ENTERING INTO A CONDUCT & COMPENSATION AGREEMENT: LANDHOLDERS BEWARE

If you are a landholder of land with underground resources such as coal, minerals, petroleum, or coal seam gas present on it you may be lucky (or unlucky enough) to be approached by a resource company (such as Origin Energy or QGC) (tenement holder) who wants to gain access to your land to extract these resources in return for compensation to enter into a conduct and compensation agreement.

WHAT IS A CONDUCT AND COMPENSATION AGREEMENT?

A conduct and compensation agreement is an agreement which sets out the activities that will be undertaken on your land, the compensation you will receive for the losses you suffer as a result of those activities (as required under the relevant legislation), and the terms and conditions that will govern the tenement holder’s access to your property and the manner in which they carry out their activities.

Under the relevant legislation tenement holders are required to enter into a conduct and compensation agreement with the landholder before accessing their property. The access terms and conditions and compensation terms that are covered in the conduct and compensation agreement are governed by the legislation, any environmental authorities issued in relation to the activities and the land access code.

As part of the land access negotiation process tenement holders will provide you with their standard form conduct and compensation agreement.

WHAT DO LANDHOLDERS NEED TO BE AWARE OF?

Although the tenement holder will tell you that this is their ‘standard document’ there are some important things to note:

  • Firstly, the document provided by the tenement holders will almost certainly be weighted in their favour. These conduct and compensation agreements can last anywhere between 30 days and 30 years and, as they attach to your land title they will bind future owners of the land so it is crucial that they are thoroughly reviewed before you sign them by a solicitor with experience in negotiating agreements of this nature. It is important that you are provided with advice making you fully aware of your obligations under the agreement during its term.
  • Secondly, the document as originally proposed is not property, business or lifestyle specific and should be reviewed and amended to reflect your specific needs and requirements. Many landholders are not aware that conditions can be drafted into the agreement addressing issues such as water, specific access conditions or specific land management practices that reflect your personal and business needs.

WHAT TERMS AND CONDITIONS TO WATCH OUT FOR?

It is important that you fully understand you rights and obligations under the conduct and compensation agreement as it will govern the conduct of the parties for the years to come. There are a number of conditions in a conduct and compensation agreement that you should be aware of and fully understand before executing your conduct and compensation agreement.

  1. Waiver of entry notice – The Mineral and Energy Resources (Common Provisions) Act 2014 (the Act) requires tenement holders to provide landholders with at least ten (10) business days’ notice prior to entering their property for a continuous period of time (i.e. to undertake a particular activity that is part of their programme which may take 3-5 consecutive business days). Tenement Holders often include a ‘waiver of entry notice’ within their draft conduct and compensation agreements meaning they are then no longer required to comply with the statutory notice requirement within the Act. It is possible to agree to include a similar provision but to nominate an alternative entry notice timeframe that is more convenient to both parties (say five (5) business days).
  2. Alternative arrangement for noise – Tenement holders must comply with their environmental authority (this an authority granted by the government for environmentally relevant activities, which resource activities are). When undertaking the activities under a conduct and compensation agreement. You may have rights to take action against the tenement holder if the noise impacts caused by their activities exceed what is authorised under their environmental authority.

Tenement Holders include ‘alternative arrangements for noise’ within their conduct and compensation agreements whereby landholders are required to acknowledge that they are already being compensated for the noise impacts and they relinquish their rights to make any further claim in respect of these impacts. Although this is now considered a standard provision of a conduct and compensation agreement it is important that you fully understand what rights you have and what rights the tenement holder has with respect to noise impacts – your solicitor will explain this to you when providing their advice.

  1. Access generally – The draft conduct and compensation agreement presented by tenement holders may allow them to access your property on any day, at any time, using any access track they deem necessary. This can make it extremely difficult and stressful for you to continue to operate your business or enjoy your property as you could be unaware of who is on your property at any time. It is important therefore to set reasonable parameters to this right of access as set out below.

Broadly drafted, unclear or heavily biased conditions can result in disputes and poor working relationships between landholders and tenement holders. It is therefore important that clauses are carefully and accurately drafted to reflect each parties’ concerns in order to ensure a smooth and painless co-existence on your land in the future.

WHAT ELSE SHOULD YOU CONSIDER?

There are a number of matters/clauses which landholders often do not consider, or they are simply not aware that they are able to negotiate into conduct and compensation agreements. Some key terms and conditions that can be negotiated by your solicitor on your behalf may include:

  1. Better access terms – your conduct and compensation agreement can include restrictions on when, where and how a tenement holder can access your property. For example you may permit them only to access your property on business days only, between the hours of 9:00am and 5:00pm via pre-agreed access tracks. Inclusion of a provision such as this will give you certainty as to who is on your property and when.
  2. Exclusion Zones – you may wish to include exclusion zones around various locations on your property. For example, landholders with families and young children may wish to prohibit access within a certain radius from their homestead.
  3. Business activities – clauses can be included in your conduct and compensation agreement to mitigate the impacts a tenement holder’s activities may have on your business operations and to ensure you are being compensated for any additional costs incurred by you due to their activities. For example, terms can be negotiated around the de-stocking of livestock during certain phases of the tenement holder’s activities to avoid injury to livestock while heavy vehicles and machinery are accessing the property. Alternatively, you may require temporary stock proof fencing to be installed during these phases (at the cost of the tenement holder).
  4. Weeds and pathogens – we find that one of our client’s biggest concerns is the risk of declared weeds and/or pathogens being introduced to properties by tenement holders traversing between neighbouring properties and/or not complying with wash-down procedures. Clauses need to be included in conduct and compensation agreements allowing landholders to inspect vehicles proposing to enter a property and giving landholders the right to refuse access if they reasonably believe a vehicle contains traces of declared weeds.

These are just some examples of the types of clauses that can be included in your conduct and compensation agreement to provide further protections for your land, business and family.

Successful negotiations of a conduct and compensation agreement require an in depth understanding of your property, your business and your requirements. These unique features can be negotiated on your behalf to ensure that your needs, wants and concerns are represented in the final agreement. The good news is that tenement holders are required under the Act to pay your reasonably and necessarily incurred legal costs so that you are not out of pocket for the costs of your solicitor reviewing, advising on and negotiating a conduct and compensation agreement on your behalf.

If you require any assistance with negotiating your conduct and compensation agreement or with any other commercial legal issue, please do not hesitate to contact our dedicated commercial team.

Helen Kay
Partner
Ph:   07 3009 6555
Email: 
Tessa Knight
Lawyer
Ph:   07 4617 8777
Email: