Australia: Coal seam gas operations on rural land - be prepared for negotiation

Recent news of oil and gas company Buru Energy's plans for a pilot exploration fracking program in the Kimberley region of Western Australia is a timely reminder for all rural landowners of the ability for those resource companies to conduct exploration and production on private land.

It is estimated that there will be 40,000 Coal Seam Gas (CSG) wells in Australia within the next 10 years.

Many landowners remain unaware that the Queensland Government can issue exploration or production (extraction) tenements to a resource company over land that is privately owned, subject only to an Environmental Authority (EA). Landowners then have no authority to deny access to their land.

It can be quite stressful for landowners and all persons and businesses that occupy land who may be unfamiliar with their obligations to enter into negotiations with large resource companies. The process from when the first notice to the landowner is given and when activity on the land may commence is over quickly and can occur within the space of two months.

To conduct preliminary activities which have little impact on the land such as site scouting, a resource company need only give 10 days notice of entry to occupiers and landowners.

Advanced activities, which have significant impact on the land can only commence after a Conduct and Compensation Agreement (CCA) is in place. The CCA is the resulting document from negotiations with the resource company about how the activities will be conducted and what compensation the occupiers will receive.

Compensation can be non-monetary but is usually for diminution of surface area, reduction in value, reduction in land use and potential improvements, damages, legal costs, costs of valuations, and other loss.¹ It is also important to consider long term plans and identify areas that might need protecting given farming practice. Both parties should seek advice about compensation that can be claimed and it is vital not to leave any information out when negotiating. The more information a landowner can obtain about the proposed activities of the resource company, the greater the compensation to be argued for. Those who can make a claim for compensation include not only the landowner but also rural businesses who occupy the land.

In Queensland, the mandatory negotiation process for agreeing on a CCA is set out by the Petroleum and Gas (Production and Safety) Act 2004 (Qld).² A resource company wanting to conduct advanced activities on private land must issue a Notice of Intention to Negotiate to each occupier. If after 20 days no CCA has been agreed to, then parties must either engage in alternative dispute resolution (ADR) or a formal conference with a Department officer from the Department of Employment, Economic Development and Innovation (the Department). The ADR process can be costly but there are advantages and disadvantages for both options. If 20 days after commencing the ADR there is still no CCA, then a party can apply to the Land Court for final determination. Importantly, once the matter has reached the Land Court, a resource company can commence advanced activities while the CCA is still unconfirmed.³

Once the mining activities have commenced on your land and a CCA is in place it is important that landowners familiarise themselves with the EA which would have been issued by the Department. This will say what activities the company is authorised to engage in. Similarly, the company must comply with the Land Access Code which was released by the Department in 2010. The Land Access Code provides best practice guidelines as to how these activities should be carried out on your land.

It is important to negotiate in good faith and be reasonable in your dealings with a resource company. Inevitably they will be conducting advanced activities on your land, the question is what compensation they will have to pay you for it.

For further information and to check whether tenure has been granted by the Queensland Government over your land, Holding Redlich's Agribusiness and Rural Industries Group is able to assist with further advice.

If you have been approached by a resource company, are currently engaged in negotiations or are concerned by a grant of tenure over an area encompassing your land please contact the Holding Redlich Agribusiness and Rural Industries Group.

Footnotes

¹Petroleum and Gas (Production and Safety) Act 2004 (Qld), ss 532 to 534.

²Ibid ss 535 to 537D.

³Ibid s 500A.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.