Variations to Conduct and Compensation Agreements (CCA) are becoming more frequent as the coal seam gas industry continues to grow and develop.
The most obvious example of where a variation is required is if a company wishes to alter the activities that it can undertake on the land. This may arise due to changes in the timing that was originally contemplated in the CCA, an underestimation of the original infrastructure requirements or simply wishing to further develop the resource that lies beneath the land.
If you are approached with a request to vary the CCA, we suggest that you consider the following:
It’s a negotiation - just like the original CCA, a variation agreement is a commercial negotiation. Anything and everything should be on the table and you should consider your bargaining position so that you get the best deal you can. If you have a question or concern about what is being proposed, raise it and consider how it may be dealt with as a term of the agreement.
Remember your dealings to date - a variation is often a good time to reflect on how your dealings to date with the company have progressed. Has the activity been carried out in the manner you thought it would be? Is there anything that you would like to be changed? If so, the negotiation of the variation agreement is an opportune time to raise such concerns.
What is being varied - often it is more than just the activities that are being varied. The company will most often use the variation as an opportunity to change various other important terms of the CCA, not just the description of the activities.
What impact will the variation have - for example, if the relevant company says that it wants to extend the activities to allow for “well intervention”, what does this mean for you? What will that involve? Will it mean fraccing, cavitation, downspacing, deepening of the wells etc. and what are the impacts of that activity?
What does your original CCA say about variations - often people don’t pay enough attention to the term of the original CCA that deals with how variations are to be dealt with but such clauses are highly important because of the nature of the resources industry. You should go back and revisit the original CCA and see what it says about dealing with variations.
Seek professional advice - contrary to what the relevant company may think, the terms of a variation agreement are important and you should seek the advice of your professional advisors (i.e. lawyers, accountants, valuers etc). You should also seek to recover the reasonable and necessary costs of those advisors from the relevant company.
Variations serve as an important reminder that the signing of a CCA will not be the end of the story; it is the beginning of the relationship between the relevant company and you as the landholder. It is therefore important that any CCA you sign be the best that it can be in the circumstances as it will form the basis of your relationship and future negotiations for any variations.
Written by Shine Lawyers Energy Team.
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Written by Shine Lawyers. Last modified: January 8, 2020.