The two parties would also work on improving water quality in lakes, rivers and streams, giving recreational fishers more opportunities, and reaffirming the use of public-private partnerships for major roading projects.
However, there was no mention in the new agreement of flexible superannuation or income splitting, two of United Future's key policies.
In the previous confidence and supply agreement, National agreed that a discussion document investigating the issue of Flexi-Super would be developed.
Mr Dunne told reporters: "This agreement is a little different from the previous two given the circumstances of the outcome of the last election".
With National winning an outright majority it doesn't need support parties to pass legislation, but Mr Key said deals with United Future and Act which he will announce this afternoon, along with the Maori Party, "makes a stronger and I believe a better Government".
Mr Dunne acknowledged his lack of bargaining power saying the new deal "relies much more on good faith and the established working relationship of the last six years as the way forward".
"I welcome the fact that the Prime Minister has reached out to other parties to broaden the scope of his Government and to enter into relationships that will ensure a good and stable government and hopefully some of the rougher edges get knocked off from time to time."
Mr Dunne said despite its absence from this morning's deal, his flexi super proposal was still alive and he would be pursuing it. The policy which has been through a discussion document and submission process had come up this morning in discussions with Finance Minister Bill English.
"I don't think the issue is dead and buried."
As for his income splitting bill which languished on the order paper last term, he said "we'll have to wait and see on that one".
Meanwhile, Mr Key's Government was unable to pass its desired changes to the Resource Management Act last term after Mr Dunne and the Maori Party said they would support them as they prioritised economic development over the environment.
Mr Dunne indicated he was unlikely to change his position this term.
"Let's see. That's one of those areas where positions are pretty clear and that may be one of those instances where the Government uses its majority."
But Mr Key said his preference was to build a bigger majority for National's legislative agenda rather than simply a one seat majority "and that's equally true for our RMA changes".
In 2011, Mr Dunne was made Inland Revenue Minister, but resigned the portfolio last year following an inquiry into the leaking of sensitive documents.
When he was reinstated in January, he picked up Internal Affairs, and was reinstated as Associate Health Minister and Associate Conservation Minister, the portfolios he has retained today.
Asked about the events that led to Mr Dunne's resignation last year Mr Key he didn't know whether Mr Dunne was responsible for the leak of the documents, "but nor do I care".
He wanted to look forward rather than backward.
"All of that becomes a bit historical."
