Under the OPGGS Act, an 'offshore area' extends three nautical miles from the baseline of the Australian territorial sea to the outer limits of the continental shelf. Areas within three nautical miles adjacent to a state or territory are 'coastal waters' and fall within the jurisdiction of the respective state or territory.
In addition to offshore petroleum activities, the OPGGS Act regulates the following offshore CCS activities:
exploration for potential greenhouse gas (GHG) storage formations
construction and operation of infrastructure facilities and pipelines for conveying GHG substances
injection and storage of GHG substances
The regulatory framework consists of a series of GHG titles including for exploration, injection and storage of GHG substances. It establishes criminal offences for activities undertaken without the necessary title or authorisation.
There are six main steps to obtaining approval for offshore storage as set out below.
1. Release of acreage for exploration of potential storage formations
The responsible Commonwealth Minister (Minister) must announce the release of acreage. The first release occurred on 27 March 2009, by the Minister for Resources and Energy. A total of ten offshore areas were released including in the Gippsland Basin and Torquay Sub-basin off the coast of Victoria, the Otway Basin off the coast of South Australia, Vlaming Sub-basin off Perth in Western Australia and the Petrel Sub-basin off the coast of the Northern Territory.
2. Application for a GHG assessment permit
In order to explore for a potential GHG storage formation, an application must be made to the Minister for a 'GHG assessment permit'. The Minister is must advertise invitations for applications on either a work-bid or cash-bid basis. The current release was advertised on a work-bid basis, meaning applicants must detail their proposals for work and expenditure in relation to the advertised block(s), in addition to details on the applicant's technical qualifications and available financial resources, amongst other requirements. Cash-bid assessment permits differ by requiring applicants to specify the amount they would be prepared to pay for a permit.
A GHG assessment permit grants rights beyond exploration for potential storage formations and injection sites. Subject to conditions, it includes rights to inject and store a GHG substance into a geological formation on an appraisal basis provided the well is situated in the permit area. There are also associated rights to inject and store air, petroleum or water on an appraisal basis in connection with the exploration. If petroleum is incidentally encountered, the permittee can recover the petroleum with the consent of the Minister, but property rights to the petroleum do not vest in the permittee.
These broad rights are qualified by the requirement to obtain an additional approval for 'key GHG operations', which cover most of the permit activities. Furthermore, the permittee must have separate approval of its 'environment plan' to undertake the permit activities.
It is a condition of a GHG assessment permit that a 'key GHG operation' must not be carried out without approval from the Minister. For example, a GHG assessment permittee must obtain additional approval to carry out injection and storage activities on an appraisal basis. Carrying out activities without this approval is grounds for cancellation of the permit.
In addition to injection and storage activities, 'key GHG operations' encompass:
seismic and other surveys;
monitoring of preliminary storage attempts; and
sampling from the seabed or subsoil.
This separate approval process is required because the Minister must take into consideration any impacts of key GHG operations on existing or future petroleum titles. In general, if there is a significant risk of a significant adverse impact (SRSAI) on petroleum interests, the Minister must consider the terms of any agreement in light of petroleum titleholders and the public interest. The Minister is precluded from granting approval to a key GHG operation if there is a SRSAI on an 'existing pre-commencement petroleum title' or an 'existing post-commencement petroleum production licence' and the titleholder has not agreed to the key GHG operation
.
Furthermore, if there is a SRSAI on petroleum operations that could be carried out under a future pre-commencement petroleum title and there is an existing pre-commencement petroleum title in force, the existing titleholders' consent must be obtained by the Minister. These provisions effectively give the petroleum titleholders a 'right to veto' a key GHG operation and are therefore a potential area of risk for CCS investors (Gibbs, 2009).
There is no express condition in the OPGGS Act for an environmental impact assessment (EIA) prior to the grant of a GHG assessment permit. However, an EIA is required to be incorporated in an 'environment plan' for activities under the permit, which must be approved by the Minister before the activities can commence (see sections below on Environment Regulations and Environmental Protection for further discussion). The Minister also has broad discretion to impose "whatever conditions [the Minister] thinks appropriate" which could include environmental conditions.
GHG assessment permits have a duration of six years. An application can be made to renew the permit once for an additional three years.
3. Declaration of an identified GHG storage formation
A holder of a GHG assessment permit can apply for a declaration (approval) of an 'identified GHG storage formation' if the permittee has reasonable grounds to believe that:
part of a geological formation is eligible; and
it is wholly located within the permit area.
This approval must be obtained before an application can be made for a GHG injection licence.
Eligibility is determined by a range of factors such as whether the formation is suitable for permanent storage of at least 100,000 tonnes of a particular GHG substance (with or without engineering enhancements) from a particular injection point and over a particular period. The spatial extent of an eligible formation must also be estimated. This is determined to be the expected migration pathway(s) starting from the date of injection to a notional site closure date.
The holders of a GHG injection licence or holding lease (discussed at steps 4 and 5 below), and a petroleum retention lease or petroleum production licence, can also apply for a declaration.
The Minister must make the declaration if satisfied that the formation is eligible and a reasonable estimate of the spatial extent of the formation has been provided. Declarations are to be published, entered on a register and continue for the life the GHG project unless varied or revoked.
4. Application for a GHG holding lease
If there is an identified GHG storage formation wholly located within the proposed lease area and the applicant is not currently in a position to inject and store a GHG substance, but is likely to be within 15 years, an application for a 'GHG holding lease' can be made. Specific procedures apply depending on whether the applicant is a GHG assessment permittee, an injection licensee who has yet to carry out any injection activities, or a petroleum retention lessee. In the case of a petroleum retention lessee, preferential treatment is accorded - the Minister must grant a holding lease to the retention lessee if there is an identified storage formation in the lease area and all general requirements have been met.
The rights granted under a GHG holding lease are essentially the same as under an assessment permit, including storage rights on an appraisal basis. It is also a condition of a GHG holding lease that separate approval for key GHG operations be obtained. Again, the Minister must refuse consent to a key GHG operation if there is a SRSAI on the following types of petroleum titles and the titleholder does not consent to the operation:
an existing pre-commencement petroleum title
an existing post-commencement petroleum title
a future pre-commencement petroleum title
Applications can also be made for a 'special GHG holding lease'. This is intended to cover GHG assessment permittees or holding lessees who have been unsuccessful in obtaining an injection licence (see step 5 below) on the grounds of a SRSAI to petroleum interests and the petroleum titleholder has not consented to the grant of an injection licence.
A GHG holding lease has a duration of five years. It can be renewed once provided the Minister is satisfied that the applicant is likely to be in a position to inject and store GHG substances within ten years. A special GHG holding lease has an indefinite duration but the Minister can request the holder to apply for an injection licence when any conflict with petroleum titles ceases to exist.
5. Application for a GHG injection licence
A GHG injection licence allows the licensee to inject a GHG substance in an identified GHG storage formation wholly within the licence area, provided the well is situated within the licence area. It authorises permanent storage and the equivalent rights to exploration and appraisal activities under an assessment permit or holding lease.
Conditions attached to the grant of an injection licence include that injections must occur within five years, that the GHG substance must be of the kind and origin specified in the licence, and that GHG substance amounts must not exceed the amount specified in the licence. The OPGGS Act also states that the regulations may establish a regime for third party access for the use of storage formations, equipment and wells used for injection activities, and equipment or structures used in processing, compressing or storing GHG substances prior to injection.
Applications can be made by holders of a GHG assessment licence, holding lease or a petroleum production licence. For each of these types of applications, the Minister must consider whether there is a SRSAI on various petroleum titles. To a certain extent the Minister has greater discretion than the powers conferred for considering impacts on petroleum interests in steps 2 and 4 above. For example, in the event of a SRSAI on existing or future post-commencement petroleum titles, the Minister can settle any conflict if satisfied that the grant of an injection licence is in the public interest. There is no equivalent 'right to veto' by the petroleum titleholder.
If there is a SRSAI on an existing pre-commencement petroleum title or existing petroleum production licence, separate detailed considerations are required, including agreement being reached and a new 'commercial viability test' for petroleum recovery operations.
In relation to applications by the holder of a petroleum production licence, the GHGs proposed to be injected must originate from the operations occurring under the production licence. If only some of the GHGs arise from those operations, the Minister must be satisfied that it is within the public interest to grant the injection licence.
As with a GHG assessment permit, there is no express condition in the OPGGS Act for an EIA prior to the grant of a GHG injection licence. However, before activities can commence under a licence, the Minister must approve an environment plan which incorporates an EIA. (see sections below on Environment Regulations and Environmental Protection for further discussion).
It must also be noted that if an injection licence overlaps with a pre-commencement petroleum title and petroleum is discovered in the area of overlap, the Minister has broad powers to protect the petroleum. If the Minister is satisfied that injection activities pose a SRSAI on petroleum recovery operations or the commercial viability of those operations, the Minister can make directions to eliminate that risk or for the purposes of mitigation and remediation. These powers extend to a suspension of the injection licence (for a period or indefinitely) or cancellation.
The duration of an injection licence is generally indefinite, but it can be terminated if no injection activities occur within five years.
6. Site closure
Applications for a 'site closure certificate' are to be made by a GHG injection licensee in the following circumstances:
injection operations have ceased;
there is a ground for cancellation of the licence; or
the injection licence is tied to a petroleum retention lease or production licence that has ceased to be in force.
Details that must be submitted with an application include:
a written report on modelling of the behaviour of the injected GHG substance;
a written report on the applicant's assessment of that behaviour, expected migration pathways, and the short and long term consequences of migration of the substance(s); and
the applicant's suggestions to the Commonwealth on the approach that should be taken towards to monitoring after the issue of a site closure certificate.
Upon lodgement of an application for a site closure certificate (or where there has been a failure to make an application), the Minister can direct the licensee to:
remove all property from the licence area
plug or close off all wells
provide for the conservation and protection of the natural resources within the area
make good any damage to the seabed or subsoil
undertake activities to prevent, manage or remediate any risks to navigation, fishing, pipeline operations, the enjoyment of native title rights or the conservation or exploitation of natural resources
There is a preliminary stage to the issue of a site closure certificate, referred to as a 'pre-certificate notice'. This indicates that the Minister is willing to issue a site closure certificate having been satisfied that injection operations have ceased or did not occur. It sets out the proposed monitoring operations to be taken over by the Commonwealth. Under the OPGGS Act, the Commonwealth is entitled to recover its reasonable costs of carrying out those operations. The pre-certificate notice therefore includes the security that must be paid by the applicant in respect of that right to recovery. The Minister is precluded from issuing a pre-certificate notice unless satisfied that all relevant statutory requirements have been met. But the Minister does have a form of waiver if there are "sufficient grounds to warrant the issue of a site closing certificate".
The Minister may refuse to issue a pre-certificate notice if the Minister is not satisfied that the injected GHG substance is behaving as predicted in the approved site plan. Furthermore, refusal may follow if the Minister is satisfied that there is a SRSAI on the conservation or exploitation of natural resources (whether offshore or elsewhere), the geotechnical integrity of the storage formation, the environment, or human health and safety. The Minister must also consider any significant risks to navigation, fishing, pipeline activities, and the enjoyment of native title rights by indigenous Australians amongst other matters. The OPGGS Act does not mandate a refusal in the event of significant risks to these potentially overlapping rights.
If a pre-certificate notice has been issued and the applicant has paid the full security, then the issue of a site closure certificate must follow. Applications for a site closure certificate must be determined by the Minister within five years.
At least fifteen years following the issue of a site closure certificate, the Minister can declare a 'closure assurance period'. Once declared, the OPGGS Act provides for the transfer of defined long-term liability to the Commonwealth (see Liability - Australia). Prior to this point, which may be at least 20 years from the date of application for site closure , the injection licensee is liable for potential claims arising from its operations under the licence.
Additional GHG titles
The OPGGS Act also provides for additional GHG titles in the form of a GHG search authority, a GHG special authority and a GHG research consent.
A GHG search authority allows the holder to carry on operations relating to exploration of potential storage and injection sites, but not to make wells. It cannot be granted where there is an existing GHG title or petroleum exploration permit, retention lease or production licence. The duration of a search authority is for a maximum of 180 days.
A GHG special authority entitles the holder to carry on certain GHG-related operations but again, not to make wells. In contrast to a search authority, it can be applied for by the holder of an existing GHG title, for instance to obtain authority to conduct GHG operations outside of an existing permit or lease area. The duration is determined by the Minister.
A GHG research consent, as the title implies, enable the holder to carry out exploration for potential storage and injection sites during the course of a scientific investigation.
Applications can also be made to construct and operate offshore infrastructure facilities and pipelines under the OPGGS Act. The relevant authority is the Joint Authority, comprised of the Commonwealth Minister and the respective Minister of the state or territory. The regulations may also establish a regime for third party access to infrastructure and pipeline facilities. As with injection licences, infrastructure and pipeline licences can be cancelled if operations have not occurred within five years.
Federal regulations under the OPGGS Act
The Australian regulatory framework includes a set of regulations enacted under the OPGGS Act. A summary of the current regulations relevant to offshore CCS storage activities is provided below. Additional regulations are also in force in relation to annual fees, registration fees and safety levies.
The Environment Regs aim to ensure that any offshore petroleum or GHG activities are carried out in a manner consistent with the principles of ecologically sustainable development and in accordance with an environment plan.
It is an offence to carry out a petroleum or GHG activity without a valid environmental plan or contrary to the plan. It is also an offence to carry out an activity if a new or increased significant environmental risk or impact arises that is not covered in the plan. Plans are to be approved by the Minister before the following activities can commence under the applicable permit, lease or licence:
seismic and other surveys
drilling
construction, operation and decommissioning of facilities and pipelines
injection and storage of GHG substances
Environment plans must include:
details of the environmental impacts of the activity
an evaluation of all impacts and risks, including potential emergency situations
an implementation strategy to ensure:
all applicable environmental laws and controls are met
; and
any impacts of the activity are 'reduced to as low as reasonably practicable'.
a report on all consultations between the operator and relevant authorities, interested persons and organisations
arrangements for recording, monitoring and reporting information in relation to compliance with environmental standards, and for periodic reporting to the Minister
The Minister must accept or refuse an environment plan within a prescribed time or state why further time is required.
In terms of public consultation on the plan, the Minister must be satisfied that the operator's consultations with authorities, interested persons and organisations are at an 'appropriate level'. Interested persons and organisations are not defined and there is no requirement to consult particular members of the public or NGOs. The implementation strategy within the plan must also provide for 'appropriate consultation' with relevant authorities and 'other relevant interested persons or organisations', suggesting further consultations during the course of the activity. If the plan is approved, a summary of the plan will be publicly disclosed.
In approving an environment plan, the Minister must also be satisfied that:
the environmental impacts and risks are of an 'acceptable level' and will be 'reduced to as low as reasonably practicable';
appropriate environmental safeguards are provided; and
the implementation strategy including monitoring and reporting arrangements are appropriate.
The Environment Regs also establish a system for notification of 'reportable incidents', which have caused, or have the potential to cause, moderate to significant environmental damage. Written reports of a reportable incident must be submitted by the operator of an activity to the Regulator (the Minister) and set out actual or proposed mitigation and corrective actions.
There are three main objects to the RMA Regs. First, to ensure that offshore operations are carried out in accordance with best practices for oilfield activities and compatible with the maximizing long-term petroleum recovery. Secondly, that the administrators of the OPGGS Act are informed in a timely manner of exploration, discovery, development, production and injection activities. Thirdly, to provide a framework for the management of petroleum and GHG data.
These regulations consolidate and repeal a number of existing regulations including the Offshore Petroleum and Greenhouse Gas Storage (Management of Greenhouse Gas Well Operations) Regulations 2010.
These regulations detail the requirements for the following six elements related to injection and storage activities described in the OPGGS Act.
SRSAI test: The regulations set out the process to be used to determine whether a particular activity will have a SRSAI on activities in existing petroleum/GHG title areas. The test requires that the probability of the occurrence of an event times the cost that would be incurred if the event occurred be less than a given threshold.
Declaration of a storage formation: The regulations outline the information required to determine a storage formation is suitable for permanent storage and specify the process for applying for a declaration by a GHG titleholder.
Site plan: The regulations detail the process around approval of a site plan as well as its contents. The site plan must contain predictions of the behaviour of the GHG substance to be stored. If the substance is found to not behave as predicted then the serious situation powers in the OPGGS Act will be triggered. The site plan must also cover risk assessment and monitoring activities. The regulations require a summary of the site plan to be made publicly available on the departmental website within 30 days of receiving it. The Minister must consider any public comments received in relation to the summary of the site plan.
Incident reporting: The regulations set out reportable incidents as any variations from the behaviour predictions in the site plan and any leakage from any wells that are part of the project. The Minister may require revisions to the site plan to address reportable incidents.
Decommissioning: The regulations require a provisional decommissioning plan be submitted at the time of applying for an injection licence. A final plan is required at least 12 months before injection is expected to cease.
Discharge of securities: The regulations allow financial securities to be discharged when the Minister is satisfied the obligations for which the security was paid have been satisfied.
Relevant guidelines
Two sets of non-binding guidelines have been developed to promote a consistent approach to the application of CCS activities in Australia, including offshore storage activities. These guidelines are summarised briefly below.
1. Regulatory Guiding Principles
Prior to the enactment of the OPGGS Act, the Ministerial Council on Mineral and Petroleum Resources (MCMPR) endorsed the Australian Guiding Principles for Carbon Dioxide Capture and Geological Storage (Guiding Principles). The purpose of the Guiding Principles is to promote consistency in the development of a CCS regulatory framework across the Australian states and territories. The Guiding Principles address six areas of CCS activities:
assessment and approval processes
access and property rights
transportation issues
monitoring and verification
liability and post-closure responsibilities
financial issues
Although non-binding, the Guiding Principles are likely to continue to be a relevant reference point as further CCS legislation is developed in Australia, particularly as a benchmark for comparing differences between jurisdictions.
2. Environmental Guidelines
The Australian Environment Protection and Heritage Council (EPHC), in conjunction with the MCMPR, produced Environmental Guidelines for Carbon Dioxide Capture and Geological Storage (Environmental Guidelines). As with the Guiding Principles, the Environmental Guidelines are non-binding but do provide relevant supplementary information on environmental assessment of CCS activities, monitoring of injected GHG substances, site closure and the need for co-ordination across jurisdictions.
State Legislation
Victoria
The Victorian Government has enacted the Offshore Petroleum and Greenhouse Gas Storage Act 2010 (Victorian Act). Under the Victorian Act, the 'Victoria offshore area' is three nautical miles seaward from the coast. This area is also known as 'coastal waters'. The Victorian Act adopts the definition of a Commonwealth offshore area under the OPGGS Act and provides for a similar regulatory framework for offshore petroleum and GHG activities. Differences between the two acts relate to requirements for separate additional state consents and the application of the Victorian criminal legislation. The key difference between the Victorian Act and the OPGGS Act is in relation to long-term liability for GHG activities (see Liability - Australia).
Key legal issues concerning CCS
The relationship between petroleum interests and CCS activities
It remains an open question whether an appropriate balance has been struck under the OPGGS Act between the competing policy objectives of protection of petroleum interests and promotion of CCS in offshore areas. In addition to examples of these protections outlined at steps 2, 3 and 4 above, the Minister has broad powers to give directions to the holder of a GHG assessment permit, holding lease and injection licence for the purpose of eliminating, mitigating or managing risks to petroleum interests. It has been suggested that a number of the protections afforded to petroleum titleholders come at the potential expense of certainty for CCS investors (Gibbs, 2009).
Scope for injection and storage of substances other than carbon dioxide
The London Protocol, OSPAR Convention and EU Storage Directive clearly provide that CO2 streams must consist 'overwhelmingly' of CO2. No waste may be injected but incidental associated substances are permissible, and in the case of the EU Storage Directive, trace agents may be added. Similarly, the OPGGS Act specifies that GHG substances to be injected must consist overwhelmingly of CO2 or other prescribed GHG. Where the mixture includes a detection agent, the concentration of the agent in the mixture is not to exceed the prescribed concentration. The OPGGS Act provides further that it will be an offence to add waste or other matter to a GHG substance if done with the intention of disposing that waste or matter.
However, an exception is provided for waste or other matter resulting from petroleum recovery operations under a petroleum production licence that has the consent of the Minister. This would appear to allow waste streams to be co-injected with CO2 into GHG storage reservoirs. This exception represents a departure from the international approach to the acceptable composition of CO2 injection streams.
Environmental protection
In regulating any new technology, an important consideration is whether adequate protections are afforded to the environment.
The main forms of regulatory environmental protection under the OPGGS Act are summarised below.
monitoring of operations by GHG project inspectors
remedial directions to GHG titleholders or former GHG titleholders in relation to the removal of property, plugging or closing off wells, the conservation and protection of natural resources and the making good of damage to the seabed or subsoil
Additional environmental protections may accrue under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) and the Environment Protection (Sea Dumping) Act 1981 (Cth) (Sea Dumping Act).
EPBC Act
The EPBC Act sets requirements for approvals from the Commonwealth Environment Minister in relation to actions that may impact matters of 'national environmental significance'. For the purposes of the EPBC Act, matters of national environmental significance include World Heritage property, wetlands of international importance (Ramsar wetlands), listed threatened species and communities, listed migratory species and the Commonwealth marine environment, amongst other matters.
Offshore CO2 storage activities may potentially impact on a number of these matters, particularly protection of the 'Commonwealth marine area' under the EPBC Act. A marine area overlaps with an OPGGS Act offshore area from 12 nautical miles onwards. It is an offence to take action in a marine area that will have, or is likely to have, a significant impact on the environment. The EPBC Act also regulates potential impacts on whales and other cetaceans, and establishes 'bioregional plans' for the protection of biodiversity for a 'bioregion' within a Commonwealth area.
The application of the EPBC Act to offshore GHG activities is significant as it may require separate approval from the Environment Minister. If this occurs, the proposed activities may be subject to a public environmental report or environmental impact assessment. The EPBC Act also has additional requirements for public consultation.
The release of three areas within the Gippsland Basin, Victoria for acreage is a good example of the environmental issues likely to arise in practice (although none have done so to date). The release areas are adjacent to a Commonwealth Marine Reserve which provides a reef habitat to seabirds, Little Penguins and Australian Fur Seals. Endangered and vulnerable migratory whale species transit through the areas for feeding. Furthermore, the first of the release areas is approximately 7km south west of the Corner Inlet Ramsar site. This release area also overlaps with a registered native title claim by the Gunai/Kunai people.
Sea Dumping Act
The Sea Dumping Act implements the requirements of the London Protocol in Australia. In accordance with the London Protocol, the injection of CO2 streams in a sub-seabed geological formation is a permissible dumping activity subject to the requisite permit and to conditions attached to the permit. The Environment Minister is the responsible Minister for issuing a dumping permit.
Serious situations and implications of leakage
The OPGGS Act sets out requirements for dealing with a 'serious situation' arising from GHG activities. Serious situations are set out below:
leakage, or the significant risk of leakage, from a storage formation or during the course of injection
behaviour of the GHG substance, or the significant risk of behaviour, otherwise than as predicted under an approved site plan
SRSAI on the geological integrity of the storage formation
the storage formation is 'not suitable' for permanent storage, with or without engineering enhancement
The inclusion of a 'non-suitable' storage formation addresses the contingency of a change in site suitability. This appears to reflect the fact that the development of CCS technology is still in transition. It is an additional protection above the initial assessment giving rise to a Ministerial declaration of an 'identified GHG storage formation'.
The powers of the Minister to deal with serious situations are very broad in order to address contingencies, including cessation of operations. The Explanatory Memorandum states that it is expected the Minister will take the 'least drastic' action in the event a serious situation arises.
An issue for further consideration in the Australian jurisdiction is the implications of leakage on any future domestic emission reduction and reporting requirements, whether in the form of an emission trading scheme or other regulatory alternative.