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Farmers say valuers play key role in gas negotiations

Posted on 3 May 2016

Source:  Gasfields Commission Queensland

Dalby farmers Ross and Jane Walker share their experience and insights in negotiating ten (10) gas wells on their farming block including the important role played by rural valuation firms.

This is another in a series of stories where landholders have shared lessons learnt with the GasFields Commission to help inform and assist other landholders and continue to improve understanding between the rural and onshore gas industries in Queensland.

Ross and Jane Walker farm a range of dryland crops on their 1250acre block in the Ducklo district south west of Dalby and run a few cattle along a swamp area that dissects their property.

In 2010, when the onshore gas industry first came to their district, the Walkers received a copy of a Conduct and Compensation Agreement (CCA) in their mail box which they felt they were expected to sign, but there was no further approach from the gas company for another 12 months.

Jane says it was quite a negative experience in the beginning because it was so badly done.

"I expect it was done that way to test individual landholders on how savvy they were with the industry and how you were going to approach it.

For the Walkers their initial discussions with the gas company actually began in mid-2011 but took another two and a half years of negotiation to finalise in 2014.

The main stumbling block to the initial negotiations was the disagreement over the location of the ten (10) proposed gas wells and related infrastructure such as low point drains.

Ross says "we wasted years on well positioningthey just wouldn't listen to us."

"Wherever they had been marked on the map was where they pegged them even though that map had been produced on a desktop in Brisbane and was mapped on a grid basis with no reference to the local landscape, our paddocks or our needs.

"Finally they gave us the name and phone number for one of their geologists in Brisbane and when I rang him I had written down the number of each proposed well we wanted shifted.

"I ran through each well site and the reason why each well site needed to move and by how much.

"We ended up shifting most wells by only around 50 or 100 metresit wasn't that much but it was very significant to our farming business positioning them in the corners or against a fence line.

"Being a farming block every piece of land is precious and we didn't want to leave a strip of no-man's land between a well pad and the fence because it meant that land was taken out of crop production," he said.

Valuation key to negotiation

During this period, the Walkers were pulling together their own team of advisors and experts to assist them in their CCA negotiations.

Ross and Jane are adamant that the most critical member of their advisory team was their valuer.

"We were lucky to have a good valuerI reckon the valuer is more important than the solicitorhe was the 'kingpin' part of our negotiation," Ross says.

Ross believes the comprehensive nature of their underlying valuation backed up by case studies and comparative information often drawn from outside of their immediate district helped to underpin their position in relation to impacts and ongoing disturbance to their business.

The Walkers acknowledge the most expensive member of their advisory team was their lawyers, however, they say it's important for landholders to determine when and how best to use them.

Jane says they had their wells positioned before they went to any solicitor and did so only when they were ready to do the actual negotiating of the CCA.

"We did keep a tight leash on our lawyer because we were paying for it upfront ourselves and the lawyer's terms were on a 30-day account, so we wanted to keep a track of things very closely.

"I understand our legal fees were a lot less than some others and we have also heard of cases where the legal fees were more than the actual compensation received by the landholder," Jane says.

Construction phase

Despite the protracted initial negotiations, the construction of the 10 gas wells was completed fairly quickly within a two-month period. However, there were still demands on Ross and Jane's time with constant monitoring of contractors required during the construction phase.

Ross says he made a point of talking to them (the contractors) every day.

"You got to be there with them to ensure they did things properly and didn't interfere with our farming business," he says.

Ross also says don't take it personally.

"I know different people will deal with change in different ways, but my advice is not to over think it and only worry about it when you have to otherwise it will consume you," he says.

With construction completed 18 months ago, the Walkers are still to sign off on the gas infrastructure on their property and say they won't do so until final land rehabilitation works are completed to a satisfactory level.

"So far we have experienced only minor subsidence, washouts and backup of overland water flow in some areas after rain because the country is so flat.

"We're also continuing to monitor the land immediately around the well pads that were compacted during construction.

"We had poor growth of our sorghum and mungbean crops around these well pads last year, but we continue to work up the soil and are planning to grow a barley crop this winter," Ross says.

Post inspection needed

The Walkers believe there is a need for a compulsory post-construction inspection between the landholder and the gas company to ensure any outstanding rehabilitation issues are identified, discussed and more promptly addressed.

They also believe that there is an urgent need for gas companies to supply what they describe as an "as-built" map of the completed infrastructure including wells, pipelines and any other gas infrastructure accurately marked with a GPS location.

Some companies, not all, provided us with a map at the start of the process showing where they planned to put their infrastructure, however, Jane says, for most properties there would have been variations made during construction phase.

She says you would expect the gas companies to have this sort of information readily available and would already supply it to the likes of "Dial before your Dig" like any other utility company?

In the case of the Walker's property they had negotiated to have all pipelines buried to a minimum depth of 1350mm across the property because they believed specific machinery crossings were impractical on their farming country where cropping areas varied from year to year.


The future

Now over 18 months on from construction, Ross says to be honest they (the gas company) don't bother us at all these days, with very few vehicles coming and going to monitor the wells.

"We were fortunate to have a designated road at the rear of our property and were able to negotiate for that rear entry to be their single access point to the property, so they never enter via our front gate and home and this helps to keep disturbance to a minimum.

"Our land liaison officer is always emailing us and notifying us when they are coming in, however, it would actually be nice if someone from the gas company would pop in from time to time to say hello and keep us informed about what is happening with the wells on our property.

Overall Ross thinks that the onshore gas industry hasn't changed their rural business, but he reckons they could certainly do things better in working and engaging with landholders.

Ross and Jane's tips for CCA negotiation

  • Valuer plays a key role in compensation negotiations
  • Ensure gas infrastructure placement suits your farm plan
  • Manage your lawyer - determine when and how best to use them
  • Post-construction keep a close eye on rehabilitation issues
  • Don't take it personally,  take a business approach