BHPs Caval Ridge mine.
BHPs Caval Ridge mine.

BATTLE OF THE MINES: David and Goliath tussle over coal land

TWO mining companies are locked in a legal tug of war in what could be a billion-dollar compensation claim over coal-rich land in the Bowen Basin.

For the past 13 years Cherwell Creek Coal Pty Ltd has waged war against BMA in a David versus Goliath-type lawsuit after the industry heavyweight blocked its competitor over mining rights on land near Moranbah.

And Cherwell Creek Coal is seeking a payout - potentially hundreds of millions or billions of dollars - for its lost opportunity to commercialise a coal resource.

The trade rivals have been at loggerheads over the land in question for more than two decades.

In 1994 Cherwell Creek was granted a coal exploration permit, and then a subsequent renewal, on land BMA deemed essential for infrastructure critical to Peak Downs Mine and its major expansion, now known as Caval Ridge Mine.

Cherwell Creek had applied for a mineral development licence over the land - while BMA held a special lease over the same area - leading to an ongoing dispute.

Court documents stated if BMA had not used that land for their infrastructure, the alternate option on the Peak Downs mining lease would have sterilised more than 52 million tonnes of coking coal and delayed the Caval Ridge Mine expansion - resulting in a loss of royalties to the State nearing about $400 million.

The State Government weighed in on the dispute in May 2008, drafting legislation under "exceptional circumstances" that thwarted Cherwell Creek's interest in the site but allowed the company to apply to the Land Court for compensation.

Mines and Energy Minister at the time, Geoff Wilson, said Cherwell Creek had had more than 13 years to develop a coal resource.

"We have to weigh up what's best for Queensland and in this case, it's the jobs of thousands of workers and the production of high-quality coking coal," Mr Wilson said at the time.

"The legislation confirms BMA's tenure over the land and gives Cherwell Creek the means to claim compensation from BMA if it can establish its tenure had value."

This sparked a legal tussle - that remains unresolved - between the two companies over how much compensation, if any, is owed.

Three months after the new legislation was introduced, Cherwell Creek filed for special purposes compensation under the Mineral Resources Act 1989, arguing that, but for the amended Bill it would have obtained all necessary approvals to exploit the coal reserves from that land and any such coal would have been highly profitable.

In 2009 the court ordered Cherwell Creek pay security for costs totalling $1 million in the event BMA was successful in resisting the claim. Six or seven years later BMA made a second security for costs application totalling in the millions as the case continued to be bogged down in legal red tape.

Court documents state Cherwell Creek, in its originating application, claimed there was about 30 million tonnes of readily mineable, predominantly hard coking coal and the likely lifespan of the coal resource was about eight years.

The company claimed it could have undertaken certain studies, investigations and designs between May and September 2008 and would have begun extracting a bulk sample in about April 2009. It expected production from about January the following year until about December 2017.

But BMA argued its rival could never have obtained the relevant mining tenures and authorities. It alleged there were extensive constraints on rail and port facilities and Cherwell had not secured access to those facilities to enable it to export the coal.

BMA also argued the original permit and renewal had been invalidly granted. Cherwell Creek tried to have the latter allegations struck out, but their application was dismissed, as was a subsequent appeal.

BMA also alleges Cherwell Creek would have withdrawn its application for a mining lease because it would have had to pay compensation exceeding $180 million to BMA, the owner of the land, making the mining lease economically unviable.

In a judgment in November 2011, Land Court Judge Paul Smith said: "the quantum that is being potentially fought over in this case is also potentially huge, having been referred to as being in the billions of dollars of potential liability".

The following year, in November 2012, Cherwell Creek sought orders allowing it to conduct drilling activities in order to inspect and take samples of coal on land owned by BMA, claiming it was necessary for it to properly prosecute its claim.

BMA hit back, alleging it was a fishing exercise and, if allowed, would expose the company to losses of tens of millions of dollars and argued the court did not have the power to make such an order.

The land in question was, at the time, in the process of being converted to significant mining infrastructure by BMA. But the court determined it was "a special case, in special uncharted waters" and, as a result, Cherwell Creek was granted permission to drill.

However the company had to pay BMA any loss, damages, costs or expenses reasonable suffered as a result of the drilling program.

There was also a clause for a dispute resolution process to be written into the orders. BMA's appeal against the decision was dismissed.

By late February 2013 the Land Court had been called on to deliver five decisions and the Land Appeal Court four decisions.

The highly complex case also involves much expert evidence, including mining, railing and port issues, coal handling and preparation, mine valuation, landowner compensation, coal marks and pricing, loss and damage, product coal yield, environmental approvals and transport logistics.

As part of the proceeding, Cherwell Creek sought documents from the Department of Natural Resources and Mines, some of which the department claimed were privileged and confidential. The court ordered Cherwell Creek to pay the DNRM $23,198.41 in costs and expenses for the production of documents.

BMA has also sought documents from Cherwell Creek that the company deemed highly sensitive and commercial-in-confidence information, which has resulted in a number of hearings over their relevance and, in some cases, the court granting restricted access.

Court documents also state the amount of coal in the compensation case is also in dispute. Cherwell Coal contends the mineral development licence referred to all the coal actually existing in the land, whereas BMA argues it means the coal actually referred to in the MDL application - the difference could be "well in excess of 100 million tonnes of coal".

The case is ongoing.


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