Have you been given a Conduct and Compensation Agreement (CCA) to sign?

Reforms to the land access laws that govern relationships between landholders and resource tenement holders took effect 19 April 2019 as part of the Mineral, Water and Other Legislation Amendment Act 2018 (Act).

The Act has introduced new mechanisms to encourage resource companies and landholders to reach an agreement and will give landholders more certainty about the circumstances in which their costs will be paid by the resource company. Unfortunately, it also threatens landholders’ bargaining power in negotiations.

Exhausting the possibility of reaching agreement

Either a landholder or resource company can now elect for an alternative dispute resolution (ADR) process if an agreement has not been reached at the end of the 20-business-day “minimum negotiation period” after a resource company commences negotiations with a landholder. The type of ADR process (for example, mediation) and the identity of the facilitator is to be decided by the Land Court or a recognised institute if the parties cannot agree. The resource company must pay the costs of the ADR facilitator. However, if a party does not attend without a reasonable excuse, it can be ordered to pay the other party’s costs of attending.

There is also a new alternative to the Land Court if an agreement has not been reached at the end of the minimum negotiation period of an ADR process. If one party offers arbitration and the other accepts, an arbitrator will be appointed to make a binding determination on the issues in dispute, including the amount of compensation payable. The resource company must pay the costs of the arbitrator, unless the parties participated in an ADR process first, in which case the arbitrator’s costs are shared unless the parties agree otherwise or the arbitrator decides otherwise. Also, subject to agreement or a decision by the arbitrator to the contract, each party must bear its own costs for the arbitration.

Landholder costs paid even if agreement is not reached

Previously, a resource company only became liable to pay the accounting, legal and valuation costs a landholder incurred in negotiations once a conduct and compensation agreement was signed. Landholders were therefore finding it necessary to reach preliminary agreements about the payment of their accounting, legal and valuation costs before commencing negotiations to ensure they were not left out of pocket if the resource company changed its plans.

The Act establishes a landholder’s right to recover necessarily and reasonably incurred negotiation and preparation costs regardless of whether agreement is ultimately reached. Further, the costs of an agronomist have been added to the list of costs that can be recovered.

Threat to bargaining power

A landholder who owns or occupies land within the area of a resource authority is entitled to compensation from the resource authority holder for certain impacts called “compensatable effects”.

Before the changes, impacts “caused by authorised activities” were compensatable effects if they related to the landholder’s land, although arguably not necessarily the land within the authorised area of the resource authority or the specific parcel of land on which the activities are being carried out. That is, compensation could have been claimed for impacts on a parcel of land caused by the resource company’s broader project, such as activities on neighbouring land owned by the same or another landholder.

The new definition of “compensatable effects” limits a landholder’s rights to compensation to the impacts caused by the resource authority holder “carrying out authorised activities on the [landholder’s] land”.

Especially in the context of projects where significant disruptive infrastructure is installed on neighbouring properties (including those owned by the same landholder), this change could represent a significant erosion of landholders’ rights.

The danger is that any legislative change that erodes landholders’ rights threatens the delicate balance that has delivered compensation payments satisfactory to landholders in many negotiated outcomes to date. Proponents of “co-existence” point to such outcomes as proof of the concept. At what point will resource companies demand rather than incentivise co-existence?

Thynne + Macartney will continue to assist landholders secure the best possible outcomes in their dealings with resource authority holders.