Shared Knowledge

Beware CSG Offers that include Advice Costs

Recent behaviour by CSG companies when meeting with landowners is cause for significant concern.

Entering into a Conduct and Compensation Agreement (CCA) that allows coal seam gas activities to occur on rural land is a decision that requires great consideration.   A CCA is a complex, long-term legal transaction that binds current and future landowners. Like any complex legal document, it is important to obtain independent advice so that an owner or occupier of land is aware of their rights, risks and responsibilities.

Gas companies have a legal requirement to pay landowners for any “compensatable effect” they suffer as a result of CSG activities carried out on their land. This is what is known as the gas company’s “compensation liability”. Part of this liability includes compensating landowners for accounting, legal or valuation costs necessarily and reasonably incurred to negotiate or prepare a CCA. The requirement to pay professional costs is in addition to the requirement to reimburse a landowner for impacts to their land and land value.

Landowners have reported to us that gas companies are offering to pay them an amount of compensation for CSG activities inclusive of professional fees, on the basis that if a landholder chooses not to get independent legal, accounting or valuation advice, or minimises the amount of advice they receive, the landholder can keep money.

The effect of this practice is to discourage landholders from obtaining independent professional advice about the effect of a CCA and to discourage a landholder from obtaining assistance in the negotiation of the CCA.  The conduct in question in our view demonstrates sharp commercial practice, and is inconsistent with the values of “honesty and fairness in dealing with consumers” to which the unconscionability provisions of the Australian Consumer Law are directed.

Remedies available for unconscionable conduct include damages, compensation and other orders including orders modifying or declaring void all or part of a CCA.

 

This information provides advice of a general nature only and should not be relied upon as legal advice.