Chapter Four
Provisions for liability
4.1
In requesting the bills be referred to the Economics Committee,
the Selection of Bills Committee specifically referred to a particular concern
that the bills shift liability for leakage of CO2 from geological
storage from the large greenhouse gas emitters to the public.
4.2
The Scrutiny of Bills Committee has also drawn attention to the
provisions that create offences of strict liability.[1]
4.3
The proposed legislation, like the arrangements relating to
petroleum, is silent on the question of long-term liability. Once the
licensee's statutory obligations cease when the closing certificate is issued,
future issues of liability would be in the domain of the common law.
4.4
As the Department of Resources, Energy and Tourism put it:
The bill does not ascribe liability. This is left to common law.
Following the existing offshore petroleum model, the proposed amendments will
neither extinguish nor limit the common-law liability, including long-term
liability, of participants in greenhouse gas projects. Under the contents of
the bill as currently drafted, the Commonwealth will therefore not take over
long-term liability from nor provide any indemnity to project participants in
respect of any liability they may incur.[2]
4.5
The Department argued it would be undesirable to include an
explicit provision for the government to assume long-term liability from the
project participants or provide indemnity to project participants in respect of
any liability they might incur. The Department explained:
...basically, the assumption of liability by the Commonwealth
would be quite contrary to site closure processes as required under activities
otherwise regulated by the Commonwealth. The emphasis in the bill and in the
approach taken to allocating sites for storage has been to minimise the
liability risk all the way through.[3]
4.6
An alternative view, mostly expressed by industry representatives,
was that the government needs to accept long-term liability:
...we would expect that that injector of carbon dioxide would be
required to meet certain standards in the injection process and then also
certain standards in what we would term the closure process. It is our view
that once those standards have been met they should be relieved from the long‑term
obligation on liability. It would be unreasonable for those companies to retain
that liability long term, because we are talking about decades, if not
centuries...unless the government or a statutory body is willing to take on this
obligation, there will not be enough incentive for companies to go in and
undertake these sorts of operations. We believe that it is important to provide
that clarity to encourage companies to go in and undertake this.[4]
...after a suitable period of assessment and with appropriate
monitoring, the liability should return to the state.[5]
...at that point in time that industry, given that it has tenure
and can actually do something about it, has demonstrated to the satisfaction of
government that all is as well as it can be—'risks are as low as reasonably
practicable' is the industry term. We are submitting that at that point
liability would transfer to the Commonwealth.[6]
The failure to transfer post closure liability to the
Commonwealth is an impost on embryonic greenhouse gas storage activities.[7]
WWF submits that the Bill be amended to...provide that upon the
issue of the site closure certificate liability and ownership of the carbon
dioxide pass to the Commonwealth...[but that] the GHG injection operator remains
liable under common law.[8]
...long-term stewardship (and therefore liability) should rest
with a long-term entity such as the State.[9]
4.7
Monash Energy and BP Australia argued the government should
assume responsibility so as to encourage offshore CCS:
The viability of greenhouse gas injection and storage is at an
embryonic stage. The placement of longer term liability with the Commonwealth
should be considered in the context of the public’s interest in the mitigation
of greenhouse gas through offshore storage.[10]
As the Bill is drafted, it asks the GHGS proponent to accept a
liability that is quantified neither in time, scale or scope. The proponent
will weigh this against the alternative liability associated with releasing CO2
to atmosphere and paying the cost of carbon, a liability which can be
immediately quantified and discharged.[11]
4.8
Some submissions made a distinction between demonstration
projects and later commercial projects. Two joint submissions argued that the
government should indemnify demonstration projects against long-term common law
liability.[12]
4.9
The industry position received some support in the recently
published report from the House of Representatives Standing Committee on
Primary Industries and Resources, which recommended:
...that a process for the formal transfer of long tem liability
from a GHG operator to the Government be established within the proposed
legislation, such transfer to be conditional upon strict adherence to
prescribed site closure criteria.[13]
4.10
Some submissions were doubtful about this argument:
It will take time to establish whether this complexity and
ongoing liability will be a disincentive to investment in the scheme and
compromise the efforts to reduce GHG emissions.[14]
4.11
Others clearly rejected the idea of the government assuming the
long-term liability. Greenpeace argued:
This effectively transfers responsibility and liability to the
Commonwealth. This is unacceptable, as the agent responsible for storing the CO2
must be responsible for its long-term monitoring and liable for any adverse
environmental impacts, including failure of the site to effectively store the
CO2.[15]
4.12
Even some who thought government might eventually assume
liability wanted this to be in a distant period:
...given the uncertainty around CO2 storage and the
lack of current demonstration, a fixed time period for monitoring by operators
is necessary to ensure environmental integrity and public confidence...there
would be a minimum 30-year period during which the company is responsible for
monitoring and verification and also holds the liability...common law liability
still remains in place so that, if there is any negligence, companies could
still be sued.[16]
4.13
One senator noted the incongruity of companies being unwilling to
bear a liability they were assuring the community was negligible:
If you are confident that it is not going to leak...why would you
not take liability for it and why would you want to shift that to the
community?[17]
4.14
Whichever way the argument is resolved there were calls for more
clarity. The Australian Network of Environmental Defenders' Offices (ANEDO)
thought the bill should:
...more clearly define the long term liability of operators and
the Commonwealth;[18]
4.15
This call was prompted by their concern that:
Whilst the issuing of a SCC may provide industry with the
confidence to invest in CCS, it simultaneously increases the potential of
public liability. Once a SCC is granted, the recipient is no longer responsible
for the ongoing monitoring, measurement and verification and so provides the
operator with a limitation point for further statutory liability and financial
responsibility...by providing industry such assurances, the Bill establishes a
framework that operates counter to the public interest of ongoing monitoring
and site stability to ensure effective long-term GHG storage...[and] may reduce
incentives for project operators to design and implement projects in a safe and
reliable manner.[19]
4.16
The question of liability is complicated by the fact that
potential liabilities for a carbon storage project run for centuries, far
longer than the lifespans of most companies or the length of insurance
contracts. If the company who had conducted the storage is long gone,
implicitly the liability may be seen to rest with the government. This point
was conceded by the Department:
...the natural progression of time could well mean that there may
be nobody to pursue under common law...the passage of time would inevitably pass
some of that responsibility back to the community in that way, but...It is not a
legislated thing.[20]
4.17
One response to this problem is a suggestion that while the
storage is taking place the company should contribute to a fund which could be
drawn on much later (even after the company no longer exists) in the event that
a problem arises. This could be like a 'bond' tenants provide to a landlord,
relating to a specific project, in which case the return on the assets provided
might be returned to the company. Alternatively, it could take the form of a
contribution to a pooled fund covering many projects, something like insurance,
from which claims could be made in the event of a leak.
4.18
Two environmental groups submitted:
...the Bill should introduce an industry funded, Commonwealth held
trust to ensure funds are available for future remediation works in the event
that the party liable are no longer in existence.[21]
...long-term monitoring, measurement and verification operations
should be paid for from an industry fund accumulated by either a levy, fee on
injection or the sale of carbon credits equal to a (relatively small)
percentage of the CO2 stored in the relevant geological formation.[22]
4.19
This was also supported by the Cooperative Research Centre for
Greenhouse Gas Technologies:
There is clearly a public benefit in mitigating the extent to
which CO2 enters the atmosphere and therefore it may be appropriate
that the Government shares liability with industry proponents; with industry
carrying liability up to the closure/early post closure stage and Government
beyond that point, perhaps with a bond and/or specific closure requirements to
ensure that there will be no major cost on the public purse.[23]
4.20
This would represent a larger scale version of the provision in
the bill (Section 249CZGAA) setting out conditions relating to arrangements for
long-term monitoring which are required before a closing certificate can be
issued. These arrangements include a requirement for the company to lodge a
security that covers the estimated cost of long-term monitoring and other
operations proposed to be carried out by the government. A similar provision is
required in legislation proposed by the Victorian government which:
...requires CCS operators pay to the state the estimated cost of
long-term monitoring and verification prior to the surrender of an injection
title.[24]
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