On 14 May 2024, the Petroleum Legislation Amendment Act 2024 (WA) received Royal Assent (the Act).
The substantive provisions of the Act will, on a date yet to be fixed by proclamation, provide the legislative framework for facilitating and regulating greenhouse gas substance (GHG) transport and permanent storage (GHGTS) activities within Western Australia (WA) by amending:
- the Petroleum and Geothermal Energy Resources Act 1967 (WA) (PGERA) and the Petroleum Pipelines Act 1969 (WA) (PPA) to cover GHGTS within WA’s onshore area; and
- Petroleum (Submerged Lands) Act 1982 (WA) (PSLA) to cover GHGTS within WA’s “State waters” area (i.e. within the 3 nautical mile limit of the WA baseline).
Previously, the injection and permanent storage of GHG within WA was only regulated on a project specific basis for the Gorgon Project under the Barrow Island Act 2003 (WA). The commencement of the substantive amendments under the new Act will pave the way for the development of carbon capture and storage (CCS) projects within WA.
In this insight, we set out a broad overview of how the new WA regime will work, key notable aspects that differ from the equivalent Commonwealth regime, and some key considerations for proponents of GHGTS developments within WA.
How will the new legislative regime work?
The WA government has recognised the similarities and synergies - in operations, technologies used, and likely proponents - between the petroleum and emerging GHG storage industries. Accordingly, many of the new provisions relating to GHGTS have been integrated within, and adopt concepts from, the existing WA legislative regime that applies generally to exploration and development of traditional hydrocarbon projects.
The new provisions have also been drafted to mostly harmonise with the equivalent “greenhouse gas storage” related provisions that apply in the Commonwealth offshore area under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) (OPGGSA), in recognition of the possibility of GHGTS projects operating across WA and Commonwealth offshore areas.
The benefit of this harmonisation is that the key pillars of the new WA legislative regime will be relatively familiar to proponents who conduct petroleum (or geothermal) operations under the existing WA petroleum legislation, or GHGTS operations (in the Commonwealth offshore area) under the OPGGSA. This familiarity will extend to the various aspects of the regulatory framework around work program-based acreage releases and the “types” of tenure catering for exploration, retention status and injection activities (GHG Titles).
We have previously discussed the various types of GHG Titles (and their associated rights) under the OPGGSA in our Legal Guide to CCS in Australia. The analogous range of GHG Titles available under the amended PGERA and PSLA, and the function of each, can be broadly conceptualised as follows:
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Importantly, the WA regime will also adopt the OPGGSA’s approach to long-term liability for GHG storage formation, following cessation of injection activities. The PGERA and PSLA will each include a mechanism for the State to provide a “site closing certificate”, following which the State will conduct “monitoring” of the stored GHG and GHG storage formation. At least 15 years post-issue of the site closing certificate, the Minister may declare a “closure assurance period” to have ended, from which point the State will indemnify any current or former injection licence holder against specified liabilities incurred or accrued after that period. However, as we noted in our Legal Guide in the context of the OPGGSA regime (and discuss further below), there is similarly no guarantee that the Minister will make such a declaration, nor any certainty as to when it may be declared.
Notable distinguishing elements of the WA regime
While proponents may be broadly familiar with the key concepts drawn from the WA petroleum legislation & OPGGSA, there are a number of distinguishable features of the new WA legislative regime, including as follows.
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Explanation
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INDIVIDUAL
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Example
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Potential earlier notification of a discovered GHG storage formation
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Both the WA GHGTS regime and OPGGSA include concepts of:
Under the WA regime, holders of a GHG Title must inform the Minister of any potential GHG storage formation, as well as any potential GHG injection site (i.e. any suitable place for any GHG injection well) discovered within the title area. In contrast, the OPGGSA requires a titleholder to inform the Cth Minister after forming a reasonable suspicion that a part of a formation could be an eligible GHG storage formation. In practice, this may occur later - following appraisal activities, when the spatial extent and fundamental suitability determinants of a potential formation have been further assessed. There is also no specific requirement under the OPGGSA for notification of a potential GHG injection site. |
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Limited application period for both a GHG retention lease or injection licence post-declaration of an identified GHG storage formation
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A declaration by the Minister of an identified GHG storage formation ‘starts the clock’ on the 12-18 month application period for holders of a GHG exploration permit or drilling reservation to apply for either a GHG retention lease or injection licence. In contrast, under the OPGGSA a time limit applies only to applications for a GHG holding (analogous to retention) lease – a similar time limit does not apply to an application of an injection licence (i.e. it will practically only be bound by the expiry date of the GHG exploration permit itself). The time limit does not, however, apply to holders of a petroleum retention lease or production licence who seek a declaration ahead of a “priority” application for a GHG retention lease or injection licence – we discuss timing considerations for those holders in Part 3 below. In addition, under the WA regime the eligibility for the grant of a GHG retention lease is narrower, requiring that the applicant is likely to be in a position to carry on GHG injection operations within 10 years (rather than a longer 15 year period under the OPGGSA). |
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Broader ministerial discretion to grant overlapping title
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The Minister will have relatively broader powers to grant “overlapping” petroleum, geothermal and GHG titles over the same block(s). Although the Minister must give one month’s notice to the registered holder of any subsisting title and take into account any matters put forward by that holder before any overlapping title is granted, the Minister’s power to grant is not otherwise expressly constrained. The ‘public interest’ and ‘significant impact’ tests (that practically function to protect an incumbent titleholder’s rights under the OPGGSA) do not formally apply to the Minister’s decision under the WA regime. Any statutory protection of a subsisting titleholder’s rights under the PGERA and PSLA only arises after an overlapping title is granted, by operation of the right to non-interference that currently applies under the WA petroleum legislative regime (and which has now been expanded to similarly apply to GHG Titles). The Department of Energy, Mines, Industry Regulation and Safety (DEMIRS) has, however, indicated that it will be updating its draft guidance note on the “management of subsisting petroleum and geothermal titles” (released for stakeholder consultation in 2023) to include GHG Titles. It appears the note will set out principles relevant to the Minister’s decision, DEMIRS’ process of assessing potential impacts, and how operations will be managed post-grant of title (including imposition of conditions and work program requirements). |
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Potential considerations for WA-based GHGTS projects
Despite some discrete differences, the new WA legislative framework remains broadly harmonised with the OPGGSA’s regulation of GHGTS operations in the Commonwealth offshore area.
This in turn means that a number of areas of potential exposure under the OPGGSA have been replicated in the WA regime, and similarly warrant further consideration by proponents of WA-based GHGTS projects.
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Explanation
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INDIVIDUAL
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Example
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No certainty of State assumption of post-closure liability
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As noted above, whilst the WA legislative framework does include a mechanism for the State to assume post-closure ongoing liability in respect of a GHG storage formation, the State’s assumption of that liability is ultimately at the Minister’s discretion and, even if exercised, is not all encompassing. Similar to the OPGGSA regime, the State has overall discretion as to whether (and when) to assume ongoing liability. Even after the proponent has undertaken and ceased injection operations, complied with the conditions of the GHG injection licence and met legislative requirements, the State will not assume ongoing liability unless the Minister has:
While the WA Government has acknowledged a “common recognition that government will ultimately assume long-term liability”, DEMIRS has also stated that assumption will only occur “when there are no doubts or uncertainties about the stored GHG”. Proponents will be left for at least 20 years (possibly more) to bear the risk and uncertainty of liability not being assumed by the State. Moreover, where the State does assume all encompassing liability, a statutory indemnity will be provided in favour of persons who are or have been the registered holder of the GHG injection licence against liability for damages that:
Requirement (c) is particularly significant, as it reserves the State’s ability to narrow the indemnity by prescribing additional conditions in the regulations. |
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Uncertainty regarding coordinated development of adjacent GHG titles
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The Minister may only declare a part of a formation to be an identified GHG formation if satisfied (among other things) that the part is wholly situated within the title area. As a result, despite the holder of a GHG exploration permit or drilling permit discovering and appraising an eligible GHG storage area, if the formation extends beyond the title area the holder will be unable to apply for a declaration of identified GHG formation, and by extension, a GHG retention lease or injection licence in relation to that formation. Given there is no mechanism to expand a GHG title once granted, the State’s process of initially identifying and selecting blocks for acreage release takes increased significance. This risk is more acute under the WA regime, which (unlike the OPGGSA) does not contain provisions allowing for “consolidation” of adjacent GHG exploration permits. Similarly, a GHG injection licence only authorises injection of a GHG substance into an identified GHG storage formation that is wholly situated in the title area. This represents the same position as in the OPGGSA and so, on the face of things, there similarly remains a question as to how the regime would respond in circumstances where an injected GHG substance migrates across a geological formation straddling two GHG Titles, noting that neither the new WA regime nor the OPGGSA includes provisions allowing for “co-development” or “unitisation” of a GHG storage formation. If the formation straddles Commonwealth-WA jurisdiction, it may be possible to apply for a cross-border title under the OPGGSA. |
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Petroleum project proponents and eligibility for priority application pathway for proposed acreage releases
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Consistent with the OPGGSA regime, both the PGERA and PSLA provide a “priority” pathway for holders of any petroleum retention lease or production licence to apply for a GHG retention lease or GHG injection licence ahead of a proposed acreage release by the State. However, to be eligible, the applicable petroleum lessee or licensee must be “entitled to apply” for such grant at the time the Minister proposes the acreage release, and make such an application within a time frame as short as 60 days. Practically, this would mean that petroleum lessees and licensees seeking to utilise the priority application pathway should consider being proactive, and consider seeking a declaration of identified GHG storage formation in advance of a proposed acreage release, so as to be in a position to lodge an application for a GHG retention lease or GHG injection licence within a 60 day timeframe. This may, however, be difficult, given that neither a petroleum retention lease nor petroleum production licence permits exploration for GHG storage formations. In this respect, DEMIRS have taken the view that the necessary data and geological information required to support any “priority” application by a petroleum lessee or licensee will need to be obtained through permitted petroleum operations. |
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Potential future regulations for specialised third party access regime
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Both the PGERA and PSLA (as amended) similarly adopt a provision from the OPGGSA, which allows regulations to be made to “establish a regime for third party access to services provided by means of the use of identified GHG storage formations” and wells, equipment or structures for use in injecting GHG. The Explanatory Memorandum for the predecessor bill to the OPGGSA explained that the equivalent provision (as it appears in the OPGGSA) is aimed at facilitating a specialised third party access regime in a circumstance where the compulsory third party access regime (pursuant to Part IIIA of the former Trade Practices Act 1974 (Cth), now the Competition and Consumer Act 2010 (Cth)) did not apply to GHG storage formations. Such a regime has not yet been implemented under the OPGGSA and so the new WA regime, by also contemplating that such regulations could be made, similarly leaves the door ajar. From a practical perspective, the prospect of third party access and use of a GHG storage formation where capacity in that formation is a “finite” resource could present a potential regulatory risk exposure that may need to be considered by proponents of a GHGTS project. |
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Position on ownership of GHG substances unclear
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As is the case with the OPGGSA, the WA regime is similarly silent on ownership of injected GHG substances (as between the State and the applicable GHG titleholder). While this allows proponents the greatest contractual freedom to regulate the ownership position opposite their respective customers under applicable commercial agreements, the lack of legislative prescription does create some uncertainty as to the allocation of liability in cases of leakage, as between current/former titleholders, the State (who, under the PGERA, own the storage formation itself) and customers. DEMIRS have stated that “while not explicitly stated, the transfer of liability to the WA Government (following any closure assurance period - see above) includes the “ownership’ of the stored GHG”. Of course, the proper interpretation of the legislation will be the determinative factor. |
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What to keep an eye out for?
Updated regulations, guidelines and CO2 Geological Storage Atlas
WA Parliament has indicated that DEMIRS have commenced work and industry engagement on:
- developing new GHGTS regulations, broadening the existing Petroleum Environment and Resource Management and Administration Regulations to include GHG operations (including decommissioning requirements), and releasing supporting guidelines (which will be modelled on the equivalent Commonwealth regulations and guidelines); and
- developing a new WA Carbon Dioxide Geological Storage Atlas that will provide government and industry with a clearer understanding of an area’s potential for the permanent sequestration of CO2 by providing new reservoir data (featuring new geographic areas like State Waters and the Officer Basin, new stratigraphic intervals and depth maps, and reservoir and seal information from wireline logs).
It remains to be seen whether the regulations and guidelines will clarify several areas of the Act left open to be prescribed by associated regulations, including:
- what constitutes a ‘primary GHG gas’, in addition to CO2 (though Parliament has indicated this regulation-making power is not expected to be used until such time as the protocol to the London Convention is amended to permit geological storage of other GHGs);
- how industry may nominate areas to be included in acreage releases;
- how often acreage releases will be made (Parliament has indicated the current intention is “about once a year”);
- the methodology, assumptions and levels of probability required to properly estimate the “special extent” of a storage formation;
- any further conditions on the damages against which the State will indemnify proponents;
- the form of any site plan required to carry out operations under a GHG injection licence (which is expected to operate like a field management plan - informing the Minister of known geological attributes of the storage formation, current and proposed injection operations, results of ongoing monitoring and predictions of GHG substance behaviour); and
- any further information required to apply for a declaration of identified GHG storage formation and a site closing certificate.
Regulation of upstream capture
The WA legislative regime does not regulate the capture of GHG substances. The starting point for coverage by the Act’s amendments to the PPA is the “terminal station” or “terminal point” where the GHG substance is put into the pipeline for transportation to a site for injection. It also does not address other forms of transport of GHG substances, such as by ship, road or rail.
While the scope of the WA GHGTS regime is consistent with other Australian jurisdictions, it remains to be seen if and how the WA Government will regulate such capture and alternative transportation.
Date of proclamation
Parliament have indicated that the substantive provisions of the Act will only commence once regulations are in place – watch this space!
Further legislative action
DEMIRS have indicated that the PGERA, PSLA and PPA may be amended further in the future, to incorporate:
- ‘cross-boundary’ provisions as contained in the OPGGSA, to facilitate titles extending between WA and Commonwealth jurisdiction; and
- an enhanced framework for decommissioning of petroleum, geothermal and GHG titles, which may reflect the ‘trailing liability’ regime which was adopted in the OPGGSA on 2 March 2022.
It also remains to be seen whether the Commonwealth will declare the PSLA to be a ‘compatible cross-boundary law’ for the purposes of the OPGGSA (thus allowing for cross-boundary titles stretching into WA jurisdiction to be granted under the OPGGSA).
DEMIRS have also noted that the WA GHGTS regime aligns with the OPGGSA in being silent on specifying the source of CO2 for injection operations, and therefore does not preclude cross-jurisdictional GHGTS projects. However, further amendments will be required to Commonwealth and WA legislation to facilitate such import and export of CO2.
Disclaimer: This alert is provided for general information purposes only and does not constitute legal advice.
