bowman) the opportunity to attract a manager to stay at or near properties 130 and 182. If Mr Bowman ultimately determines that he must convert to beef cattle because of difficulties in running the dairy, that choice should also be supported by Ashton. 38Noise, dust and blasting criteria should continue to apply to properties 130 and 182 regardless of any compensation condition provided. Two different conditions are proposed, new condition 2B proposed by the Applicant and Ashton's proposed condition. These overlap and both need amending before one of them can be finalised, which requires discussion with the parties. Amended land acquisition condition 7 Sch 4 to be made in part 39The condition proposed by the Applicant should apply in part. The Applicant seeks to apply the Just Terms Act in relation to special value and solatium in the land acquisition condition inter alia. These provisions must be modified by "if any" in new condition 7(d) and (e) and solatium must be limited as provided under the Just Terms Act. Reference to severance in amended condition 7(c) should also be qualified by "if any". I accept the criticisms of the Minister in written submissions par 24(a), (b) and (d). The Minister's submissions in par 25 require clarification. New condition 2A Sch 3 not appropriate 40I agree with the Respondents that the Applicant's proposed condition 2A would provide a veto right to the properties listed in that condition, if they do not agree to sell to Ashton the SEOC project could not proceed. That undermines this approval process. Amended blasting condition warranted in part 41The Applicant's proposed condition requires the agreement of landowners to any blasting within 500 m of land not owned by Ashton. Seventy-two hours notice, the period of notice recommended by Mr Barnett, is also specified in the proposed condition. That period needs to be assessed in light of the other conditions already included in the draft proposed conditions relating to blasting, such as condition 18 and the Blast Management Plan (conditions 11-19 Sch 3). The current condition 18 requires no blasting within 500 m of any land not owned by Ashton unless there is written agreement with the landowner which has been advised to the Department in writing or where Ashton (presumably in the absence of agreement with a landowner) demonstrates to the Director-General's satisfaction that blasting is safe to people, livestock and buildings. The current condition 18 does not require Ashton to try to reach agreement with a landowner before approaching the Director-General and should. It is also reasonable for Ashton to have to give 72 hours notice of intended blasting to private landholders. The agreement of landowners/residents should not be mandatory however as that will enable a landowner/resident to effectively veto blasting operations near their land thereby defeating this approval process. 42The Court will discuss the final form of the conditions considered above with the parties. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 August 2014