Australia: Our policy says otherwise: how should local councils categorise land for the purpose of rates?

The recent case of Geldard v Western Downs Regional Council [2019] QLC 17 (Geldard) raises two important considerations:

1.  What is the correct approach for determining the applicable category of rates that will attach to land?

2.  What is the relevance of a local government’s policy in determining which category applies?

In this Thinking Piece we break down the Geldard case, and consider what it means for local government.

Importantly, the case confirms that policies used to categorise land for the purpose of rates must be used only as a guide, and that local governments should be receptive to reasonable submissions from landowners.

The background

The appellant had purchased land in the Western Downs Regional Council (Council) area from Australian Pacific LNG Pty Ltd (APLNG). APLNG retained rights to extract coal seam gas from wells on the land under a Conduct and Compensation Agreement between it and the appellant.

At the relevant times eight wells were operational, while another 14 remained on the land but were not in use.

Council issued a rates notice to the appellant for the land under the category 'Petroleum Other''. In Council’s Revenue Statement, this category was described as:

''Land other than a Petroleum Lease, with an area 400 Ha or greater, which is used or intended to be used, in whole or in part, and whether predominantly or not, for:

(a) gas and/or oil extraction; and/or

(b) processing of gas and/or oil; and/or

(c) transportation of gas and/or oil by pipeline; or

(d) for any purpose ancillary to or associated with (a) to (c),

including water storage, compressor stations or block valves …''

The appellant objected to this categorisation, arguing that Council should instead charge rates in accordance with the 'Rural' category. This category was described as:

'Land used principally for rural purposes, which is not otherwise categorised, and has an area not less than 100 ha.'

In correspondence to the appellant, Council stated that it was aware that many properties with similar gas infrastructure were categorised as 'Rural'. However, Council had adopted a policy that where a property had been categorised as 'Petroleum Other', Council would continue to issue rates for that category despite a transfer of the land.

After Council overruled the appellant’s objection, the appellant appealed to the Land Court of Queensland. In the appeal, the issue was whether Council had correctly categorised the land as 'Petroleum Other' or whether it should be re-categorised as 'Rural'.

The Land Court's decision

The Court allowed the appellant’s appeal, finding that the land was properly categorised as 'Rural'.

Member Cochrane cited earlier decisions which held that, in determining the correct categorisation of land, 'the purpose of the enquiry is limited to a determination of the nature of the land use.' Categorisation is to be undertaken in a common sense and practical way to find the categorisation that best describes the activities performed on the land.

The Member stated that the correct approach for the Land Court was not to start with the existing rates category. Instead, the Court would consider the local government’s revenue statement and the characteristics of the land in question, then determine the category most reflective of the land’s use.

He stated that the rating regime is meant to impose reasonable burdens on landowners according to activities carried out on the land, whether that activity is carried out by the landowner or a lessee.

When APLNG owned the land, the principal activity carried out on the site was gas extraction. Accordingly, at that time it was appropriate to categorise the land as 'Petroleum Other'. But once the appellant became the registered owner, the use of the land 'became almost exclusively rural save for the presence of wells and pads which remained on the land …'. Therefore, the most suitable categorisation of the land was 'Rural'.

APLNG’s continuing extraction of gas from the land did not prevent the land from being categorised as 'Rural'. In fact, the parties' entry into a Conduct and Compensation Agreement indicated the existence of another land use, because the agreement was necessary to compensate the appellant for the diminution of that land use.

The fact that this categorisation was contrary to Council’s policy was not fatal to the appellant’s case. Although Council could adopt a policy to guide its categorisation of land, it could not apply the policy so inflexibly that it would not even consider the appellant’s objections with an open mind. This is because under section 91 of the Local Government Regulation 2012 (Qld) (LGR), Council had an obligation to consider the objection.

In these situations local governments must apply a policy fairly, not rigidly, and in accordance with their statutory function – a policy that is applied otherwise will lose its validity. To blindly follow the policy without considering the objection was not consistent with Council's function under the LGR. Therefore Council could not simply overrule the appellant’s objection on the basis that the categorisation of the land was contrary to Council’s policy.

In support of its case, the appellant had pointed to a property known as the Wilgas Property, which had also been sold by APLNG. The new owner of the Wilgas Property used it for grazing, although APLNG retained a number of gas wells on the land. Council had written to the new owner of its own volition, to advise that the land had been re‑categorised from 'Petroleum Other' to 'Rural'.

The Court held that Council’s treatment of the Wilgas Property could not be determinative of the appeal in this case. Ultimately each case will turn on its own facts, although the categorisation of Wilgas was 'relevant' to the Court’s consideration of the appellant’s land).

Finally, the Court rejected Council’s argument that land ought to be categorised as 'Petroleum Other' because it was a 'high intensive use' and that higher rates should therefore apply to cover the cost of additional local government services. Member Cochrane was not convinced that CSG extraction was in fact a more intense use, given the gas infrastructure did not require daily attendance by APLNG’s employees.

Lessons for local government

The Geldard case is a reminder that that local governments must ensure policies are not drafted so rigidly that council officers cannot exercise some discretion, by departing from them where this would be reasonable.

A policy should act as a guide, not a rule. Councils should remain mindful of their statutory functions and ensure that in applying a policy, they do not derogate from their statutory duties.

The case also makes clear that rates are to be charged according to the use of the land. Councils should be receptive to submissions from landowners that a rates category should be changed with a change in land use.

Equally, a council may reassess the categorisation of land if it becomes aware of uses justifying a change in category – provided it does so in accordance with the law and allows the landowner a reasonable opportunity to make representations on the proposed change.

Finally, the fact that a local government’s policy may indicate that another category of rates is applicable does not mean that the other category must apply. Council is under an obligation to consider landowner’s objections, and should not immediately dismiss them simply due to the contents of a policy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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