Shared Knowledge

New Make Good Requirements to Assist Landowners

The Environmental Protection (Underground Water Management) and Other Legislation Amendment Act 2016 (the Act) commenced on 22 November 2016.  The Act changes environmental assessment and management of underground water extraction by resource projects by amending the Environmental Protection Act 1994 and the Water Act 2000.  Numerous changes have been made to the “make good” framework under the Water Act 2000. A summary of these changes is set out below.

Costs of Engaging a Hydrogeologist

One key issue that landowners should be aware of is an amendment to the Water Act 2000 that requires resource companies to reimburse landowners for any hydrogeology costs incurred by the landowner in negotiating or preparing a Make Good Agreement.  This is a significant change from the previous position at law and one which we have advocated for years. Previously landowners were only entitled to be reimbursed for legal, valuation and accounting costs.  This is obviously a sensible change and a positive result for landowners seeking to obtain expert advice about impacts to their bores.

Landowners should be cautious to engage only appropriately qualified hydrogeologists.  The Act expressly provides that only the costs of an appropriately qualified hydrogeologist will be reimbursed. Hydrogeologists must have the minimum experience and qualification as stated in a guideline produced by the Department   including sufficient experience in underground water level monitoring programs, underground water quality sampling programs, groundwater hydrology, engineering as well as practical knowledge of water bore construction and infrastructure. We suggest seeking prior approval from a resource company should you wish to retain an expert, prior to the hydrogeologist commencing work.

We have been involved in the negotiation of a number of Make Good Agreements for landowners and can recommend appropriately qualified hydrogeologists to provide independent advice to landowners to assist in negotiations.

Clarification about when a bore has “impaired capacity”

Whether or not a bore has “impaired capacity” (as that term is defined in the Water Act 2000) can often be a contentious issue between resource companies and bore owners. Once it is established that a bore has “impaired capacity”, the resource company has make good obligations to “make good” the bore by, for example, paying compensation or drilling and equipping a new bore to a deeper aquifer. The new Act introduces positive changes for landowners.

The previous position under s 412 of the Water Act 2000 was that the impairment must be caused by the exercise of underground water rights by resource companies. This position has been amended in favour of landowners so that impairment to a bore may occur when it is likely to be caused or materially contributed to, by the exercise of underground water rights. The level of certainty required about the cause of the impairment has been reduced and this is sensible given the difficulty in some cases of determining with certainty the cause of impairment.

Damage to Pumps, Health or Safety Risks

Another amendment to this provision is the expansion of the circumstances in which a bore is taken to have been impacted. The previous position was that a bore must suffer a decline in quantity of water at the location of the bore and because of the decline the bore can no longer produce a reasonable quantity or quality of   water for its authorised use. Under the changes, if a landowner can show evidence of damage to the bore, pump or other infrastructure or if the bore poses a health and safety risk, then the bore will be taken to be impaired provided it has been caused or likely to have been caused or materially contributed to by the exercise of underground water rights.

Free Gas in Bores

If free gas from the carrying out of resource activities has, or is likely to have, caused or materially contributed to damage to the bore, there will be a requirement for the resource company to “make good” the damage to the bore. Free gas may adversely affect water quality and flow impacts, and bores can become impaired by free gas even in circumstances where there is no decline in water level at the bore.

Cooling Off Period

Another sensible amendment allows landowners to terminate a Make Good Agreement during a cooling-off period of five business days from the date of the agreement. If an agreement is terminated during the cooling-off period, it is no longer a Make Good Agreement and landowners can re-negotiate.

Costs of Alternate Dispute Resolution

In our experience, Make Good Agreements can be complex agreements and it is common for parties to disagree on a range of issues including whether the resource company has caused impairment to a bore and the appropriateness of the make good measures proposed by the resource company such as compensation, drilling a new bore etc. In some cases, alternative dispute resolution may be required to settle the matter. The Act now requires the resource company to pay the costs of an alternative dispute resolution facilitator or mediator if the dispute resolution process has been instigated by the resource company.

 

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