INSIGHT

Proposed regulation of offshore clean energy infrastructure – what you need to know

By Jodi Reinmuth, Jacqui Rowell
Energy Infrastructure Oil & Gas

In brief 6 min read

The proposed regulatory framework for offshore wind and other clean energy technologies and associated infrastructure in Commonwealth waters looks to be modelled on the regulation of offshore petroleum, with some key differences.

Key takeaways

  • The Federal Government has released a Discussion Paper and a Process Map outlining the proposed regulatory framework for offshore wind and other clean energy technologies and associated infrastructure in Commonwealth waters.
  • Commonwealth waters begin three nautical miles off the territorial sea baseline, and it is unknown how each state will deal with the offshore areas falling within its jurisdiction.
  • The Government has proposed that the National Offshore Petroleum Safety and Environmental Management Authority regulates the new industry, given its experience in regulating offshore petroleum exploration, production and greenhouse gas activities.
  • The regulatory framework is set to cover exploration, construction, operation and decommissioning, and appears to be based on the regulatory framework for offshore petroleum (eg the use of graticular blocks, competitive bid processes, and two phases of licences analogous to exploration and production licences). There is, however, a requirement to lodge a decommissioning bond before the installation of any clean energy infrastructure.
  • As the framework is very similar to the regulatory regime for offshore petroleum, it would be useful if industry participants included in their feedback whether any aspects from the offshore petroleum regime are, in their view, not appropriate for clean energy infrastructure.

What is in the framework?

The Department of the Environment and Energy has issued a Discussion Paper for the proposed regulatory framework, which also includes a Process Map depicting the framework. The Discussion Paper explains that the proposed framework will be technology neutral (with risk-based regulation); promote shared use of Commonwealth waters; ensure all environmental impacts and risks are appropriately managed (including requirements under the Environment Protection and Biodiversity Conservation Act 1999 (Cth)); and protect the offshore workforce.

The framework proposes four different types of licences:

  • Feasibility licence: this licence has a five-year term to allow a proponent to undertake exploration activities, finalise their project design, and consult with other users and regulators. The proponent will then submit a management plan to the regulator, which, if accepted, gives the proponent first rights to apply for and be granted a commercial licence.
  • Commercial licence: this licence has a 30-year term, with indefinite renewal rights (each renewal being for an additional 30 years). Thirty years is consistent with the economic life of an onshore wind farm – therefore, this term should be sufficient for offshore wind farms, with the renewal period making any repowering of the wind turbines feasible. A commercial licence is an exclusive grant, and so, competing feasibility or commercial licences cannot be granted over the same footprint. Under a commercial licence, a holder can apply to the regulator to construct, test and commission, operate and decommission a project.
  • Non-commercial licence: this licence is for research, exploration and demonstration projects. It has a term of 10 years, is non-exclusive and does not lead to a commercial licence.
  • Transmission and other infrastructure permit: This is a permit for the construction and operation of transmission or other infrastructure (and for safety buffer zones around as-built infrastructure). This can be a stand-alone licence or tied to another licence.

Before any feasibility, commercial or non-commercial licence can be issued, the Energy Minister needs to declare the underlying area an Offshore Energy Site. The proposed framework provides that, in order for an area to be so declared, the spatial offshore area must be defined and a consultation process take place. The consultation process would require the Minister to seek the views of known users of the potential area and to invite broader public comment. The Minister will also be required to consider defence interests, environmental impacts and sensitives, existing and planned industries, and national security interests. Following the consultation process, if they declare an area an Offshore Energy Site, the Minister may open applications to seek competitive interest in the area for commercial and non-commercial activities. We query why such an extensive consultation process is required for a non-commercial licence, but perhaps the thinking is that the Commonwealth needs to ensure there is no activity around sensitive areas (eg a naval base).

It appears from the Discussion Paper and Process Map that the Minister will set the terms of the competitive assessment and any other conditions, and that the criteria and process for assessing the interests will be published. The terms of the competitive assessment criteria will be critical, as a proponent may have funded preliminary stages of the project throughout the consultation phase, only to have another proponent awarded a feasibility licence at the competitive assessment stage. It is not yet known whether it is intended that this will move to an annual acreage release process (as is the case for offshore petroleum exploration).

The mere fact that a generator is offshore should not pose any difficulties with connecting it to the grid in the relevant state, but it is not clear at this stage how/whether state regulatory requirements for generators connecting into the grid would extend to offshore generators, and how any overlap will be managed.

Other key items

  • Decommissioning: Before infrastructure is to be installed, a proposed licence holder needs to lodge a decommissioning bond (the Process Map suggests this bond is to be lodged before the relevant licence is issued, but it is not clear if it can be delayed until infrastructure installation). This bond is to cover the entire cost of decommissioning all infrastructure proposed to be installed on the licence (based on costs estimated through the planning process), which would be available to the Government in the event the licence holder fails to meet its decommissioning obligations.
  • Scope of legislation: Certain low-impact activities will not be subject to the legislation. Notices may be issued from time to time to specify those activities not considered to be 'offshore clean energy activities'. The example given in the Discussion Paper was the installation of met-ocean buoys.
  • Grandfathering: Holders of existing rights for offshore transmission assets and offshore clean energy exploration will continue to operate under their current arrangements. Presumably, any significant expansions that are not pre-approved will fall under this new regime.
  • Safety zone: Licence holders will be permitted to apply for safety zones around their infrastructure.
  • Pre-qualification of licence holders and any proposed assignee: Licence holders will be subject to certain suitability tests, including a fit and proper person test, assessment of technical and financial capability, and measures of past performance. More detail is yet to be developed for these tests, although we do see similar requirements in the offshore petroleum regime.

Next steps

Information sessions will be held on the proposed regulatory framework in Perth (10 February 2020) and Melbourne (20 February 2020).

Feedback has been sought on the proposed regulatory framework, and the Department will not be publishing any responses. All submissions must be made by 28 February 2020.