Alert

Who does this affect?

Energy industry and holders of petroleum tenements.

What do you need to do?

Review the Committee's recommendations and assess how they will affect the application of the CCS Bill to your business.

Authors
James Fahey  
Partner

Lachlan McMurtrie  
Solicitor

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James Fahey  
Partner
T +61 3 9643 4331

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The House of Representatives Standing Committee on Primary Industries and Resources released its Final Report on the Offshore Petroleum (Greenhouse Gas Storage) Amendment Bill exposure draft (the CCS Bill). The Committee made significant recommendations in several areas, particularly in relation to the interaction between CCS and petroleum titles, and the long term liability of CCS operators.

As reported in our previous alert, the CCS Bill adopted several approaches to aspects of the proposed carbon capture and storage regime which were potentially controversial. In particular, the CCS Bill was effectively silent on long-term liability for CCS operators, an issue which many stakeholders viewed as critical to the effective generation of a CCS regime and industry in Australia. Similarly, some stakeholders held concerns that the CCS Bill gave primacy to the rights of petroleum tenement holders in a way which may have inhibited the development of the Australian CCS industry.

The House of Representatives Standing Committee on Primary Industries and Resources (the Committee) has made significant recommendations in relation to these issues and others in its Final Report on the CCS Bill released last Friday, 15 August 2008 (the Final Report). Prior to preparing the Final Report, the Committee held four public hearings and received 31 separate submissions.

The Committee was of the view that the current form of the CCS Bill did not go far enough to facilitate the development of a CCS industry as a potential greenhouse gas (GHG) abatement measure under an emissions trading scheme. Consequently, the majority of their recommendations in the Committee’s Final Report were aimed at promoting investment in, and the uptake of, CCS. The Committee’s key recommendations are that:

• the CCS Bill be amended to allow a GHG assessment permit holder to apply for a single right of renewal up to 3 years in duration to address stakeholder concerns that the initial 6 year term was too short

• the CCS Bill be amended to provide for the development of “integrated petroleum projects” where existing petroleum tenement holders would be permitted to inject CO₂ into a storage formation within a production licence where that CO₂ was derived from outside the production area (Recommendation 8). This would not require existing petroleum production licence holders to enter into a competitive tender process for a GHG title

• the CCS Bill be amended to allow the responsible Commonwealth Minister to direct the relevant parties to negotiate in good faith where there are potential or actual overlapping GHG storage and petroleum titles (for both “pre-” and “post-” commencement titles) and, where no agreement is reached, direct an outcome (Recommendation 9)

• regulations and guidelines be released for comment as a matter of urgency (Recommendation 10)

• incumbent petroleum operators be offered a “one-off” opportunity to incorporate a GHG assessment permit over their exploration or production licence, with the condition that they must demonstrate utilisation of this permit within five years, or surrender it (Recommendation 11)

• further financial incentives, and preferential treatment for GHG acreage allocation, be considered for early movers in the CCS industry (Recommendations 12 and 13)

• the CCS Bill be amended to provide for formal transfer of long term liability from a GHG operator to the Government (Recommendation 14), and

• further strategies and mechanisms for community engagement and consultation be implemented because the Committee is of the view that the acceptance of CCS within the wider community is essential to the industry’s long term viability (Recommendations 17, 18 and 19).

The Government will now consider the Final Report and it seems likely that the CCS Bill will now be amended. The Committee secretariat has stated that it is not yet clear whether stakeholders will be given further opportunity to make submissions in relation to these amendments. The release of the related CCS regulations and guidelines will be keenly anticipated by stakeholders.