Coal mine owners in NSW to be directly liable for subsidence damage

By Nick Thomas, Rebecca Davie

14 Sep 2017

Underground coal mine owners and operators should review their internal procedures for dealing with subsidence compensation claims.

The new NSW coal mine subsidence compensation scheme will make coal mine owners directly liable for subsidence damage arising from their active mines. The NSW Government says it is making the compensation process "fairer, faster and more community responsive". But what does this mean for coal mine owners and operators?

The Coal Mine Subsidence Compensation Act 2017 was passed by the NSW Parliament on 8 August 2017. It is expected to take effect from 2018 although the date of commencement has not been confirmed.

Overview of the new scheme

When the new scheme commences, which may be in early 2018, it will involve the following:

  • compensation claims will be lodged with Subsidence Advisory NSW (SA NSW) (which replaces the Mine Subsidence Board) through an ePortal. Claims must be made within 12 months after the owner became aware the damage was caused by subsidence (within three months if the claim is for preventative or mitigation expenses);
  • a case manager will be assigned;
  • claims will be independently assessed by an expert panel;
  • claimants or mine operators can seek a review by the Secretary of the Department if they are not happy with the decision, without having to commence litigation. However, appeal rights to the NSW Land and Environment Court also remain;
  • subsidence damage caused by active mining will be compensated directly by the mine operator responsible;
  • subsidence damage from inactive mines will be compensated from the Mine Subsidence Compensation Fund;
  • mine owners will continue to pay a levy (although at a reduced rate) to compensate for impacts arising from inactive mines.

When will coal mine owners and operators be liable?

Compensation is to be paid by "the proprietor of the coal mine that caused the subsidence" in relation to compensation arising from an active coal mine. A party who purchases a coal mine is liable to pay compensation in relation to subsidence arising from the coal mine, whether occurring before or after the purchase.

Compensation arising from a non-active coal mine will be paid by the Chief Executive from the Mine Subsidence Compensation Fund, which will be made up from industry-wide levy contributions.

Coal mine owners who deal with a claim for compensation in connection with subsidence under the Act, and who comply with the conditions of their relevant mining authority and the Act, will not be further liable to compensate the claimants. That is, the property owners or occupiers cannot separately commence common law or other proceedings seeking compensation for the same damage.

What is compensation payable for?

Compensation is payable for damage to improvements or goods as a result of subsidence due to underground coal mining. It may also cover a claimant's reasonable and necessary expenses as a result of the subsidence damage and loss of rent or reasonable accommodation expenses.

In addition, compensation is available for prevention and mitigation costs but only if the expenses were incurred after the subsidence commenced and the preventative or mitigating work is "appropriate and necessary" to prevent or mitigate the damage concerned.

The amount of compensation will be reduced if the damage was partially as a result of the negligent or improper manner in which an improvement was constructed or maintained.

Key differences to the old scheme

The new scheme makes both structural and procedural changes to compensation for damage caused by mine subsidence.

The new scheme replaces the Mine Subsidence Compensation Act 1961. Previously, coal mine owners paid a levy into a compensation fund. Claims for compensation for subsidence damage were paid out of the industry-wide pool of funds. Effectively, mine owners and operators were not liable for the damage they caused. As noted above, the focus will now be on mine owners being directly liable for damage caused by their mining operations.

Procedures are also changing. The new Act includes provision for "approved procedures" (yet to be published) around various aspects of the claim process, including:

  • determining whether damage is caused by subsidence from an active or non-active coal mine;
  • the selection of independent assessors;
  • payment of costs, fees and charges in connection with claims; and
  • timeframes for the claims process.

Steps in preparation for the new scheme

Underground coal mine owners and operators should review their internal procedures for dealing with subsidence compensation claims. It is likely that they will need to be updated to address the new direct liability regime and the new procedures (including stricter timeframes for dealing with claims).

Underground coal mine owners and operators should also consider whether their financial arrangements are enough to cover the new direct liability scheme. They might want to make specific provision, or update insurance arrangements, to address this.

Look out for further details as the regulations and approved procedures are published by SA NSW.

SA NSW will be hosting community information sessions on the reforms in late 2017. The SA NSW website states that information on dates and locations will be provided on the website shortly.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.