In the last several years a significant amount of coal seam gas (CSG) work has taken place on landholders' properties right across Australia. In some instances, CSG operations can have negative impacts on underground water sources that landholders rely on. To protect landholders against the effects of these impacts, landholders are entitled to negotiate a Make Good Agreement (MGA) with the resource company seeking access.
However, we’ve witnessed a range of tactics employed by resource companies to convince landholders to allow access without having a MGA in place. It's important for landholders to understand their entitlements, and how a properly negotiated MGA can ensure they’ll be adequately compensated for any possible negative impacts and related costs incurred.
What are Make Good Agreements?
A MGA ensures that landholders who have water bores on their property are adequately protected if CSG operations have a negative effect on water supply. A MGA is required for all bores that have had a bore assessment undertaken, not just those with an impaired capacity due to resource activities on underground water. The agreement is drawn up and agreed as a legally binding contract, entered into by resource tender holders and landholders.
Landholders be aware
Resource companies are obliged to use best endeavours to enter into an MGA within a specified time limit and reimburse reasonable and necessary costs of legal, accounting, hydrogeology and valuation assistance. The legislation clearly intends landholders have access to proper advice to ensure they enter into negotiations on a fair basis.
It has been noted that recently resource companies have approached landholders in a way that has all the appearacnce of following the ‘make good’ formalities and even feigned entering into MGA negotiations – all the while operating outside the legislative regime and ignoring the time limits and obligations that should apply.
Is this allowed?
We believe the resource companies are intentionally undermining statutory protection by engaging in this behaviour and they may well be in breach of the Australian Consumer Law. The more a landholder gets drawn into a process that is outside the framework, the harder their position becomes. These types of underhanded dealings are deliberately intended to see costs become a reverse negotiating tool against the landholder.
Resource companies promote the process as being straightforward and take a ‘sign whatever we put in front of you’ approach to negotiation. They suggest anything beyond that as fee gouging by lawyers or the other professionals involved and don’t have adequate consideration of the landholder’s perspective.
What should I do?
These negotiations are not as simple as resource companies suggest. There are a range of considerations that landholders must take into account if they hope to secure a fair agreement. At Shine Lawyers, we have identified that the following is a snapshot of some of the work required to ensure an agreement is equitable:
- Assessing whether the bore is in an Immediately Affected Area or Long Term Affected Area under the Underground Water Impact Report
- Correctly identifying the aquifer tapped by the bore and reviewing the bore log to confirm the depth of the bore (often mis-described in the Bore Assessments)
- Identifying the predicted level of decline in standing water level for the bore as reported by the Office of Groundwater Impact Assessment
- Reviewing and comparing client records in respect of the bore (licencing, permitting, drill logs, yield, etc.)
- Ascertaining the proximity, scale and timing of nearby CSG activity
- Assessing impacts and likely impacts to the bore (including a hydrogeologist if needed)
- Reviewing the importance of the bore to the overall operations – including future use potential
- Reviewing the legal standing of the bore – is it properly permitted and licensed? Does it have a particular flexibility, utility or value due to its legal nature?
- Where relevant, writing to the Chief Executive to request that they compel the gas company to undertake an assessment due to flaws in the company’s approach or inaccurate or downplayed conclusions
- Reviewing the Baseline Assessment and Bore Assessment in detail and, if necessary, engaging a hydrogeologist to critique
- Considering alternative water sources and evaluating the reliability of those alternatives – involving the hydrogeologist and/or local drillers and/or an agronomist (depending on bore usage and importance)
- Evaluating the cost of alternative water supply and works and infrastructure required (including a valuer and/or hydraulic engineer if need be)
- Ascertaining, where possible, other potential venting points (e.g. old core holes or ploughed over bores, etc.)
- Calling for a Decommissioning Plan to understand where, when and how they propose plugging the bore – it can be a highly intrusive process leading to loss and damage in itself
- Liaising with experts in methane migration to inform as to health and safety risks and approaches to assessing methane flux in connection with decommissioning venting bores – especially where bores are located near homes, workplaces or alternative water sites
- Engaging a valuer to determine reduced property value or impacts
- Engaging an accountant to advise on any taxation, financial planning, estate planning, social security implications of any approach taken
- Calling for the draft agreement. This is regularly drafted in a way that places all future risk onto the landholder and attempts to remove rights the landholder has to revisit the arrangements if the alternative water sources do not work
- Negotiating until we get an outcome that is acceptable to the landholder.
It’s important for landholders to be aware that access agreements with resource companies can have implications for your property that carry through both their lives and across future generations. It’s therefore critical that as soon as possible a landholder engages an expert in this area of the law to ensure that every aspect is considered. These issues can be extremely complex, but at Shine Lawyers we have experts in extensive experience in this area of the law. We will help guide you through a range of considerations to ensure the best outcome for you.
Written by Shine Lawyers. Last modified: January 8, 2020.