The Shell and Petrochina joint venture is developing the $10 billion Surat gas project in a rich agricultural area near Dalby in southern Queensland.
The company on Thursday said it accepted the Department of Resources' decision and penalty, and is committed to improving landholder engagement.
"We recognise we made mistakes in the earlier implementation of the deviated wells model," a spokesman said in a statement.
"We have acknowledged this publicly and made substantial improvements to our operations."
The fine follows an investigation by the department into breaches of Queensland's land access framework by Arrow Energy from 2018 until early 2022.
"Queensland's resources framework promotes the coexistence of landholders, regional communities, and industry, however coexistence is a fragile concept," Resources Minister Scott Stewart said on Thursday.
"Arrow Energy has acknowledged it has made mistakes in the past and in more recent times the company has taken tangible steps towards fostering genuine coexistence with landholders impacted by their operations."
Campaign organisation Lock the Gate Alliance described the fine as a slap on the wrist, but said it was a good first step for the Queensland government.
"Minor changes to company procedures won't fix this. Farmers want an unequivocal right to say no to mining on or under their land," spokesperson Ellie Smith said on Thursday.
"We need farmers to be given the unequivocal legal right to refuse gas companies on their property. Anything less will result in repeated violations by companies like Arrow Energy."
Queensland's gas regulator in February formally requested the state government to provide details of its expectations on compliance and acknowledged ongoing concern regarding development activities on farmland.
"The allegations and complaints levelled against Arrow are being driven by a common desire held by regional communities to understand what a resource company's regulatory obligations are, and if they are complying with these requirements," GasFields Commission CEO Warwick Squire said at the time.
"That is why we are now calling on the government to finalise their investigations into compliance issues as a matter of urgency."
The Department of Resources is conducting a six-month campaign of targeted checks on gas operations across the Surat Basin to ensure all operations are meeting their obligations.
A clarification of the legalities when dealing with gas infrastructure left on site after a tenure has ended has now been published online, Mr Stewart said.
"Landlords are protected from liability for harm caused by, or arising from, the failure of any legacy petroleum and gas infrastructure on their properties, unless they have caused or contributed to the harm through their own activities."
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