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Focus: Queensland greenhouse gas storage legislation

2 March 2009

In brief: Stand-alone carbon storage legislation commenced in Queensland last week. This follows the earlier leads of Victorian and federal (offshore) legislation and, at some 450 pages, provides a detailed regime for storage of greenhouse gases within Queensland territorial borders. Partner Ben Zillmann (view CV) and Senior Associate Rochelle Carey report on some of the key features of the legislation.

How does it affect you?

  • Queensland's economy is heavily dependent upon a healthy coal industry and, with vast coal resources still to be mined, carbon capture and storage is seen as key technology to secure the future of the industry in a carbon-constrained world. This legislation provides a fundamental regulatory building block to support carbon capture and storage.
  • For existing mining and petroleum tenement holders, the legislation introduces a new, potentially overlapping, tenement into the mix and raises issues for tenure security.

Background

The passing of the Greenhouse Gas Storage Act 2009 (Qld) (the Act) follows the introduction of the Greenhouse Gas Geological Sequestration Act 2008 (Vic) in October 2008 (see Focus: Climate Change, 7 November 2008), and the Federal Government's passing of the Offshore Petroleum Amendment (Greenhouse Gas Storage) Act 2008 (Cth) in November 2008 (see Focus: Climate Change, 20 November 2008).

As with the Victorian and federal legislation, the Act regulates the 'storage' aspect of carbon capture and storage, but does not seek to regulate the 'capture' of greenhouse gases (GHG).

It does this primarily by introducing a new tenure regime governing the discovery and use of underground reservoirs for the storage of carbon dioxide. The provisions creating the new tenures under the Act have not yet commenced, and will commence on a date to be fixed by proclamation.

For those acquainted with the Petroleum and Gas (Production and Safety) Act 2004 (Qld) (the P&G Act), the Act will seem familiar, as its format and many of the tenure concepts and processes are similar to those in the P&G Act.

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Key concepts and issues

GHG streams

The Act regulates 'GHG streams', which are defined as a stream of carbon dioxide or a substance that 'overwhelmingly' consists of carbon dioxide in a gaseous or liquid state. It does not permit the sequestration of other greenhouse gases.

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GHG tenures

The Act essentially provides for two types of authorities or tenures to facilitate GHG storage:

  • GHG exploration permit – permitting the exploration for underground geological structures suitable for injecting and storing GHG streams; and
  • GHG injection and storage lease – for the actual injection, storage and monitoring of GHG streams.

The Act also provides for a third type of authority. This is a GHG injection and storage data acquisition authority, which can be applied for by a GHG permit or lease holder to allow geophysical surveys on land close to that in the existing GHG tenure.

GHG permits will only be granted by way of competitive tender, with the minister nominating which land is available for GHG permits. Potentially, this can be anywhere in the state, with the Act vesting ownership of all GHG reservoirs in the state, regardless of the form of land tenure under which the reservoirs reside. GHG permit terms (including renewals) will not exceed 12 years, with periodic relinquishments of one-third of the area of the permit every four years.

If a GHG permit holder discovers a reservoir, it can apply for a declaration of a 'potential storage area' where there are currently no GHG streams available to utilise that reservoir. Such a declaration effectively reserves the reservoir until GHG streams become available, although a declaration will last no longer than 10 years.

GHG injection and storage leases are obtained either by transitioning from a GHG permit upon discovery of a reservoir or by way of competitive tender. The grant of a GHG lease is subject to ministerial discretion, even if the applicant is the current holder of a GHG permit. A GHG lease will only be granted if the applicant is able to establish that GHG stream storage will occur at the site within five years after the grant of the lease, or if the applicant has existing arrangements with third parties for GHG stream storage in the lease area. A GHG lease has no fixed term – it will continue until the Government accepts it for surrender.

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Surrender and long-term liability

The term of a GHG lease does not simply end upon the cessation of injecting carbon dioxide and the decommissioning of wells. Ongoing monitoring is required, the Government's aim being risk minimisation. The Government will not accept a surrender of a GHG lease until it is satisfied that the risks associated with the carbon storage have been reduced 'as much as possible'.

While it remains the holder of the GHG lease, the carbon storage operator obviously is potentially liable for any adverse consequences or impact on third parties associated with the injection and storage of the carbon dioxide. The GHG lease holder will therefore, upon the end of the carbon dioxide injection process, be keen to surrender the lease as soon as possible in order to minimise this liability. In time, it will be interesting to see what the benchmark for 'reducing the risk as much as possible' is that allows the surrender to occur.

The Act provides that upon surrender of a GHG lease, ownership of the carbon dioxide stored in the GHG reservoirs passes to the state. With ownership, one would argue that primary responsibility and liability for the stored carbon dioxide passes to the state at that point in time. However, potentially there is still residual liability resting with the former GHG lease holder, as the state does not indemnify the lease holder from such potential liability, and there is no absolute release from liability provided for in the Act. On the contrary, the Act specifically provides that the Act does not affect or limit a civil right or remedy that exists apart from the Act, whether at common law or otherwise and, further, that demonstrating compliance with the Act does not necessarily show that a civil obligation that might exist apart from the Act has been satisfied. Such a provision will give little comfort to a GHG storage operator who is concerned about long-term liabilities.

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Enhanced petroleum recovery

The Act provides that exploration for GHG reservoirs, and use of such reservoirs for storage of carbon dioxide, can only be undertaken according to the tenures issued under the Act.

However, the petroleum industry will be relieved to see that the Act does recognise an exception to this regarding enhanced petroleum recovery – ie the practice of injecting carbon dioxide into a reservoir to enhance petroleum recovery is still permitted if a person is appropriately authorised under the state's petroleum legislation.

Notably, the Act does not give any preferential right to a GHG permit or lease to the holder of an existing, but different type, of tenure – eg a petroleum lease holder.

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Tenure security for existing tenement holders

Existing mining and petroleum tenement holders will be particularly interested in the provisions of the Act relating to overlapping tenements, and priority between tenements.

There is a lot of detail in the Act in this regard, as well as substantial amendments to existing mining and petroleum legislation, but, in short, the key principles are:

  • The Act allows for the granting of GHG tenements that overlap existing mining and petroleum tenements and geothermal exploration permits.
  • Existing mining/petroleum tenement holders have an ability to make submissions in response to a GHG lease application that will overlap their tenements, but ultimately it is up to the minister's discretion. This discretion is very broad and involves the minister taking into account the 'public interest', which is defined very broadly and includes considerations such as government policy, environmental impacts and social impacts.
  • Where a GHG lease is sought over an area subject to a mining or petroleum exploration tenement, a process similar to the existing 'preference decision' regime that applies to overlapping coal and petroleum tenements is provided for – there is an opportunity for submissions to be made if there are competing arguments as to which GHG, mining, or petroleum operation should be given preference, with the minister ultimately having the discretion to decide to which activity preference will be given. Unlike the coal/petroleum regime, there is no interim reference to the Land Court for a recommendation – the matter proceeds directly to the minister.
  • The Act does provide for 'coordination arrangements' between overlapping leaseholders, but a significant divergence from the coal/petroleum overlapping tenure regime, and the one that raises the most significant tenure security concern for existing mining and petroleum tenement holders, is that the minister is able to grant a GHG lease that overlaps an existing mining or petroleum lease without there necessarily being any agreed 'coordination arrangement' between the respective tenement holders, and without the existing leaseholder's consent.
  • Equally as curious is that where overlapping tenements have been granted as a result of the parties first agreeing on a coordination arrangement (which would outline how their operations would interact), the minister has unilateral power to cancel that coordination arrangement; this does not impact on the leases themselves, which remain on foot. This could compromise an existing leaseholder who has only agreed to an overlapping GHG lease being granted on the basis of conditions set out in a coordination arrangement.

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Information availability

The Act imposes information disclosure requirements on a GHG tenement holder - eg providing the Government with injection and monitoring reports and exploration data.

Similar to the provisions in the P&G Act, information that a GHG tenure holder must disclose to the Government has the potential to become public after a certain period of time. These periods are to be prescribed by regulations (which have not yet been released); however, the time frames under the P&G Act after which information can become public are generally between two and five years.

The Act does not otherwise provide for additional information disclosure requirements on petroleum tenure holders under the P&G Act.

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Water

In carrying out activities, GHG permit and lease holders need to take into account potential groundwater issues. Before the minister can approve work programs for GHG permits and development plans for GHG leases, the program/plan must be referred to the minister administering the Water Act 2000 (Qld) for approval, to ensure that the program/plan does not have an undue or adverse impact on groundwater.

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Conclusion

Carbon capture and storage is in its infancy as an industry, but the introduction of this Act paves the way for carbon capture and storage aspirants to begin exploration activities locating potential reservoirs, and perhaps, in the near future, commencing carbon storage activities.

Published 2 March 2009

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