Australian Onshore Regulation: the Victorian experience
Introduction
In 2005, the Ministerial Council on Mineral and Petroleum Resources (MCMPR) endorsed the 'Australian Regulatory Guiding Principles for Carbon Dioxide Capture and Geological Storage', a set of principles viewed as fundamental to the creation of a regulatory framework for CCS. In developing these principles, the MCMPR sought to ensure that nationally consistent legislative frameworks were designed and that, where possible, existing legislative frameworks were utilised. In many instances, legislation relating to the pipeline transport and underground storage of CO2, as part of petroleum operations, already existed at federal and state level.
In November 2008, the Australian Commonwealth (i.e. federal) Government passed the Offshore Petroleum Amendment (Greenhouse Gas Storage) Act 2008, which provides a regulatory framework for carbon dioxide storage in federal offshore waters (i.e. waters that come under national as opposed to state jurisdiction, which are those that extend beyond 3 nautical miles from the baseline of the Australian territorial sea).
The federal legislation described above focuses exclusively upon the offshore storage of captured CO2. For an overview of this legislation see the Australian Offshore CO2 Storage page. However, several states and territories have recently passed legislation which focuses either in part or exclusively upon the onshore storage of CO2. The states of Victoria and Queensland, for instance have introduced legislation which builds upon their existing experience in the oil and gas industries and seeks to make use of the potential storage sites available within each state. Both have done this using dedicated regulatory frameworks.
Greenhouse Gas Geological Sequestration Act 2008 - State of Victoria
Overview
The Victorian Government, in its Discussion Paper of January 2008, cited the need to distinguish CCS from petroleum legislation, which it viewed as premised upon fundamentally different processes. The state viewed CCS activities as posing a number of unique issues, including the potential for CO2 to migrate beyond the storage site, the various liabilities that may attach to these operations and the extended time-frames over which they operate.
The Victorian Greenhouse Gas Geological Sequestration Act 2008 (No. 61 of 2008) received Royal Assent on 5 November 2008 and is required to come into force no later than 1 January 2010. It provides a dedicated legal framework enabling the onshore injection and permanent storage of greenhouse gas substances. The state government has also developed a regulatory framework for offshore storage sites (i.e. those sites falling within the 3 nautical mile extent of state jurisdiction, the Offshore Petroleum and Greenhouse Gas Storage Act 2010. This largely mirrors the Commonweath's framework for offshore waters with the exception of the treatment of long-term liabilities. For a further discussion of the offshore regulatory framework see the Australian Offshore CO2 Storage page.
The onshore regulatory framework is based loosely upon the Petroleum Regulations 2000 and the Geothermal Energy Resources Regulations 2006, which the Victorian Government viewed as useful models.
Under the Act, a permitting system is created for granting access to geological storage formations located in onshore Victoria. A number of licences/permits are introduced along with detailed permitting requirements and processes. The Act vests property rights, relating to storage sites, in the Crown and sets out detailed requirements for the surrender or cancellation of licences, enabling the Crown to assume responsibility for the monitoring and verification of the formation post-closure. Where there is ongoing occupancy of Crown land, a rent may be charged to the holders of permits.
Permitting
A new permitting regime is introduced and three new licences or permits have been created. These include an Exploration Permit, which may lead to an application for an Injection and Monitoring Licence or, alternatively, a Formation Retention Lease. Under the Act, it is an offence to undertake exploratory or injection activities without the correct licence, lease or permit.
Exploration permits allow the operator, subject to any terms that may be attached, to undertake exploration of potential underground geological storage formations within a given locale. A permit does not entitle the holder to extract any resources that may be discovered during the exploration process and the holder must adhere to a recommended work programme set out in the Act. An application for a permit has to be made to the relevant Minister and include evidence of the applicant's finances, proposed work programme and technical expertise. The grant of an exploration permit is for a period of five years, unless surrendered or cancelled.
The Act allows the holder of an exploration permit to inject a liquid or gas into a geological formation, for the purpose of examining the behaviour of injected substances or the suitability of a chosen formation. Injection activities may only be undertaken where an injection testing plan has been submitted to, and approved by, the relevant Minister.
Where a suitable geological storage site is discovered by the holder of an exploration permit, they are obliged to report it to the relevant Minister immediately. Written details of the discovery must then be sent to the Minister no later than three working days following the discovery. The Minister may then require the permit holder to apply for either a retention lease or an injection and monitoring licence, with regard to the site.
Formation retention leases enable those holding exploration permits to 'retain the right' to suitable underground storage sites, which may become financially viable as sites for injection and storage within the next 15 years. The holder of a lease may undertake further exploration work in the area, as well as any other activities which may be are incidental to that purpose.
An application for a lease must be made at least 90 days before the expiration of an exploration permit and must contain certain information specified in the Act. A lease must be granted where the Minister is satisfied both that the site is suitable and that access to a commercially viable volume of greenhouse gas is likely to be obtained by the operator in the next 15 years. Leases will be granted for an initial period of 5 years, with the possibility of two further 5-year renewals.
An injection and monitoring licence is required where an operator, already holding either an exploration permit or retention lease, seeks to inject a greenhouse gas substance into a geological formation for the purpose of permanent storage. An application for a licence must be submitted to the relevant Minister and contain an assessment of the suitability of the proposed site, as well as details of the nature and volume of the greenhouse gas substance to be stored. A date for the commencement of commercial scale injection must also be specified.
Once granted by a Minister, a licence may include various conditions including restrictions upon the area of application and the volume of greenhouse gases that may be stored. An obligation to pay an annual fee towards the long-term monitoring and verification costs of the site is a mandatory condition. A licence will remain in force until it is cancelled or surrendered.
Operators are required to complete and submit an injection and monitoring plan prior to the start of injection and storage activities. The plan must include, amongst other details: the activities to be carried out by the operator, the nature of the substance to be injected, an estimate of storage capacity for the site, a monitoring and verification plan, and a risk management plan.
An operation plan also needs to be completed by a holder of an authority, prior to the start of any greenhouse gas sequestration activity. This plan, which is to be approved by the relevant Minister, will guide the 'daily' processes associated with sequestration activities. It will outline risks posed by the operator's activities and how they are to be managed, as well as detailing how affected land will eventually be rehabilitated.
Completion of injection activities and post-closure obligations
Upon cessation of injection activities for a given site, the holder of an injection and monitoring licence is required to inform the Minister in writing. The operator must remove all the relevant infrastructure associated with injection activities, plug and close off any wells, and rehabilitate the site. The holder of the licence must surrender the right to inject a greenhouse gas substance, but is not taken to have surrendered the licence itself.
For a licence to be surrendered, the operator must satisfy the Minister that: the injected greenhouse gas substance is behaving and will continue to behave in a predictable manner; that the risks associated with the permanent storage of the substance are 'as low as reasonably practicable' and that the stored greenhouse gas substance will not 'present a risk to public health for the environment'. The Minister must also approve the applicant's long-term monitoring and verification plan.
Once the injection and monitoring licence is surrendered, the Crown will assume responsibility for the ongoing monitoring and verification of the storage site. No timescale is set out for the transfer of this responsibility.
Insurance and the Rehabilitation Bond
The Act includes provisions regarding insurance and rehabilitation, to address the risks associated with any greenhouse gas sequestration operations. The 'holder of an authority' (exploration permit, formation retention lease or monitoring and injection licence) is required to hold full insurance ('as directed by the Minister from time to time') to cover any of the operations associated with that authority. These are described in the Act as 'expenses or liabilities or specified things arising in connection with, or as a result of, the carrying out of operations or the doing of any other thing, under the authority, including the expenses of complying with directions with respect to the clean-up or other remedying of the effects of the escape of a greenhouse gas substance.'
In addition to insurance, the holder of an authority must also obtain a 'rehabilitation bond' of an amount that is deemed acceptable by the Minister. The bond, which is currently of an ambiguous nature, must be capable of securing the payment of funds for any works associated with the remediation of a site or the prevention of pollution. The amount secured by the bond may be increased by the Minister if he believes it to be insufficient. The costs connected with long-term monitoring or verification arising from the surrender of a licence will not be included in the bond.
Other resource authority holders
The Act reflects many of the principles of Victoria's Petroleum Act 1988, but it makes clear concessions to ensure that the interests of those regulated under that regime and other similar systems will not be adversely affected.
Where CCS injection activities, undertaken in accordance with an exploration permit, 'present a significant risk of contaminating or sterilising other resources in the permit area', operators are required to take 'all reasonable steps' to obtain the consent of any resource authority holders whose resource 'is likely to be contaminated or sterilised'. The Act makes provision for compensation agreements to be made between the competing authority holders; however, there is no obligation for agreements to be reached.
Part 12 of the Act provides detailed rules relating to consents and the compensation of owners of private land. No greenhouse gas sequestration activities may be undertaken without the consent of the land owner and occupier, and the observation of processes required by the Native Title Act 1996. Compensation may be paid to the owners or occupiers of private land, which has been or is likely to be affected by sequestration activities.
The development of secondary legislation
In April 2009, the Department of Primary Industries released a discussion paper entitled 'Greenhouse Gas Geological Sequestration Regulations', which sought responses to various operational issues associated with sequestration activities in the State of Victoria. The Government paper discussed the need for further regulations and provided an overview of areas in which new legislation may be necessary, including fees and rents, information requirements and other miscellaneous matters. The paper also considered the need for development of guidelines to assist industry and the wider community.
The Regulations entered into force in December 2009, with a view to finalising all the relevant material in time for entry into force of the Act in March 2010.