Chapter 1
Background to the bill and conduct of the inquiry
1.1
On 18 June 2008, the Minister for Resources and Energy, the Hon
Martin Ferguson MP, introduced the Offshore Petroleum Amendment (Greenhouse Gas
Storage) Bill 2008 into the House of Representatives. As part of the
consultation process associated with the introduction of the bill, the Minister
asked the House of Representatives Standing Committee on Primary Industries and
Resources to conduct an inquiry into the provisions of the draft bill. The Committee
reported on 15 August 2008.[1]
1.2
On 25 June 2008, the Senate referred the provisions of the
Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and three
related bills to the Standing Committee on Economics for report and inquiry.
The committee was asked to report by 16 October 2008.
1.3
In requesting the bills be referred to the Economics Committee, the
Selection of Bills Committee was particularly concerned that the bill shifts
liability for leakage of CO2 from geological storage from the large
greenhouse gas emitters to the public:
The long-term cost of unforseen leakage of carbon dioxide from
geological storage could be very substantial. This legislation shifts the
liability for such leakage from the large greenhouse gas emitters who may use geological
storage, to the public. Given the uncertainty about the permanence of
geological storage the Senate needs to carefully consider these liability
risks.[2]
1.4
On 25 June 2008, the Standing Committee for the Scrutiny of Bills
Committee also raised concerns in respect of the bill. These concerns related
to the failure of the explanatory memorandum to explain adequately the intent
and operation of numerous provisions in the bill. Of particular concern were
the commencement clauses and the provisions that create offences of strict
liability.[3]
1.5
As the House of Representatives Standing Committee on Primary
Industries and Resources' report has already canvassed extensively a range of
issues, this report concentrates on a closer examination of these key issues. The
first chapter provides an outline of the purposes of the bill and discusses the
regulatory framework for greenhouse gas injection and storage in Commonwealth
offshore waters. Chapter 2 provides some background information on the science
and economics of offshore CO2 storage. Chapter 3 investigates the
provisions contained within the bill for regulating the offshore CO2
storage market and Chapter 4 examines the question of liability. The final
chapter of the report provides conclusions and recommendations.
Purpose of the bill
1.6
The bill provides for access and property rights for greenhouse
gas injection and storage activities in Commonwealth offshore waters. It
applies to titles which will be located in the area between the outer limits of
the states' coastal waters (i.e. 3 nautical miles from the shore) and
the outer limit of the continental shelf.[4]
The bill amends the Offshore Petroleum Act 2006 to establish a system of
offshore titles that will authorise the transportation, injection and storage
of greenhouse gas (GHG) substances, principally carbon dioxide (CO2),
in deep geological formations under the seabed.[5]
To achieve this aim, the bill changes the existing regime of petroleum titles
in order to accommodate the new kinds of activity being authorised by the Act. Accordingly,
the legislation seeks to balance the rights of new participants in the industry
with those of the petroleum industry. The legislation also seeks to provide a
regulatory and management system for carbon dioxide to be stored safely and
securely in geological storage formations deep underground in Australian
offshore waters under Commonwealth jurisdiction.
1.7
The bill emerges at a time when Australia looks to lower
substantially its greenhouse gas emissions. As such, it represents one part of
a broader legislative commitment to reducing the impact of climate change, including
legislation related to a proposed carbon emissions trading scheme.
1.8
As a country which obtains 80 per cent of its electricity from
coal-fired power stations and exports somewhere in the vicinity of 30 per cent
of the world's coal, it is incumbent upon Australia to reduce the amount of CO2
it releases into the atmosphere.[6]
Carbon capture and storage (CCS), or geosequestration, may prove an effective
mechanism for significantly reducing Australia's greenhouse gas emissions.
1.9
Along with other mitigation measures, CCS could significantly
reduce the costs of stabilising greenhouse gas concentrations. Potentially, CCS
technology would allow Australia to continue to draw upon its fossil fuels,
which are used for electricity generation and a variety of industrial purposes,
without significant emissions of greenhouse gases into the atmosphere.
1.10
If Australia is to develop its CCS potential, it faces a series
of regulatory, legal, economic and technical changes. The IEA's Carbon
Sequestration Leadership Forum describes the challenge as related to the 4
'Ps':
- Policy: government policies are needed to encourage, not
inhibit CCS deployment e.g. efficient permitting processes; project incentives;
long-term liability for stored CO2;
- Price: a price will have to be established for CO2 if
CCS is to be deployed widely; the cost of CCS will need to come down
significantly;
- Partnerships: arrangements between CO2
producers, transporters, storage providers, host communities and governments to
enable CCS raises challenges. This may require new forms of partnerships;
- Public Acceptance: awareness of CCS is almost
non-existent. Gaining public acceptance is critical to widespread CCs
deployment.[7]
1.11
However, it is not the intent of the proposed legislation to
create drivers for CCS uptake. Rather, the legislation provides an enabling
framework in which greenhouse gas storage may be undertaken.
1.12
The decision to use the Offshore Petroleum Act 2006 (OPA) as
the legislative basis for CCS storage was based on the technical similarities
between petroleum exploration and extraction and GHG storage. The OPA was also
chosen as it was considered a mechanism for managing the interactions between
the two activities within a consistent regulatory framework.
1.13
In evidence to the committee, the Department of Resources, Energy
and Tourism explained why the OPA allows for the establishment of an effective
regulatory framework for greenhouse gas injection and storage:
The framework for our proposed legislation is primarily based on
the carbon dioxide capture and geological storage regulatory guiding principles
endorsed by the Ministerial Council on Mineral and Petroleum Resources in 2005.
Those guiding principles provide nationally agreed upon recommendations on how
to manage critical elements of any carbon capture and storage legal system,
including access and property rights, approvals processes, transport and
financial considerations. It was the ministerial council which endorsed the use
of the Offshore Petroleum Act 2006 as the most appropriate platform on
which to develop this legislation. The reason that this was agreed to is to
allow for the establishment of a consistent, longstanding and effective
framework for greenhouse gas injection and storage activities to ensure that
both the existing petroleum industry and the newly emerging greenhouse gas
injection and storage industry can co-exist.[8]
Nationally consistent legislation
1.14
This pioneering legislation will see Australia the first country
in the world to establish a specific legislative framework for CCS. In its
submission, the Australian Petroleum Production & Exploration Association
suggested the legislation will:
...make Australia one of the first jurisdictions to develop a
comprehensive legislative and regulatory framework for greenhouse gas (ghg)
injection activities.[9]
1.15
ExxonMobil also referred to the pioneering nature of the
legislation:
The vast majority of existing law around ownership and access to
underground resources is based on extractive uses such as oil and gas
production and mining. There is very little law (statutory or case) regarding
ownership of other geologic pore space.[10]
1.16
In observing the current state of legislative and technological
advancement in Australia, the abovementioned IEA Carbon Sequestration
Leadership Forum report claims:
Australia is a leader in the science and technology of
geosequestration and perhaps the most advanced in terms of the legislation. One
of the lessons from current projects is that regulatory trail-blazing is
difficult and time consuming.[11]
1.17
The complexities involved in the establishment for a framework of
nationally consistent legislation are significant, particularly when one
considers the planning, environmental and property law that may be involved in
establishing the pipeline required for large-scale CO2
transportation. Yet, in spite of this complexity, efforts are being made to
establish a nationally consistent approach to infrastructure investment in CO2
transportation.[12]
1.18
While the proposed legislation is concerned with Australian
offshore waters, which are under Commonwealth jurisdiction, the retrieval,
conversion and transport of CO2 may take place in the states and
territories, prior to sequestration.
1.19
In explaining the current status of CCS legislation in Australia,
the Department of Resources, Energy and Tourism explained:
At the moment, the Commonwealth legislation is the first
legislation that has been introduced into a parliament around Australia. Queensland
and Victoria are fairly advanced in their own legislation. South Australia is
amending its Petroleum Act rather than doing stand-alone legislation. But CO2
storage is already allowed in South Australia in existing oil and gas title
areas...We have tried to deal with the potential interactions between the oil
and gas industry and the greenhouse gas storage industry in particular while
acknowledging that there are potential interactions with the fishing industry
in relation to pipelines and the location of wells. But the states will have to
deal with a more complex set of interactions.[13]
Submissions
1.20
The committee advertised the inquiry in the Australian and
on the committee's website from 26 June 2008. It also wrote to a number of
government agencies and organisations alerting them to the inquiry and calling
for submissions to be lodged by 15 August 2008 (later extended to 26 August).
In total, the committee received 15 submissions. A list of submitters is
included in Appendix 1; they are available at: https://www.aph.gov.au/Senate/committee/economics_ctte/offshore_petrol_08/submissions/sublist.htm
Public hearings
1.21
The committee held public hearings in Canberra on 29 August and 1 September 2008 and received evidence from many of those who had made submissions to
the inquiry.
Acknowledgement
1.22
The committee thanks those who made submissions to the inquiry
and those who provided evidence during public hearings in Canberra. The committee
is particularly grateful to the Department of Resources, Energy and Tourism and
Geoscience Australia for providing a technical briefing to committee members
and for the promptness with which they responded to questions placed on notice
at the public hearing.
Navigation: Previous Page | Contents | Next Page