Bills Digest no. 26 2008–09
Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date introduced:
18 June 2008
House:
House of Representatives
Portfolio:
Resource, Energy and Tourism
Commencement:
There are a large number of different commencement
dates for various provisions of the Bill, and these are detailed in clause
2 of the Bill. However, Schedule 1, which is the focus of this Digest,
will commence the day after Royal Assent.[1]
Links:
The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills
have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
This Bills
Digest does not take the House of Representatives amendments into account.
The Offshore Petroleum Amendment (Greenhouse
Gas Storage) Bill 2008 (the Bill) amends the Offshore Petroleum Act
2006 (the Act) to create a legislative regime for the potential geosequestration
of greenhouse gases in suitable geological formations in the seabed under
Commonwealth waters.[2] In particular, the Bill regulates:
- the exploration, assessment and testing of geological formations
and the transportation to, and storage of greenhouse gases in, such
formations, and
- potential conflicts between current and future offshore petroleum
operations and titles and current and future geosequestration operations
and titles.
Please note that an explanation of the science and technology
behind geosequestration is in Appendix 1 of this Digest.
In 2003, Australia became a founding member of the Carbon
Sequestration Leadership Forum (the CSLR), which was an international
group of governments, non government organisations, industry and researchers
collaborating on carbon capture and storage (CCS).[3]
In 2005, the Ministerial Council on Mineral and Petroleum
Resources (the MCMPR) endorsed a set of regulatory principles relating
to CCS in Australia[4] and
according to the Government:
The aim of the Regulatory Guiding Principles was to
achieve a nationally-consistent framework for CCS activities in each
Australian jurisdiction.
Six key issues were seen as fundamental to a CCS regulatory
framework:
assessment and approvals processes
access and property rights
transportation issues
monitoring and verification
liability and post-closure responsibilities
financial issues.[5]
In August 2007, the House of Representatives Standing
Committee on Science and Innovation (the Science and Innovation Committee)
published a report from its inquiry into the science and economics of
CCS.[6] The Science and Innovation Committee concluded
that CCS technology would potentially be important in the global effort
to reduce carbon dioxide emissions.[7]
In order to realise that potential, the Science and Innovation Committee
emphasised the importance of encouraging investor confidence in undertaking
large scale CCS activities and recommended that Commonwealth, State and
Territory governments should develop appropriate legislative and regulatory
CCS frameworks.[8]
Following consultation with industry stakeholders,[9] it was decided that the Act would
be the most appropriate means of implementing a greenhouse gas storage
regime in offshore areas.[10] This decision was made on the basis of a belief
that the longstanding petroleum and emerging greenhouse gas storage industries
have similarities and would be able to co-exist in offshore areas.[11]
Greenhouse gas storage or CCS is administered by the
Department of Resources, Energy and Tourism (DRET).[12] According to DRET:
CCS is one of many options which the Australian Government
is pursuing to help Australia and the world reduce greenhouse gas emissions.
The Australian Government is committed to developing these technologies
within both the domestic and international spheres.[13]
The Act replaced the Petroleum
(Submerged Lands) Act 1967 (the PSLA), which had been the primary
Commonwealth legislation for the administration of Australia's offshore
petroleum resources for almost 40 years and, through age and many amendments,
had become complex and unwieldy.[14]
The PSLA and associated Acts
provided the legal framework within which petroleum exploration, development
and production activity occurred in Australia beyond the State coastal
waters,[15] setting out
a basic framework of rights, entitlements and responsibilities of Government
and industry.[16]
The Act was not intended
to introduce any major policy or legal changes to regulatory arrangements
existing at the time.[17]
The Exposure Draft of the Bill was referred to the House
of Representatives Standing Committee on Primary Industries and Resources
on 19 May 2008 for inquiry and report. The Committee’s Report[18] was tabled on 15 August 2008
and its major recommendations are listed in Appendix 1 of this Digest.
Submissions were made to the House of Representatives
Standing Committee on Primary Industries and Resources in relation to
its Exposure Draft inquiry.[19]
In general, the submissions expressed the following concerns
about the Exposure Draft:
- there are disincentives to future investment in greenhouse gas storage
due to uncertainty of risk created by:
- unequal access to existing acreages due to factors such as the
alleged power of veto by pre-existing petroleum title holders
- insufficient protection of greenhouse gas titles once obtained,
and
- potential long term liability of greenhouse gas title holders
and failure of the Government to assume such liability
- insufficient definitions of ‘serious risk’ and ‘serious adverse impact’
results in inability of stakeholders to fully understand on what basis
the Minister would be making decisions regarding matters such as release
of acreages and protection of titles
- there is insufficient information about how public interest considerations
will be accommodated by the Bill
- a lack of proper consultation regarding the Bill — much of the detail
of how the greenhouse gas storage regime would operate has been left
to regulations that have not yet been made — some stakeholders have
said that they do not have sufficient information to make informed opinions
about the Bill
- expansive discretionary powers of the Minister
- insufficient information as to whether, and if so how, the Minister
would use industry expertise when making decisions under the Bill, and
- lack of clarity regarding the extent of consultations that may be
undertaken under the Bill.
It has been stated that there is very little difference
between the Exposure Draft to the Bill and the Bill.[20]
Consequently, the concerns expressed in those submissions would be equally
relevant to the Bill.
Details of the inquiry into the Exposure Draft can be
found at:
http://www.aph.gov.au/house/committee/pir/exposuredraft/index.htm.
The Bill itself was referred to the Senate Standing Committee
on Economics for inquiry and the
report was tabled on 23 September 2008 (the Bill Inquiry).
To date there have been 15 submissions to this current
inquiry on the Bill, many of whom had made submissions to the House of
Representatives Committee Inquiry. There are 13 agencies that have made
submissions to both inquiries.[21]
Details of the inquiry into the Bill can be found at:
http://www.aph.gov.au/senate/committee/economics_ctte/offshore_petrol_08/info.htm.
In addition, the Bill was reviewed by the Senate Standing
Committee on the Scrutiny of Bills (the Scrutiny of Bills Committee) and
was reported upon in the Alert
Digest published 25 June 2008.[22] Some of the concerns expressed by the Scrutiny of Bills Committee
will be discussed in the Main Provisions section of this Digest.
There are number of international instruments of general
application to which Australian is a Party that place restrictions and
conditions on the use of the seabed and subsoil within our claimable continental
shelf. These include United Nations Convention on the Law of the Sea
1982 (UNCLOS) and various regional agreements. However, the most directly
relevant instruments are the Convention on the Prevention of Marine Pollution
by Dumping Wastes and Other Matter 1972 (London Convention)[23] and the Protocol to the London
Convention 1996 (London Protocol).[24]
Australia is a Party to both instruments.
The London Convention and the London Protocol control
and regulate the deliberate disposal of wastes at sea and are intended
to:
prevent the indiscriminate disposal at sea of materials
and wastes that may be harmful to human health, living resources and
marine life, or which may damage amenities, or interfere with other
legitimate uses of the sea.[25]
However, while the London Convention regulates dumping,
the London Protocol ‘seeks to prevent, reduce, and where practicable eliminate
pollution, and adopts the precautionary approach as a general obligation’.[26]
Both the London Convention and the London Protocol define
dumping as:
any deliberate disposal at sea of wastes or other
matter from vessels, aircraft, platforms or other man-made structures
at sea.[27]
It is unclear whether this definition will include pipeline
discharges direct from land-based sources. It has also been suggested
that the transportation of CO2 by pipeline from a land-based
course direct to sub-sea repositories will not breach international law
because the Protocol ‘does not extend to sub-seabed repositories accessed
only from land’.[28]
Parties to both the London Convention and the London
Protocol are encouraged to create regional agreements that further their
objectives. An example of this is the Convention for the Protection
of the Marine Environment of the North-East Atlantic 1992 (see below).[29]
The London Convention has been ratified by 82 parties,
including Australia.[30]
The London Convention prohibits ocean dumping of wastes
and other matters listed in Annex I (CO2 is not included),
but permits the dumping of materials listed in Annex II if a permit is
issued by the country doing the dumping. Annex III lists the factors that
must be considered before issuing a permit.[31]
The London Protocol commenced on 24 March 2006 and replaces
the 1972 London Convention for the 38 countries that have ratified the
Protocol (of which Australia is one). The 2006 amendments to the Protocol
to the London Convention specifically relating to the storage of CO2
under the seabed commenced on 10 February 2007.
The London Protocol adopts a stricter legal framework
for preventing ocean waste disposal than the London Convention, placing
a general prohibition on the dumping of wastes, except for those wastes
or matter listed in Annex 1.[32]
The London Protocol also adopts the precautionary principle — if an action
or policy might cause severe harm to the public or the environment, the
proponents of that action must prove it safe rather than its opponents
prove it unsafe.[33]
From 10 February 2007, amendments to the Protocol now
allow storage of CO2 under the seabed.[34] Australia, as a party to the Protocol (along with France, Norway
and the United Kingdom) proposed an amendment which changed Annex 1 to
the Protocol to allow for the sequestration of captured carbon dioxide
streams into sub-seabed geological formations.
Following the 2007 amendments, Annex 1 now includes carbon
dioxide streams from carbon dioxide capture processes for sequestration
as an exception to the general prohibition on dumping.[35] Carbon dioxide streams may only be stored if
they meet the following three criteria:
- Disposal is into a sub-seabed geological formation; and
- They consist overwhelmingly of carbon dioxide. They may contain incidental
associated substances derived from source material and the capture and
sequestration processes used; and
- No wastes or other matter are added for the purpose of disposing of
those wastes or other matter.[36]
Following the 2007 amendments to the London Protocol,
Guidelines
for sub-seabed geological sequestration of carbon dioxide were agreed
to at the second meeting of the contracting parties in November 2007.[37]
The OSPAR Convention[38] is the current instrument guiding international cooperation
on the protection of the marine environment in the North-East Atlantic.
While this Convention is not relevant to carbon capture and storage off
the coast of Australia, it underwent amendments in 2007 to allow the storage
of CO2 in geological formations under the seabed, thereby contributing
to the international jurisprudence relating to carbon capture and storage.
According to the Government, greenhouse gas title holders
would incur compliance costs that are similar to those incurred by petroleum
title holders.[39] However,
the Government admits that it cannot quantify those costs in the absence
of details in regulations and guidelines, which are yet to be published.[40]
The Government states that:
Many of the requirements of the regulator are costly
but not additional to work which would be carried out by titleholders
as a routine part of designing and executing and managing an offshore
geosequestration operation…
As long as administration is directed towards minimal
duplication and consistency of requirements, as is done in offshore
petroleum, there should be no undue burden to preparing submissions
for the regulator.[41]
The House of Representatives Standing Committee on Science
and Innovation Committee looked at the economic costs of CCS and concluded
that:
The predicted actual costs of implementing CCS technology
also vary.[42]
…
There is also the question of what impact CCS deployment
will have on electricity costs. Clean energy comes at a price but in
the case of CCS, the size of a price increase is not clear.[43]
…
At this stage, it is extremely difficult to accurately
estimate the costs of CCS. The cost estimates for CCS that are made
are marked by very wide variations.[44]
Increased electricity costs have also been predicted
by others.[45]
Of primary concern is that, contrary to the stated aims
of the Bill,[46] it is
argued that a greenhouse gas storage regime, as proposed, creates a significant
disincentive to invest in greenhouse gas storage operations.
Such a disincentive to invest derives largely from the
uncertainty of future rights, obligations, costs and liability created
by proposed provisions in the Bill.
Greenhouse gas storage operations involve new and developing,
knowledge and technology and the general consensus is that such operations
would be extremely expensive. Stakeholders generally submit that greenhouse
gas storage proponents would be disinclined to invest such large amounts
of money into operations if the prospect of receiving profitable returns
is uncertain.[47]
Uncertainty generally relates to the themes, which are
outlined below and discussed in more detail in the Main Provisions section
of this Digest.
As mentioned above, the offshore petroleum and proposed
greenhouse gas storage industries are closely linked, hence the decision
by the Commonwealth that both industries should be regulated by the same
Act.
However, as it has been pointed out, there are differences
between the offshore petroleum and greenhouse gas storage industries,
which must be considered.[48] Consequently, the challenge with proposed provisions
in the Bill is how to mesh the new greenhouse gas storage industry with
the existing petroleum industry framework and to manage the synergies
of these competing industries without diminishing or destroying the momentum
of either industry.
As the Standing Committee of Primary Industries and Resources
stated:
The need for the co-existence of petroleum and GHG
storage activities became very clear to the Committee during our deliberations.
Both endeavours are in the national interest, and certain key locations
in Australia’s offshore waters are prime sites for both activities.[49]
The issue of how the proposed greenhouse gas storage
regime intersects with the existing petroleum framework, and, in particular,
how it deals with potential conflict between competing uses, is a key
theme in the main provisions part of the Digest.
Access to data - differing views exist about the perceived
imbalance in the availability of data to existing petroleum titleholders
and to new greenhouse gas titleholders. Some consider access to data a
major obstacle to the development of offshore storage and when submitting
work bids for acreage release.[50] Others consider these comments are misguided
suggesting that there is sufficient publicly available data to meet the
needs of both greenhouse gas and petroleum operators in identifying potential
storage sites.[51]
Protection of petroleum titles - pre-commencement petroleum
titles[52] are protected
and petroleum titleholders virtually have a right of veto over greenhouse
gas operations through the application of ‘impact’ tests and ‘public interest’
tests. Proposed subsections 249CZC(1) and (3) allows the
Minister to issue a direction to:
- eliminate any risk of significant adverse impact under a greenhouse
gas injection licence,
- suspend for a period or indefinitely any or all of the rights rights
conferred under a greenhouse gas injection licence, and
- cancel the licence.
The Bill allows for overlapping titles but stakeholders
are concerned at the lack of transparency in bidding for acreage releases,
the subjective nature of the criteria[53] and lack of certainty in relation
to post-commencement declared exploration permits, retention leases and
production licences which requires Commonwealth ministerial approval to
carry on key petroleum operations.
The Bill makes little provision for mechanisms to consult
on State or Territory interests in relation to cross-jurisdictional issues
should they arise.[54] Given that greenhouse gas injection and storage
projects regulated by the Bill will take place within the Commonwealth
jurisdiction, any need to consult on State/Territory interests was viewed
by the Government as being addressed through more formal avenues such
as the MCMPR and its subcommittees and other consultative forums.[55]
Applications for pipeline licences are made to the Joint Authority (comprising
the responsible State Minister and the responsible Commonwealth Minister)
but the licence is conditional on approval by the Joint Authority of the
greenhouse gas substance to be transported in that pipeline. The Commonwealth
Minister can however direct the Joint Authority in relation to a decision
it has made in approving or refusing a greenhouse gas substance to be
conveyed by pipeline.
Proposed provisions of the Bill have been criticised
for providing for only limited consultation regarding what are largely
discretionary ministerial decisions made and actions performed with respect
to various aspects of greenhouse gas storage operations.[56]
As the greenhouse gas storage industry is a relatively
new and emerging industry, limited provision for consultative processes
creates uncertainty particularly with respect to future rights of greenhouse
gas storage proponents, as well as the technological and knowledge base
development of the industry.
There is consensus that greenhouse gas storage operations,
such as exploration activities, appraisal drilling, and construction of
infrastructure, could potentially impact the environment.[57]
The Bill contains several requirements aimed at environmental
protection and conservation.[58]
However, it is argued that these proposals do not go
far enough in environmental protection and conservation, thereby contributing
to uncertainty regarding greenhouse gas storage proponents’ future obligations
and thereby, future costs.[59]
Although it is recognised that adverse impacts associated
with greenhouse gas storage operations may not arise or be known until
many years into the future,[60]
there is no proposed provision in the Bill expressly transferring liability
to the Government once a greenhouse gas storage site is closed.[61]
Under the Bill, the Minister has expansive discretionary
power to make certain decisions and take certain action, in some cases,
without provision for mandatory criteria that the Minister must consider
when using his or her discretion.[62]
This does not reflect transparency in ministerial decision
making, creating uncertainty for greenhouse gas storage proponents with
respect to their rights, obligations and liabilities.
This is exacerbated by the lack of express provision
in the Bill for the establishment of and/or reliance on panels or committees
with appropriate expertise to advise the Minister.[63] It is noted that the lack of express provision for the use of
experts in the Bill is not necessarily unusual and that, in such circumstances,
it is common practice for the Government to rely on experts in the relevant
area. However, given that greenhouse gas storage is a new and emerging
industry and that industry stakeholders have clearly expressed their interest
in and concern for reliable and appropriate expert advice being relied
upon in developing this new industry,[64]
the Government may consider providing an explanation for its position
regarding the use of expert advice.
While the Bill does propose some rights of appeal, these
rights are limited largely to judicial as opposed to merits review of
ministerial decisions and actions.[65]
It is arguable that, in the context of the sort of decisions
being made, judicial review is the norm. For example, this is the case
with most major decisions under the Environment Protection and Biodiversity
Conservation Act 1999 (the EPBC Act).
However, some stakeholders take the view the limited
appeal rights further exacerbate the lack of transparency in ministerial
decision making and ensuing uncertainty for greenhouse gas storage proponents
as mentioned above.[66]
Many of the details of the proposed provisions in the
Bill are to be found in, as yet, unpublished regulations. Consequently,
stakeholders would not have sufficient information with which they can
properly be consulted with regarding the Bill. This is a source of great
uncertainty for stakeholders.[67]
Due to the comprehensive explanation of proposed amendments
in the Bill by the
Explanatory Memorandum to the Bill, this Digest will only deal with
the proposed amendments in Schedule 1 of the Bill and will do so according
to issues rather than by item numbers.[68]
In addition, this Digest does not purport to cover all
issues relating to nor all proposed amendments in the Bill.
The current range of petroleum titles will link closely
with the proposed greenhouse gas titles. The following briefly summarises
the range of petroleum titles.
A petroleum exploration permit is granted by the
Joint Authority (relevant State Minister and the Australian Government
Minister) for a period of six years, with a renewal period of five years.
An exploration permit can be extended if the permittee applies for a retention
lease or a production licence (Part 2.1 and Part 2.2 of the Act). When
petroleum is discovered the holder of the permit must notify authorities
of its discovery and then apply for either a retention lease or
a production licence.
A retention lease allows explorers to retain tenure
over discoveries until they become commercial. The lease is issued for
five years with a renewal period of five years (Part 2.3 of the Act).
The criteria to be satisfied when applying for a retention lease is that
it is not commercially viable at the time of the application but the block
is likely to become commercially viable within 15 years.
A production licence is issued for an indefinite
period (Part 2.4 of the Act).
An infrastructure licence (Part 2.5 of the Act)
is issued to enable the construction of offshore facilities for the storage
and processing of petroleum and for facilities for the recovery of petroleum
in areas outside a production licence.
A pipeline licence (Part 2.6 of the Act) is issued
to transport petroleum and is granted for an indefinite period. However
the licence is terminated if no construction occurs or the licence is
not used for a continuous period of at least five years.
Item 125 of the Bill proposes to amend existing
section 137 of the Act to prohibit a petroleum production licensee
to either inject or store a substance in a geological formation permanently
or otherwise. It is the intention of the Government to:
preserve pre-existing rights of the petroleum industry
as far as is practicable to minimise sovereign risk[69] to existing title-holders’ investment
in Australia’s offshore resources.[70]
However, certain stakeholders have submitted that this
provision restricts the rights that petroleum production licensees currently
have under section 137. Woodside Energy Ltd comment that “in practice,
this had included the authority to dispose of gas via re-injection into
the production licence area and to inject gas as a means of enhanced oil
recovery or enhanced gas recovery”.[71]
The Act, as amended by the Bill, would continue
to apply only in the Commonwealth offshore jurisdiction – not within State
or Territory Coastal waters.[72]
The new greenhouse gas titles, to be created by proposed
Chapter 2A, generally correspond to ‘equivalent’ petroleum titles
in the Act (titles in parentheses are the equivalent petroleum
title).
Proposed sections 249AC-249AS relate to the application
for and grant of assessment permits which enable the holder to explore
for greenhouse gas injection and storage sites. The rights and conditions
under which these permits operate are contained in proposed sections
249AD and 249AE. The permit is granted for six years
(proposed section 249AH), although an extension is available
if the permit holder applies for a declaration of a ‘greenhouse gas storage
formation’ (proposed section 249AHA).
Proposed sections 249BB-249BS relate to the
application for and grant of greenhouse gas holding leases. These
enable the lessee to explore the lease area for potential storage formations
and injection sites; and to inject and store substances to determine the
suitability of sites. Conditions relating to greenhouse gas holding leases
are found in proposed section 249BC. The criteria that apply
to holding leases are that an identified greenhouse gas storage formation
exists in the lease area and that the applicant is not able to commence
operations immediately but is likely to be able do so within 15 years
(proposed sections 249BI, 249BO, 249BU). The duration of a greenhouse
gas holding lease is five years. A greenhouse gas holding lease cannot
be extended more than once (proposed section 249BT). However
it can be extended if the lessee applies for a special greenhouse gas
holding lease (see discussion on next page) or a greenhouse gas injection
licence. A special greenhouse gas holding lease remains in force indefinitely
(proposed subsection 249BF(2)). This enables the lessee to retain
tenure over a block or blocks until petroleum operations are completed.[73]
The Minister must take account of the following matters
when considering an application from a greenhouse gas holding lessee to
carry out key greenhouse gas operations:
- the potential impacts that could affect existing and future petroleum
exploration or recovery operations under existing or future petroleum
titles such as an exploration permits, retention leases or production
licences — this applies to pre-commencement and post-commencement petroleum
titles (proposed subsection 249BD(4))
- if the Minister considers that there is a significant risk of significant
adverse impacts, the Minister must take into account any written agreements
that may exist between the petroleum title holder and the greenhouse
gas applicant (proposed subsection 249BD(5)) — a similar provision
relates to future petroleum titles over the blocks (proposed subsection
249BD(6))[74]
- the composition of any substance being injected or stored ( proposed
subsection 249BD(7))
- the Minister must have regard to the public interest[75]
(proposed subsection 249BD(8)) , however
- if the Commonwealth Minister is satisfied that there is significant
risk that the key greenhouse gas operations will have a significant
adverse impact on petroleum exploration or recovery operations being
carried out under either, an existing pre-commencement petroleum title
or post commencement production licence, held by someone other than
the applicant , the Minister must not approve those greenhouse gas operations
unless the holder of a pre-commencement or post commencement petroleum
title holder has agreed in writing to the greenhouse gas operations
being carried out and the Minister is satisfied with that arrangement
(proposed subsection 249BD(11)).
A greenhouse gas injection licence authorises greenhouse
gas injection and storage activities of greenhouse gas substances into
identified greenhouse gas storage formations within the licensed area.
A greenhouse gas assessment permit holder, a greenhouse gas holding lessee
and a production licensee may apply for an injection licence (proposed
sections 249CH and 249CQ). As part of the process for applying
for an injection licence, the applicant must submit draft site plans to
the Minister. The draft site plan (see below) forms the basis of the information
that flows between the injection licensee and the Commonwealth Minister
(proposed subsection 249CH(9)).
A greenhouse gas injection licence remains in force indefinitely,
depending on the time it takes for the project to be completed (proposed
section 249CF). However, an injection licence will be terminated if
no injection operations have been carried on for five years (proposed
section 249CG).
The Bill does not specify what information is to be included
in a site plan. The Explanatory Memorandum states that matters to be covered
by the site plan will be contained in the regulations and be modelled
on the existing ‘objective based’ regulations under the Act, for example
the Petroleum (Submerged Lands) (Management of Safety on Offshore Facilities)
Regulations 1996.[76]
The site plan will contain details of:
- the geological attributes and features of the greenhouse gas storage
formation
- current and proposed injection and storage operations
- the operations and techniques to be used by the licensee to monitor
and verify the behaviour of the greenhouse gas over the life of the
project
- operations management systems, including processes for identification,
assessment and management of risks, and
- predictions as to the short, medium and long term behaviour and fate
of the greenhouse gas in the identified storage formation and associated
geological formations.[77]
The site plan will be required by the regulations to
be updated both periodically and whenever there is a material change in
the level and kind of risk.[78]
The Bill proposes certain protections for pre-commencement
and post commencement petroleum titles.
Pre-commencement petroleum titles are titles granted
under the Act, prior to the commencement of the Bill.
Post commencement petroleum titles are defined in proposed
section 6 as including a post-commencement exploration permit, retention
lease and production licence.
In proposed subsection 249CZC(1), where a greenhouse
gas injection licence area overlaps with an area covered by certain pre-commencement
petroleum titles in which petroleum is discovered, the Minister must,
with written notice, suspend rights conferred by the greenhouse gas injection
licence; or cancel the greenhouse gas injection licence; or give directions
to the greenhouse gas injection licence holder to take certain steps to
eliminate risk if the Minister is satisfied that:
- the recovery of petroleum either is, or is likely to become, commercially
viable
- there is a significant risk the greenhouse gas injection licence operations
will have a significant adverse impact on either the recovery of the
petroleum or the commercial viability of such recovery[79]
- it is practicable to eliminate the risk, and
- the relevant petroleum title holder has not agreed in writing to the
greenhouse gas injection licence operations being carried out.
A similar provision is proposed by subsection 249CZC(3)
in relation to mitigating, managing or remediating risk in such situations.
This provision is aimed at protecting pre-commencement
petroleum rights,[80]
which has been a particularly contentious part of the Bill.[81]
Some stakeholders have argued that proposed subsections
249CZC(1) and 249CZC(3) effectively give a right of veto to
pre-commencement petroleum title holders, which could affect competition,
being unfairly advantageous to large petroleum companies, because some
of the most suitable greenhouse gas storage sites would be located in
areas where petroleum is being recovered, thereby limiting access to suitable
storage areas.[82] Other stakeholders argue that
protecting pre-commencement petroleum title rights is important.[83]
However, it is noted that in both of those proposed provisions,
the actual power to suspend or cancel greenhouse gas titles, in the absence
of consent by the relevant petroleum title holder, lies with the Minister.
It is also pointed out that at the injection and storage
stage of the greenhouse gas operations, the greenhouse gas title holder
would have already invested large amounts of money. The proposed provisions
create uncertainty of title for greenhouse gas title holders who would
suffer very substantial detriment or loss of their investment if the Minister
cancels or suspends the injection of greenhouse gas.[84]
Proposed subsection 442D(1) provides that, where
the operation of the Act or regulations would result in an acquisition
of property from a person otherwise than on just terms, the Government
must pay a reasonable amount of compensation for that acquisition of property.[85]
Section 51(xxxi) of the Constitution provides that:
The Parliament shall, subject to this Constitution,
have power to make laws for the peace, order, and good government of
the Commonwealth with respect to:
…
the acquisition of property on just terms from any
State or person for any purpose in respect of which the Parliament has
power to make laws;
Section 51(xxxi) effectively ensures that all Commonwealth
laws relating to the acquisition of property must provide ‘just terms’
to people whose property has been compulsorily acquired.[86] Such laws failing to provide as such would
be invalid.
The question of whether the Bill proposes a right of
compensation to greenhouse gas title holders who lose their investment
if the Minister cancels or suspends the injection of greenhouse gas includes
consideration of whether:
- there is ‘property’
- the cancelling or suspension of the operations is deemed to be the
acquisition of property, and
- it is an acquisition of property other than on just terms.[87]
The majority of the High Court has stated that:
It is well established that s 51(xxxi) of the
Constitution is concerned with matters of substance rather than form
and that "acquisition" and "property" are to be
construed liberally.[88]
It has been argued that the primary question in determining
whether there has been an acquisition is whether the statutory right was
‘inherently susceptible to statutory modification or extinguishment’ from
the time the right was created. If so, then it is argued that there can
be no acquisition because anything done would not be inconsistent with
the right as originally granted.[89]
It is noted that in Commonwealth
v WMC Resources Ltd.,[90]
Gummow J explained that:
To accept this proposition is not to assert that the
defeasible character of the statutory rights in question denies them
the attribute of "property" in the "traditional"
sense of the general law.[91]
However, Gummow J went on to state that:
in some circumstances, of which the statutory rights
in this case are an instance, the nature of the property may be such
that its defeasance or abrogation does not occasion any acquisition
in the constitutional sense.[92]
However, more recently, the High Court has warned that:
references to statutory rights as being "inherently
susceptible of change" must not be permitted to mask the fact that
"[i]t is too broad a proposition … that the contingency of subsequent
legislative modification or extinguishment removes all statutory rights
and interests from the scope of s 51(xxxi)". Instead, analysis
of the constitutional issues must begin from an understanding of the
practical and legal operation of the legislative provisions that are
in issue.[93]
No definitive answer may be given regarding the question
of whether, and if so, how proposed section 442D applies to greenhouse
gas titles proposed to be created under the Bill. However, it is noted
that despite the cautious approach of the High Court in the more recent
cases,
Commonwealth v WMC Resources Ltd has not been overruled.
A post-commencement petroleum title is defined in item
63, proposed section 6 as including a post-commencement exploration
permit, retention lease and production licence.
Proposed section 249NDA generally allows for overlapping
of greenhouse gas and petroleum titles.
However, the primary intent to protect post commencement
petroleum titles and discoveries is apparent in the following proposed
provisions in the Bill.
Under proposed subsections 249AD(3) (greenhouse
gas assessment permits), 249BB(3) (greenhouse gas holding leases),
and 249CD(3) (greenhouse gas injection licences), petroleum recovered
by a greenhouse gas title holder in the relevant title area would not
become the property of that title holder. Instead, such petroleum may
only be recovered by the greenhouse gas title holder, with the Minister’s
written consent, to appraise the petroleum discovery made as an incidence
of the particular greenhouse gas operations carried out.
In addition, proposed section 249NB provides that
if petroleum is discovered in a greenhouse gas title area, the relevant
greenhouse gas title holder must immediately inform the Minister about
the discovery and, within three days after the date of the discovery,
that greenhouse gas titleholder must provide the Minister with a written
notice of:
- details of the discovery, and
- any other information as provided for by the regulations.
Failure to comply with the notification requirement would
be an offence punishable by a maximum penalty of $11 000 (100 penalty
units).[94]
According to proposed subsection 249NB(4), the
notification requirements do not apply to petroleum title holders.
Proposed sections 79B, 114B and 138B provide
a process for post-commencement exploration permits, retention leases
and production licences to be determined by the Minister as declared
exploration permits, declared retention leases and declared production
licences.
When the Minister makes a determination to declare
a title, it indicates that operations under these petroleum titles may
have a significant risk of significant adverse impacts on the injection
or storage of greenhouse gas substances under existing or future greenhouse
gas titles. The determination can be made at the time when the petroleum
title is issued or at a later time. The Minister can revoke the determination
if the Minister considers that the significant risks of those significant
adverse impacts no longer exist.
Under existing sections 79, 114 and 138, exploration
permits, retention leases and production licences are granted by the Joint
Authority (consisting of the responsible State Minister and the responsible
Commonwealth Minister). However, should they subsequently become declared
titles, they will be subject to Commonwealth ministerial approval under
proposed sections 79A, 114A and 138A in order to carry out key
petroleum operations.
The Explanatory Memorandum explains that where there
are competing interests to be taken account of, these provisions allow
the Commonwealth Minister to decide the competing merits of cases where
they cannot co-exist.[95]
The Regulatory Impact Statement stated:
Allowing the regulator (Commonwealth Minister) to
make decisions on which industry should proceed in cases where they
cannot co-exist allows the relative merits of the two competing opportunities
to be taken into account (the ‘public interest’ model). It also allows
for flexibility if the relative importance of petroleum and greenhouse
gas operations change. It also enables commercial agreements between
the parties to be taken into account, which could lead to acceptable
compromise solutions. This could be done through a public interest test
in which the regulator would consider the relative merits of the two
competing proposals. Criteria could include social, economic and environmental
factors.
Stakeholders comment that the process of declaring petroleum
titles is unclear as is the way in which significant adverse impact
is assessed. Some consider that there is no predictable or transparent
system to manage the interaction between greenhouse gas title holders
and pre-existing and co-existing petroleum title holders and in the opinion
of some stakeholders these provisions require significant reconsideration.[96] There is concern with this part
of the Bill also that it will result in a disincentive to future upstream
oil and gas activity because of a lack of legal certainty,[97]
and uncertainty about whether titles might be declared or not.[98]
Note however if an applicant applies to carry on key
petroleum operations where an existing greenhouse injection licence is
in place, and the Minister considers that the proposed petroleum operations
poses a significant risk of significant adverse impact on existing or
future greenhouse gas operations, then unless there is an agreement between
the greenhouse gas titleholder and the applicant to carry on petroleum
operations with which the Minister is satisfied, then the responsible
Commonwealth Minister must not give approval (proposed subsections
79A(10), 114A(10) and 138A(10)).
The Government states that there is no longer a need
to protect existing rights for post commencement titles.[99] However, it is still necessary to avoid perception
by the petroleum industry that the proposed greenhouse gas storage system
hinders future offshore petroleum operations, which would make it difficult
to attract investment in Australia by major petroleum companies.[100]
The need to protect future petroleum title development
is reflected by proposed section 249CZC, as discussed above.
Some stakeholders expressed concern about the disincentive
on development of the greenhouse gas storage industry caused by uncertainty
in title is due to what is perceived as the Bill’s overarching aim of
protecting petroleum interests.[101]
The provisions of the Bill relating to pipelines enable
stakeholders to apply for a licence to construct greenhouse gas substance
pipelines within a petroleum production licence area or a greenhouse gas
injection licence area, or to construct pipelines from places outside
those licensed areas to the licensed areas.
Proposed subsection 181(5) provides that the Joint
Authority must first approve the greenhouse gas substance to be transported
under a pipeline licence before a pipeline can operate. Licensees must
also comply with regulations that establish third party access to services
(proposed subsection 181(8)).
The Joint Authority must take account of the following
factors in relation to applications:
- whether the substance is suitable for injection and permanent storage
into an identified greenhouse gas storage formation, and
- for exploratory purposes, if the substance is suitable for injection
and storage when searching for a potential greenhouse gas storage formation,
(proposed subsection 181A(3).
The Commonwealth Minister may direct
the Joint Authority under proposed subsection 181A(5)
in its exercise of power in approving or refusing an application under
subsection 181A(2). Please note that a direction under proposed subsection
181A(7), is not a legislative instrument.
Proposed section 186A enables a production licensee
to apply for a pipeline licence under section 185 (application for pipeline
licence) within 90 days of the gazettal of a notice of an application
by another person other than the production licensee. The application
must be made within the 90 days after gazettal and not more than 180 days
(although this can be longer if applied for within 90 days and approved
by the Joint Authority). In the application, the production licensee may
request that the application of the other person notified in the gazette
be rejected. This gives preference to the existing titleholder if they
wish to apply for a greenhouse gas pipeline licence. There are no specific
provisions in the Bill relating to criteria to refuse the grant of a pipeline
licence under proposed section 188A other than if the Joint Authority
is not satisfied that there are sufficient grounds to grant a pipeline
licence then the Joint Authority must refuse to grant it. Similar rights
for greenhouse gas injection licensees exist in proposed section 186B.
Proposed section 187A grants greenhouse gas-related
licences to those who have applied for a pipeline licence under section
185. Greenhouse gas pipeline licences may be granted to the following:
- a person other than the production licensee (proposed subsection
187A(2))
- a production licensee after compliance with certain requirements(proposed
subsection 187A(3))
- a person in a greenhouse gas injection licence area other than a greenhouse
gas injection licensee (proposed subsection 187A(5))
- a greenhouse gas licensee after compliance with certain requirements(proposed
subsection 187A(6))
- refusal of a greenhouse gas related pipeline licence to these categories
is dealt with in proposed section 188A — consultation provisions
in section 226 apply to the refusal of a licence to a production
licensee and a greenhouse gas injection licensee who apply for a pipeline
licence — consultation involves written notice to the affected
person with 30 days notice of the intended decision by the Joint
Authority to give the person an opportunity to make a
submission to the Authority.
The route of the pipeline should be shown in the plan
accompanying the application for a licence. The Joint Authority may suggest
a different route if it thinks it appropriate (proposed subsection
187A(8)).
Although Native Title rights are protected under the
Bill in relation to greenhouse gas activities generally and under section
243 of the Offshore Petroleum Act 2006 in relation to petroleum
activities, pipelines that extend beyond the licensed area into the coastal
waters of a State or territory may result in possible conflicts or interference
with the ‘enjoyment of native title rights within the meaning of the Native
Title Act 1993’. The Bill refers to such possible interference in
relation to the matter of a site closing certificate (proposed section
249CZF), in proposed section 249NF where persons carrying out
activities under any of the greenhouse gas titles are to do so in a manner
that does not interfere with that enjoyment to a greater extent than is
reasonably necessary, and in proposed section 316-311A relating
to site closing directions to holders of greenhouse gas injection licences
to take action to eliminate or manage the risk that an injected greenhouse
gas substance will have significant adverse impacts on the enjoyment of
native title rights. The Attorney-General’s Department advises that the
Native Title Act will ensure that grants of greenhouse gas titles are
valid and that native title claimants and holders will have the same procedural
rights as holders of non-native title interests. That is those with title
interests will be consulted about the grants of rights under the Bill.[102]
Certain State jurisdictions are concerned about the lack
of mechanisms in the Bill to enable State and Territory interests to be
considered. Cross-jurisdictional issues may arise concerning the treatment
of piped greenhouse gas from onshore sites to offshore greenhouse gas
storage facilities.[103]
There is some concern that administrative confusion will occur because
of the separate regimes for the approval of pipeline licences at State/Territory
level and approval of the transportation of a greenhouse gas substance
by pipeline which is the responsibility of the Commonwealth. The States
want a more cooperative effort in dealing with the interactions between
the State and the Commonwealth jurisdictions.[104]
One stakeholder comments that the pipeline right of way over State and
Territory coastal waters is one matter not dealt with by the legislation.
A problem that needs addressing, according to the stakeholder, is one
illustrated by the Otway Project where one of the difficulties encountered
were the approvals necessary for the pipeline which resulted in significant
delays and extra expense for the project.[105]
Part IIIA of the Trade Practices Act 1974 (the
TPA) enables third parties to be able to use certain essential infrastructure
facilities, where particular public interest criteria are met.
Following the recommendations of the Hilmer Report in
1993 and as part of the commitment to national competition principles,
amendments were made to the TPA which came into effect in 1995, establishing
‘a new legal regime under which firms could be given a right of access
to ‘essential facilities owned by another firm, when the provision of
such a right meets certain public interest criteria.’[106] The Explanatory Memorandum raises a question
as to whether the regime contained in Part IIIA applies to a particular
identified greenhouse gas storage formation, or infrastructure used for
injection and storage operations or related operations.[107]
As there appeared to be some doubt as to the applicability of Part IIIA
of the TPA to the facilities, it was considered desirable to establish
a specialised third party access regime by regulation under the Act.
Compliance with a third party access to services regime
may be an attached condition to several categories of licence in the Act;
- revised section 167 – conditions of infrastructure licences are amended
to provide for regulations that may establish a third party access regime
to services related to infrastructure facilities in connection with
greenhouse gas activities
- revised section 181 – conditions of pipeline licences are amended
to provide for regulations that may establish a third party access regime
for services related to greenhouse gas pipelines
- proposed section 249CE – conditions of greenhouse
gas injection licences provide for regulations that may establish a
third party access regime to services that relate to the following:
- identified gas storage formations
- wells, equipment or structures used in injecting greenhouse gas
activities, or
- equipment and structures used in processing, compressing or storing
greenhouse gas substances prior to injection.
Several problems/issues are raised by stakeholders concerning
third party access. The primary issue is that the detail as to the setting
up of the regimes is left to regulations rather than the principal Act
itself.[108] Another
concern is that third party access regimes will only apply to greenhouse
gas facilities and services, something that currently does not apply to
the petroleum industry’s facilities and services.[109] The Australian Coal Association and the Minerals
Council of Australia consider that third party access to identified storage
formations will pose liability issues and for that reason greenhouse gas
storage formations should be removed from the list of facilities and services
to which third party access may apply. [110] APPEA considers that the
full extent of these powers are unclear with the detail to be included
in regulations and therefore unknown. Initially, it had understood that
the third party regimes would only apply to pipelines.[111] The Bill however, includes
provisions to set up third party access regimes in relation to all aspects
of greenhouse gas injection and storage activities as set out above.
Greenhouse gas industry stakeholders have commented on
about their lack of access to data held by existing petroleum title holders
that may relate to areas where greenhouse gas injection and storage activities
could take place.[112] Factors causing concern include:
- there is an imbalance of information available to greenhouse gas title
holders and petroleum title holders in relation to proving whether there
is a significant risk of significant adverse impact, usually to overlapping
petroleum titles ,[113] which could be a significant hurdle to the
development of offshore storage[114]
- the availability of data needed for the preparation of site plans[115]
— a site plan must demonstrate the safe and secure nature of the storage
to the Minister and identify risks and ways in which those risks would
be reduced to their lowest practicable level — the regulator then has
to make a decision based on this information[116]
- access to data is considered to be a major obstacle to the creation
of a ‘level playing field’ in relation to work bids in acreage release[117]
- petroleum title holders have a competitive advantage to enter the
greenhouse injection and storage market, while creating a significant
barrier for new greenhouse gas competitors — stakeholders recommend
that the Minister should be required to take the relative information
advantage into consideration when evaluating bids[118]
Proposed section 249CZC is an example of where
unequal access to data could create an uneven ‘playing field’ in relation
to entering the new greenhouse gas storage industry.
It may be argued that there will be occasions where the
onus for refuting questions of:
- commercial viability of any petroleum discovered in an area over which
there is a greenhouse gas injection licence and which is subject to
a pre-commencement petroleum title
- whether there is significant risk of serious adverse impact test
on petroleum recovery operations or the commercial viability thereof,
and
- whether it is practicable to eliminate such risk,
would lie on the relevant greenhouse gas injection licensee.[119]
This raises the question of whether the greenhouse gas
injection licensee can get access to what would be confidential in-house
data relating to the petroleum operations in the area possessed by the
petroleum title holder of that area.
Proposed section 249CZC does not clearly address
this particular question.
This was the subject of concern expressed by some stakeholders.[120]
The procedure for releasing acreage is contained in proposed
sections 249AJ and 249AP. Both procedures relate to the work-bid greenhouse
gas assessment permit and the cash-bid greenhouse gas assessment permit.
Proposed section 249AJ provides that the Minister
can invite applications for the grant of a greenhouse gas assessment permit
over any or all of the blocks specified in the gazettal notice. Where
there are two or more applicants, the Minister ranks them by means of
criteria that will be made publicly available (proposed subsection
249AL(3)).
A similar provision exists for cash-bid greenhouse gas
assessment permits (proposed section 249AP)).
Stakeholders have several comments in relation to the
procedures for acreage release. Some consider that the criteria for the
work-bid process are inadequate, allocating tenure to acreage to the ‘most
deserving’ applicant. Such criteria, they claim, are highly subjective
and involve different considerations to those involved in the grant of
petroleum rights. The Victorian Government noted that the petroleum operators
of the Gippsland Basin with their accumulated knowledge and longstanding
presence in the area and that this is likely to be the ‘most deserving’
of the grant. New greenhouse gas storage proponents to the area will be
unable to make a competitive acreage bid.[121]
Others consider that there is a distinct absence of public participation,
transparency and accountability throughout the entire greenhouse gas storage
process. The Bill only provides the minimal mandatory matters that the
Minister need take account of when granting rights, citing as an example
the greenhouse gas acreage releases.[122]
Stakeholders have argued that greater transparency is required in the
process, and that there should be publicly available guidelines or procedures
prescribed by regulation and that the same transparent and accountable
procedures should also relate to the petroleum acreage release system.[123] As previously mentioned, some stakeholders
have argued that the availability of data is seen as a major obstacle
to a ‘level playing field’ being created because petroleum title holders
will have a significant advantage as far as availability of data is concerned
and this very fact runs counter to general competition principles and
creates a significant barrier to entry into the greenhouse gas injection
and storage market.[124]
The Significant Risk of Significant Adverse Impact test
(SROSAI test) is referred to in several proposed provisions in the Bill,
for example:
- subsection 146(4B) (impact of post commencement
petroleum production licence on greenhouse gas titles)
- sections 249AF and 249BD (approval by
Minister of key greenhouse gas operations)
- sections 249BZ (directions the Minister
may give to greenhouse gas title holders)
- section 249CXA (directions Minister may give
to greenhouse gas injection licensees to protect geological formations
containing petroleum pools)
- section 249CZ (serious situations)
- section 249CZC (protecting petroleum discovered
in the title area of a pre-commencement petroleum title), and
- section 249CZF (site closure and pre-certificate
notices).
Issues have been raised with the definition of the SROSAI
test.[125]
Item 81 of the Bill proposes that the meaning
of ‘significant risk’ is affected by proposed section 15E (see
item 109 of the Bill), which appears to be a mistake and should
actually be section 15F, providing that where there is a risk that
a particular operation will have a large adverse impact on other operations,
such risk will be considered as being significant even if the probability
of it occurring is low.
The actual SROSAI test is not defined elsewhere in the
Bill nor in the Petroleum Act, leaving its meaning unclear.[126]
However, it is noted that in other similar cases, the
Government has to provide non-legally binding guidance of the meaning
of significance in the form of administrative guidelines.[127] It may be possible for the Government to do the same in this
context.
Under the proposed amendments in the Bill, instances
when the Minister must consider public interest include decisions about:
- approving key petroleum operations in relation to declared exploration
permits (proposed subsection 79A(7)); retention leases; (proposed
subsection 114A(7)); production licences (proposed subsection
114A(7))
- approving key greenhouse gas operations relating to greenhouse gas
assessment permits (proposed subsection 249AF(8)); greenhouse
gas holding leases (proposed subsection 249BD(8)), and
- grants of greenhouse gas injection licences (proposed subsection
249CI(3)).
Under the proposed amendments in the Bill, instances
when the Joint Authority must consider public interest include decisions
about grants of production licences (proposed subsections 145(1)(d)
and 146(4B)(c)).
However, it is noted that under proposed section 442C
of the Bill, the public interest test may, in fact, be applied to every
ministerial decision made under the Bill.
The Government has stated that the public interest test,
among other things, will be covered in the Regulations because:
… it appeared inappropriate to pursue this level of
detail without first soliciting clearer feedback from stakeholders on
the proposed legislative amendments.[128]
Stakeholders generally point out that without the detail
of what the public interest test involves, they are unable to make informed
comments about relevant provisions in the Bill.[129]
Some indication of what the public interest test would
involve is given in the Government’s Regulatory Impact Statement on the
Bill:
Allowing the regulator to make decisions on which
industry should proceed in cases where they cannot co-exist allows the
relative merits of the two competing opportunities to be taken into
account (the ‘public interest’ model). It also allows for flexibility
if the relative importance of petroleum and greenhouse gas operations
change. It also enables commercial agreements between the parties to
be taken into account, which could lead to acceptable compromise solutions.
This could be done through a public interest test in which the regulator
would consider the relative merits of the two competing proposals. Criteria
could include social, economic and environmental factors.[130]
There are several proposed provisions in the Bill relating
to consultations that must or may be carried out in relation to ministerial
decisions and/or actions under the Bill. Examples are the Minister:
- proposing to direct a greenhouse gas injection licensee under:
- proposed section 249CZAA of the Bill,
to take certain action outside the licence area in an attempt to
deal with a serious situation pursuant to proposed section 249CZA
of the Bill
- proposed section 249CZCA of the Bill,
to take certain action outside the licence area in an attempt to
eliminate, mitigate, manage or remediate a risk that greenhouse
gas injection operations could have a significant adverse impact
on recovery of petroleum or the commercial viability thereof pursuant
to proposed section 249CZC of the Bill, and
- proposed section 316-311B of the Bill,
to take certain action outside the licence area in relation to site
closure pursuant to proposed section 316-311A of the Bill
- granting or varying a greenhouse gas special authority under proposed
sections 249HG and 249 HJ respectively of the Bill
- making adverse decisions under the Act pursuant to proposed section
249JH of the Bill
- cancelling a greenhouse gas title pursuant to proposed sections
249MB and 249MC of the Bill, and
- making entries into the Register to maintain the Register’s accuracy
and currency pursuant to proposed section 298-286 of the Bill.
However, on closer examination of some of those provisions,
it appears that consultation generally involves the Minister giving written
notice to the relevant registered greenhouse gas titleholders of the Minister’s
intention to give the direction; grant or vary a greenhouse gas authority;
make an adverse decision; cancel a greenhouse gas title; or correct the
Register. The notice must include details of the Minister’s intention,
as well as an invitation to make submissions regarding such intention.
The Minister must take into account any submission received (see,
for example, proposed subsection 249HJ(4)).
In addition, in certain cases, the Minister must also
give a copy of such notice to any other person as determined by the Minister,[131] which leaves the following
questions unanswered:
- on what basis would the Minister decide who should receive the notice?
- how would the Minister inform him or herself of what he or she should
consider when making this decision?
- what avenues of review would be afforded to people who do not agree
with that decision?
The Bill also proposes a further limitation — if the Minister
considers that the situation is one of an emergency, the Minister would
not have to undertake the consultation provided for in the Bill.[132]
Stakeholders have commented on the perceived failure
of proposed provisions in the Bill to ensure proper public consultation
of the greenhouse gas storage processes provided for in the proposed amendments.[133]
State and Territory
Interests
Existing Part 1.4 of the Act provides for the application
of the general body of State and Territory laws, as laws of the Commonwealth,
to petroleum exploration, exploitation and conveyance activities in the
offshore area of that State or Territory.[134]
State and Territory interests in relation to pipelines
are discussed on p. 33.
There are also amendments proposed in items 253-261
of the Bill, regarding the National Offshore Petroleum Safety
Authority (the Safety Authority). These amendments essentially include
greenhouse gas storage operations within the scope of the Safety Authority’s
functions and powers relating to its regulation and supervision of occupational
health and safety (OH&S) obligations. These proposed amendments allow
for communication with relevant State and Territory Greenhouse Gas Storage
Ministers about certain matters relating to OH&S obligations.
Some stakeholders have commented on the lack of provision
in the Bill for consideration of State interests. It is submitted that
this is particularly so because cross jurisdictional issues arise from:[135]
- sources of greenhouse gas, such as power stations and refineries that
generate the greenhouse gases, located within State and Territory jurisdictions
- transportation of greenhouses gas from those locations, possibly across
jurisdictional boundaries, to offshore sites, and
- greenhouse gas storage formations located across jurisdictional boundaries.
The Government’s response is:
Close involvement with the States/Territories on major
projects can be addressed through existing consultative processes, including
the Ministerial Council on Minerals and Petroleum Resources and its
sub-committees.[136]
The Bill proposes several provisions aimed at environmental
protection and conservation generally. The following are examples.
Proposed subparagraphs 249CZF(4)(b)(i) and (iii)
provide that the Minister may refuse to give a pre-certificate
notice[137] in relation to an identified
greenhouse gas storage formation if the Minister is satisfied there would
be a significant risk of significant adverse impact on the conservation
and exploitation of natural resources and on the environment, among other
things.
Proposed subparagraphs 316-311A(2)(f)(ix) and
(xi) provide that, in relation to site closure, the Minister may
direct the greenhouse gas injection licensee to undertake specified activities
to eliminate, mitigate, manage or remediate the risk of significant adverse
impact on the conservation or exploitation of natural resources; or the
environment, among other things.
Notably, both of these powers are discretionary.
Proposed paragraphs 249NF(2)(b) and (c)
provide that someone carrying on activities in an offshore area under
a particular greenhouse gas title, must do so without interfering with
fishing or the conservation of the sea and seabed resources, to an extent
greater than is necessary for ‘the reasonable exercise of the rights and
performance of the duties’ of that person.
However, it has been argued that these proposals do not
go far enough in environmental protection and conservation.[138]
It is noted that sections 23-24A of the Environment
Protection and Biodiversity Conservation Act 1999 (EPBCA) prohibit
actions that could have a significant on the environment in a Commonwealth
marine area, unless:
- ministerial approval has been granted, or
- one of the other exceptions in subsections 23(4) or 24A(8) apply.
Presumably, therefore, the relevant environmental assessment
and approval provisions of the EPBCA will apply to greenhouse gas operations
in Commonwealth waters if it is possible those actions might have a significant
environmental affect.
The Government has stated that while there is limited
experience with the permanent storage of large amounts of greenhouse gas,
greenhouse gas operations are generally analogous, in scale and complexity,
with offshore petroleum.[139]
In addition, the Government considers that careful site selection and
effective monitoring of greenhouse gas storage sites will minimise risks
to people and the environment.[140]
In line with the above comments, liability is only addressed
by the Bill to the extent of minimising risk by monitoring and regulating
greenhouse gas operations. Such provisions include:
- ministerial powers relating to dealing with serious situations (proposed
section 249CZ)
- obligations of a greenhouse gas permit, lease or licence holder in
relation to surrender of the relevant title (proposed section 249LB)
- remedial ministerial directions to former and current greenhouse gas
permit, lease or licence holders (proposed sections 316-312 and
316-311)
- establishment of greenhouse gas inspectors to monitor and inspect
greenhouse gas operations (proposed sections 316-318 and 316-319)
- discretionary power of the Minister to impose conditions on greenhouse
gas titles that the title holder maintain insurance in relation to the
greenhouse gas operations, which are the subject of the greenhouse gas
title (proposed subsection 302(2A))
- site closure processes, which include:
- greenhouse gas injection licensees’ obligations to provide certain
information with an application for a site closing certificate (proposed
section 249CZE)
- issue of a pre-certificate notice to an applicant for a site closing
certificate (the applicant) once greenhouse gas injection operations
have ceased (proposed section 249CZF)
- payment of security by the applicant to the Government in relation
to the estimated costs of programs that the Government proposes
to carry out to monitor the behaviour of the greenhouse gas substance
stored, as specified in the pre-certificate notice (proposed
sections 249CZGAA and 249CZM), and
- site closing ministerial directions to greenhouse gas injection
licensees once greenhouse gas injection operations have ceased (proposed
section 316-311A).
There is no provision in the Bill expressly transferring
liability to the Commonwealth Government once a greenhouse gas site is
closed. In fact, the Government states that:
there be no new regulation and the issue of long term
liability be left to common law in the same way as it does for petroleum
and other industries.[141]
According to the Government:
No new regulation would involve relying on
common law for long term liability. Under this option, greenhouse gas
title holders would not be immunised from common law liability to persons
who suffer injury or loss as a result of their actions. Nor would their
liability be limited. This non-intervention would extend to all forms
of common law liability, including long term liability. The Government
would therefore not ‘take over’ long term liability from project participants.
Nor would the Government provide any indemnity to project participants
in respect of any liability they might incur.
In the long term, the risk would, in a sense, pass to the community
because project participants may cease to exist or because of some other
time related factor such as availability of witnesses. For example if
GHG operations were to result in personal injury or loss to individuals,
at a time when there were no project participants still available to
be sued, or where damages were for some other reason irrecoverable,
the cost would in practice be borne by the community. This would, however,
be the consequence of the passage of time, not of any assumption of
liability on the part of government. Greenhouse gas industry participants
would therefore need to make their own arrangements to deal with potential
common law liability, as an ordinary cost of doing business, as must
members of any other industry. [142]
The concern with the approach taken in the Bill regarding
liability associated with greenhouse gas storage is that the need for
monitoring and management of the greenhouse gas site over a much longer
period of time than for petroleum recovery activities.[143]
The Government’s statements acknowledge that long term
liabilities raise the following issues:
- non-existence of those responsible for the damage at the time when
an event occurs giving rise to the liability, and
- difficulties of maintaining proceedings after a long period of time
has passed such as unavailability of witnesses.
However, it does not reflect recognition of the difficulties,
for example, of obtaining insurance for cover of future risks of unknown
scale and magnitude.
The Government’s position on long term liability relating
to CCS does not reflect the following recommendations of the Science and
Innovation Committee:
The Committee recommends that the Australian Government,
following industry consultation, develop legislation to define the financial
liability and ongoing monitoring responsibilities at a geosequestration
site.
The Committee recommends that financial liability
and site responsibility should consist of three phases:
- Full financial liability and responsibility for site safety and
monitoring should rest with industry operators for the injection phase
and a subsequent length of time (this time to be determined by the
Australian Government subject to specific site risk analysis);
- Following the above specified time, shared financial liability and
responsibility for site safety and monitoring should rest equally
with industry operators and state, territory and Australian governments
in the longer term. The exact length of this shared responsibility
and liability risk analysis; and
- Following the determined phase of shared liability and responsibility,
full financial liability and responsibility for site safety and monitoring
should be transferred to the two spheres of government in perpetuity.[144]
Stakeholders have expressed concerns about the prospect
of greenhouse gas titleholders, particularly, greenhouse gas injection
licensees, being liable for damage incurred for many years following closure
of a greenhouse gas site, which would discourage investment in greenhouse
gas storage investments.[145]
However, the Australian Network of Environmental Defender’s
Offices (ANEDO) submits that the Bill does not provide sufficient mandatory
powers to the Minister to effectively protect against risks to the environment
and humans, citing the example of proposed subsection 249CZF(4)
of the Bill.[146] Under
proposed subsection 249CZF(4), the Minister does not have to refuse
to give a pre-certificate notice, relating to an application for site
closure of a greenhouse gas storage formation, even if the Minister is
satisfied that there is a significant risk that the greenhouse gas injected
into that site will have an significant adverse impact[147] on the geological integrity of the site,
natural resource conservation or exploration, the environment or people.
Nor would the Minister have to refuse to give such pre-certificate notice
if the Minister was not satisfied that greenhouse gas substance was behaving
as predicted pursuant to the site plan for that greenhouse gas storage
formation.
As it is generally agreed that most depleted or uncommercial
petroleum sites are likely to be optimal greenhouse gas storage sites,[148] this could create situations
where petroleum titleholders may also be greenhouse gas title holders
(joint title holders).
The proposed amendments in the Bill would effectively
create two regulators for these joint title holders:
- the Joint Authority[149]
(see, for example, items 131-136, 140-142 of the Bill),
and
- the Minister.
The situation would be further complicated in that the Minister,
also part of the Joint Authority,[150] has greater power or authority
both as a part of and over the Joint Authority.[151]
Such potential administrative burdens for joint title holders
are particularly noticeable in relation to the transport of greenhouse
gas from its source to the greenhouse gas storage site by pipelines.
The Joint Authority has the power under section 181 to
grant pipeline licences subject to any conditions it thinks appropriate.
In relation to a greenhouse gas pipeline, the Joint Authority has to approve
the greenhouse gas substance under proposed section 181A. The Minister,
however, under proposed subsection 181A(5) can direct the Joint
Authority in its exercise of power of approving or refusing approval of
a greenhouse gas substance to be conveyed by the pipeline. In addition,
the Minister may generally direct the Joint Authority in the exercise
of its power conferred by Part 2.6 of the Act (Pipeline Licences) if it
relates to an application for an infrastructure licence or is an infrastructure
licence relating to infrastructure associated with greenhouse gas activities
as set out in proposed subsection 13(3). These directions under
proposed subsections 177B(1) and 181A(5) are not legislative instruments,
which means they are not tabled in the Parliament nor are they subject
to parliamentary scrutiny.
Greenhouse gas title holders would have various regulatory
obligations imposed on them, in relation to greenhouse gas operations,
by proposed amendments in the Bill. These include:
- applications for:
- various greenhouse gas titles (proposed sections 249AE, 249BC
and 249CE) and authorities (proposed sections 249GF
and 249HE)
- consent to surrender a greenhouse gas title (proposed section
249LA)
- a site closing certificate (proposed section 249CZE)
- approval of transfer of a greenhouse gas title (proposed section
298-257)
- entering name on Register as greenhouse gas title holder (proposed
section 298-265)
- approval of current and future dealings[152] (proposed sections 298-271 and 298-280
respectively), and
- data management (see Chapter 5 of the Act and proposed Chapter
5A of the Bill)
Greenhouse gas special authority holders would also have
particular reporting obligations under proposed section 249HK in
the Bill. If, during a particular month a greenhouse gas special authority[153] is in force over any part
of a block, which is also subject of a greenhouse gas permit, lease or
licence, the holder of the greenhouse gas special authority must, within
30 days following the end of that month, report to the registered greenhouse
gas permit, lease or licence holder about operations carried out on the
block during the month.
In addition, greenhouse gas permit, lease and licence
holders must notify the Minister about possible eligible greenhouse gas
storage formations and any discovery of petroleum under proposed sections
249NA and 249NB of the Bill respectively.
Some stakeholders have commented on the potential for
additional administrative burdens being placed on joint title holders
by proposed amendments in the Bill.[154]
The Minister has various discretionary powers under proposed
amendments in the Bill. Examples of these powers are:
- by written or published notice, make certain directions (numerous
proposed provisions)
- request information (proposed section 298-288)
- make decisions about blocks (proposed subsections 249NE(1)
and 249NH(3))
- cancel titles (see, for example, proposed sections 249MB (greenhouse
gas permits, leases and licences), 249ME (greenhouse gas search
authority))
- consent or refuse to consent to surrender of a greenhouse gas title
(proposed section 249LB)
- vary, suspend or exempt titleholders from conditions imposed on greenhouse
gas permits; leases; licences; search or special authorities (proposed
sections 249KA and 249KE), and
- grant, refuse to grant, vary or revoke greenhouse gas titles and authorities
(see, for example, proposed sections 249HC, 249HF, 249HI
and 249HL (greenhouse gas special authorities)).
This is an extensive, but by no means exhaustive, list
of discretionary powers that would be given to the Minister. In addition,
the Bill does not always clarify those factors that the Minister must
consider when using his or her discretion. Both factors are of concern
to stakeholders largely because of the uncertainty created by such discretionary
decision making and the ensuing disincentive to invest in greenhouse gas
storage operations.[155]
The lack of clarity of the term ‘public interest’, as
discussed above, is related to this issue.
The Bill does not expressly mandate the use of expert
advice by the Minister when making decisions regarding matters such as
impact assessment tests.
In addition, the Explanatory Memorandum does not explain
whether, and if so, how the use of expert advice would be used.
Stakeholders have expressed concerns about this issue.[156]
As previously mentioned, it is noted that the lack of
express provision for the use of experts in the Bill is not necessarily
unusual and that the Government, in such circumstances, does refer to
experts in the relevant area. However, given that greenhouse gas storage
is a new and emerging industry and that industry stakeholders have clearly
expressed their interest in, and concern for, reliable and appropriate
expert advice being relied upon in developing this new industry, the Government
may consider explaining its position regarding the use of expert advice.
Such explanation would have been usefully incorporated into the Explanatory
Memorandum to the Bill.
Stakeholders have also commented that ministerial decision
making proposed by the Bill would not be sufficiently transparent, thereby
not encouraging accountability.[157]
The Bill does propose some degree of notification requirements,
including the requirement to publish:
- variations of notices of directions to greenhouse gas titleholders
in relation to:
- dealing with serious situations (pr
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