Fact Sheet: Carbon capture and storage legislation in Australia
6 March 2009
In the past five months, significant legislation and amendments to existing legislation to facilitate carbon capture and storage (CCS) have been passed at both a federal and state level in Australia.
To help understand these changes, Allens Arthur Robinson has written this fact sheet, which summaries the three major CCS legislative regimes in Australia.
CCS in Commonwealth offshore waters
The Federal Government amended the Offshore Petroleum Act 2006 (Cth) (the Act) in November 2008 to introduce a regulatory regime for CCS activities in Commonwealth offshore waters.
The Offshore Petroleum Amendment (Greenhouse Gas Storage) Act 2008 (Cth) (the Amendment Act) applies to 'greenhouse gases' (GHG), a concept that expands upon carbon dioxide to include incidental and other prescribed substances. It establishes a system of titles to provide proponents with rights to undertake exploration, injection and storage and related activities, mirroring the existing petroleum regulatory regime under the Act. The key CCS titles are:
- a GHG assessment permit, which allows the holder to explore for GHG storage formation and injection sites;
- a GHG holding lease, which may be granted over an identified GHG storage formation, enabling the lessee to retain tenure for a period of time if a GHG stream is not available;
- a GHG injection licence, which authorises the licensee to inject and store GHG in an identified GHG storage formation.
The Act contains detailed provisions regulating the respective rights and obligations of CCS and petroleum titleholders, respectively. The key test is whether undertaking certain activities or the grant of certain titles will have a significant risk of a significant adverse impact on another title. In most scenarios, the Minister may authorise an activity, or grant a title, even where such a risk exists, if her or she determines it to be in the public interest. However, approval can only be given to a key GHG operation or injection licence that poses such a risk to a petroleum title predating the Amendment Act, or an existing production licence, with the agreement of the petroleum titleholder.
The Commonwealth has explicitly agreed to take the long-term liability risk for CCS activities authorised by the Act, by providing a 20-year sunset on a proponent's liability in damages for CCS operations. Proponents must meet stringent closure requirements to obtain the benefit of these provisions.
The provisions implementing the CCS regulatory regime came into effect on 22 November 2008. Regulations and guidelines necessary to support the regime are being developed.
CCS in onshore Victoria
The Victorian Parliament passed the Greenhouse Geological Sequestration Act 2008 (Vic) (the Victorian Act) in November 2008. The Victorian Act is a stand-alone Act and creates a regulatory regime for the conduct of CCS activities in onshore Victoria.
The Victorian Act establishes the processes by which CCS proponents will be permitted to obtain access and property rights to geological storage formations located in onshore Victoria. The tenure system for CCS activities closely resembles that applicable to petroleum exploration and development under the Petroleum Act 1998 (Vic) and provides for the following CCS titles:
- exploration permits and 'Special Access Authorisations' permitting exploration activities;
- injection and monitoring licences entitling the holder to inject greenhouse gas substances underground for permanent storage; and
- retention leases enabling the holder to retain the right to apply for an injection and monitoring licence over a suitable storage formation area.
CCS proponents are required to take 'all reasonable steps' to obtain the consent of existing authority holders, whose resources will be at significant risk of contamination. Existing authority holders include mineral, petroleum, water, geothermal energy and extractive industries titleholders. However, if this consent is not obtained, the Minister may still approve the CCS activities if, having referred the matter to an independent panel or relevant authority, he or she considers it to be in the 'public interest'.
An injection and monitoring licence can only be surrendered if the Minister is satisfied that the stored gas is behaving in a predictable manner and has approved a monitoring and verification plan. The Victorian Act is silent on the issue of long-term liability for injected gases after the licence has been surrendered.
The Victorian Act will come into operation on a day to be proclaimed, but no later than 1 January 2010.
CCS in onshore Queensland
The most recent state to introduce a regulatory regime for CCS activities is Queensland, with the passing in February 2009 of the Greenhouse Gas Storage Act 2009 (Qld) (the Queensland Act). The Queensland Act is stand-alone carbon storage legislation that closely aligns itself with the current petroleum regime in Queensland.
The Queensland Act introduces a tenure regime to govern the discovery and use of underground reservoirs for the storage of carbon dioxide – the Act does not permit the sequestration of other greenhouse gases. The key tenures to facilitate GHG storage are:
- a GHG exploration permit, which permits the exploration for underground geological structures suitable for injecting and storing GHG streams. A GHG permit holder also has the ability to apply for a declaration of a 'potential storage area' (which is essentially the equivalent of a holding authority) for a period of time, if a reservoir has been found but there is no available GHG stream; and
- a GHG injection and storage lease, for the actual injection, storage and monitoring of GHG streams.
The introduction of the new GHG tenures adds another level of complexity to Queensland's current overlapping tenement regime. The Queensland Act allows for the granting of GHG tenures over existing mining and petroleum tenures. Existing tenement holders have the right to lodge submissions in response to a GHG lease application, but ultimately the decision whether or not to grant the GHG tenure is at the discretion of the Minister. An existing exploration tenement holder has the right to request 'preference' for their resource in response to a GHG lease application. However, for existing mining and petroleum lease holders, the ability for the minister to grant GHG leases over these tenements without the existing holder's consent or a 'coordination arrangement' in place, raises significant issues regarding tenure security.
A GHG lease will only be accepted for surrender when the risks associated with carbon storage have been reduced as much as possible. Ongoing monitoring is required. Ownership of carbon dioxide stored in underground reservoirs passes to the State upon surrender of a GHG lease; however, the Queensland Act does not explicitly state that liability is also transferred to the State at that point.
The majority of the provisions of the Queensland Act commenced on assent; however, the key provisions creating the new GHG tenures are to commence on a date to be fixed by proclamation.
Ends
For further information, please contact:
Ph: +61 3 9613 8014
Jason.Silverii@allens.com.au
Notes for editors.
Allens Arthur Robinson has staff in 14 cities and eight countries across the Asia Pacific.