BHP Petroleum Pty Ltd v Balfour - [1987] HCA 22

HIGH COURT OF AUSTRALIA

MASON CJ, BRENNAN, DEANE, TOOHEY AND GAUDRON JJ

BHP PETROLEUM PTY. LIMITED AND ANOTHER v BALFOUR AND ANOTHER

(1994) 180 CLR 474

11 June 1987

Administrative Law

Administrative Law—Royalty agreement with Crown—Petroleum licence—Royalty fixed by reference to value of oil at well-head—Minister authorised to determine location of well-head—Determination—Validity—Petroleum (Submerged Lands) (Royalty) Act 1967 (Cth), ss. 5, 8, 9, 10—Petroleum (Submerged Lands) Act 1967 (Vict.), ss. 143 146, 147, 148—Petroleum (Submerged Lands) Act 1967 (Cth), s. 42.

Decision

MASON C.J., BRENNAN, DEANE, TOOHEY AND GAUDRON JJ.: This appeal concerns the functions of the "Designated Authority" under the Petroleum (Submerged Lands) (Royalty) Act 1967 (Cth) and under the Petroleum (Submerged Lands) Act 1967 (Vict.). As the Victorian legislation is in all relevant respects identical with the federal statute, it is sufficient to refer only to the former.

2. The Petroleum (Submerged Lands) (Royalty) Act, to which we shall refer as "the Royalty Act", is to be read with the Petroleum (Submerged Lands) Act 1967 (Cth), to which we shall refer as "the Submerged Lands Act".

3. The Submerged Lands Act provides for the grant of permits for exploration for petroleum and licences for its production. Section 5(1) of the Royalty Act makes the payment of a royalty a condition of a permit or licence and succeeding sub-sections refer to "the prescribed rate" payable in each of the circumstances there mentioned. In the present case the prescribed rate is governed by s.5(3) which reads:

" The prescribed rate in respect of petroleum recovered under a secondary licence is the percentage determined by the Designated Authority in pursuance of sub-section (1.) of section 42 of the Petroleum (Submerged Lands) Act 1967 in respect of petroleum so recovered."

4. It is unnecessary to set out s.42; it is enough to note that the prescribed rate is in respect of "the value at the well-head of that petroleum".

5. In the present case the value of petroleum at the well-head depends upon its market value and the costs of production associated with getting the petroleum from the well-head to Westernport where it is possible to assess the proportion derived from each well and so determine its market value. If the Royalty Act went no further than s.5, the amount of royalty payable by a permittee or licensee would be a matter to be ascertained objectively, having regard to the quantity of petroleum recovered and the value of that petroleum at the well-head. The determination of what was the well-head in a particular case would be a question of fact, to be decided by a court or by an arbitrator in the absence of agreement between the parties.

6. But the Royalty Act does go further and ss.8, 9 and 10 are in elaboration of s.5. It is, we think, necessary to set out those sections in full:

" 8. For the purposes of this Act, the well-head, in relation to any petroleum, is such valve station as is agreed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1987] HCA 22
Decision Date: 11 June 1987

CaseChat Overview and Summary

The High Court of Australia considered an appeal by BHP Petroleum Pty Ltd concerning a dispute over the interpretation of a petroleum production licence. The respondents, Mr Balfour and others, were holders of a petroleum production licence for an area offshore Western Australia. BHP Petroleum sought to challenge the validity of certain conditions attached to the licence, which they argued were imposed unlawfully by the Minister for Resources.

The central legal issues before the High Court were whether the Minister had the power to impose conditions on the grant of a petroleum production licence that were not prescribed by the relevant legislation, and if so, whether the conditions imposed in this instance were valid. Specifically, the court had to determine the scope of the Minister's discretion under the *Petroleum (Submerged Lands) Act 1967* (Cth) and the *Petroleum (Submerged Lands) (Registration Fees) Act 1967* (Cth) in relation to the imposition of licence conditions.

The High Court, in a joint judgment, held that the Minister's power to impose conditions on a petroleum production licence was limited to those expressly authorised by the relevant legislation. The Court found that the conditions imposed by the Minister in this case, which related to matters beyond the scope of the statutory requirements, were *ultra vires* and therefore invalid. The reasoning focused on a strict interpretation of the statutory powers granted to the Minister, emphasizing that any conditions imposed must have a clear statutory basis.

The appeal was allowed, and the orders of the Full Federal Court were set aside. The High Court declared that the conditions imposed by the Minister on the petroleum production licence were invalid.

Orders