Metgasco Ltd v Minister for Resources and Energy [2015] NSWSC 453: Compensation for Right to Drill
Tuesday 28 April 2015 @ 1.12 p.m. | Legal Research
On 24 April 2015, the NSW Supreme Court ruled to allow Metgasgo to drill at Bentley, overturning a NSW Government decision which banned the company from drilling in the face of large protests.
Facts of the Case
Rosella EO1 is a well planned to test the non-CSG potential of the Greater Mackellar structure. In March 2013, Metgasco lodged to the NSW Government its environmental approval submission for the Rosella well. The application also included information about the community consultation program specific to the well.
In February 2014, the Office of Coal Seam Gas (OCSG) approved the company’s environmental submission to drill the Rosella well. However, shortly after in May 2014, OCSG suspended the permit on the basis that Metgasco had not complied with the government’s community consultation guidelines. The happened when Metgasco was within days of having the drilling rig and other services mobilized to the site.
The company wrote to the NSW Government demonstrating that it had compiled with the consultation guidelines and requested to review the suspension, but OCSG maintained its decision. As a result, Metgasco was forced to cancel drilling contracts and the company’s share price fell by 40%. The firm filed summons with the NSW Supreme Court seeking to have the suspension decision overturned.
The NSW Supreme Court Decision
Justice Button upheld a claim by Metgasco against the Minister for Resources and Energy for the State of New South Wales in relation to two decisions of the Minister, by his delegate, to suspend mining operations at the Rosella E01 conventional gas exploration well in the Northern Rivers of New South Wales.
His Honour made declarations that the two decisions were invalid, and ordered the Minister to pay the costs of Metgasco of the proceedings. The claim was based upon the proposition that the delegate of the Minister had not acted in accordance with the governing statute. It was also asserted by Metgasco that the delegate had taken into account irrelevant considerations in making the decision to suspend. Justice Button accepted most, but not all, of the submissions of Metgasco.
At the start of the judgment, his Honour emphasised that it was no part of the Court’s function to assess the desirability of any of the activities of Metgasco, or the desirability of the suspension of any of those activities. Rather, it was simply a matter of determining the lawfulness or unlawfulness of the decisions made by the delegate.
Reaction to the Decision
The Australian Petroleum Production and Exploration Association (APPEA) welcomed the decision, saying protest action should not be considered by government and regulators as an indicator of ‘ineffective’ consultation leading to grounds for suspension of operations:
“Last year’s suspension decision only served to encourage the actions of protestors intent on stopping natural gas production.”
Metgasco Managing Director, Peter Henderson said, this was a landmark decision for the resources industry in NSW and could have implications for broader industry in the state:
“Had we lost, future investors in NSW would have had to consider the real threat of sovereign risk and NSW’s image would have been tarnished...We believe that our decision to pursue legal action has been vindicated. We will be seeking compensation for the damage that has been inflicted on Metgasco and its 5000 shareholders by the NSW government’s unlawful decision...We are still very keen to develop a gas business in NSW and hope to be able to work cooperatively with the government to achieve this outcome."
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Metgasco Ltd v Minister for Resources and Energy [2015] NSWSC 453
