A number of Thynne + Macartney's clients have, in the past
few years, generated income streams by changing the management of
environmentally significant, although potentially unproductive,
parts of their properties.
Resource and infrastructure companies are often required, as a
condition of their environmental approvals, to "offset"
proposed environmental damage by securing other areas of
"ecological equivalence" for preservation.
Those companies engage environmental offset brokers to find
suitable offset areas and the search often leads them to properties
owned by the State's primary producers.
Once an offset arrangement is negotiated and documented, the
landholder is compensated for commitments to manage the offset area
in a particular way.
Landholders' commitments and compensation
A landholder makes two kinds of commitments under an offset
arrangement: the first to the relevant government authority, and
the second to the resource or infrastructure company.
The landholder becomes primarily accountable to the government
for adopting an agreed management plan for the offset area. The
management plan is referenced in a "legally binding
mechanism", often a "voluntary declaration" under
Queensland's Vegetation Management Act that is
recorded on the property's title.
The landholder also commits to the resource or infrastructure
company in a separate agreement, as that company has an ongoing
interest in ensuring the offset is maintained to meet the
conditions of its environmental approval.
Usually, a landholder will be required to restrict vegetation
clearing and to manage weeds and pests on the offset area.
Landholders may also be required to fence stock out of sensitive
Compensation will paid to the landholder by the resource or
infrastructure company on the terms of the negotiated agreement.
Usually, the majority of the compensation will be paid when the
"legally binding mechanism" is put in place. Other
amounts may be payable at certain milestones such as the
achievement of annual targets under the management plan.
Suggestions to avoid problems
If a property is mortgaged, the consent of the landholder's
financier to the offset arrangement will be necessary. Landholders
should begin discussions with their bank manager early to determine
whether the bank will support the proposal.
Landholders should also seek legal advice before signing any
documents. The proposed offset area management plans Thynne +
Macartney's agribusiness lawyers have reviewed in recent times
have been defective in many respects. They are often unnecessarily
lengthy and repetitive documents. Landholders should take care
resist giving commitments outside their control (for example, a
commitment to ensure vegetation reaches a particular height or
canopy cover or remnant status);
ensure there is an end date on the landholders' commitments
and an effective mechanism to remove the offset from title;
minimise repetition in the document where possible and, as a
last resort, ensure like concepts are expressed consistently.
When it comes to the agreement with the resource or
infrastructure company, landholders should seek adequate security
for any payments to come from the resource or infrastructure over
time. That is particularly important because the landholders'
commitments to the relevant government authority under a management
plan will not be affected by the company's failure to pay.
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.
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