Legal aspects of geosequestration

Introduction

Carbon capture and storage (CCS) is the process whereby carbon dioxide (CO2) is captured at point sources such as power stations, liquefied, transported (typically by pipeline) and injected into deep underground or undersea geological formations such as saline aquifers, non-mineable coal seams and depleted oil and gas reserves, where the stored CO2 is expected to remain for geological periods of time measured in the hundreds of thousands or even millions of years.

‘Geosequestration’ is often used as a synonym for CCS. However, the term can be used in a narrower or a wider sense. The narrower sense confines use of the term ‘geosequestration’ to CCS carried on under the ground (but not under the seabed). The wider sense extends the use of the term to geological sequestration of substances other than CO2.

For the purposes of the present paper, we will use the terms CCS and geosequestration interchangeably, merely noting that this is a somewhat imprecise usage.

CCS is considered to be a technology that will have an important role to play, in conjunction with other measures such as fuel switching, renewables, energy efficiency, demand-side abatement and perhaps nuclear energy, in achieving a reduction in the level of increase of atmospheric CO2 as part of the global effort to combat dangerous levels of climate change.

Indeed, CCS may have a unique (if controversial) role to play because it is the only technology currently ‘on the table’ which is compatible with the continued large-scale use of fossil fuels.

This paper does not aspire to be an exhaustive statement of the legal issues raised by the prospect of CCS. However, it is hoped that the paper will give at least an impression of some of the challenges posed by CCS to the current legal landscape.

Technology and potential

Geosequestration is not a new technology.

For more than 25 years, the oil and gas industry, particularly in the United States and parts of Europe, has been injecting CO2 into operational oil reservoirs as part of a technique of enhanced oil recovery (EOR), which is designed to increase the mobility of the underground oil. Enhanced coalbed methane recovery (ECBM) and enhanced gas recovery (EGR) also use injected CO2 to push and extract gas in geological formations.

In North America alone, approximately 20–30 million tonnes of CO2 are injected annually in the course of EOR operations.

In many of these cases, much of the CO2 remains trapped in the underground formation. However, storing CO2 is not the primary aim of the exercise, and indeed in most cases the operators actually purchase CO2 for this purpose.

In addition, many operations, particularly in western Canada, have for the past 30 years injected ‘acid gas’ (a mixture of CO2 and hydrogen sulphide), which is a normal by-product of natural gas recovery from certain fields, and which would otherwise be flared into the atmosphere.

In Australia, a similar technique is proposed to be used to inject into a saline aquifer below Barrow Island the CO2 component of acid gas from the Gorgon Field natural gas project in the North-West Shelf, expected to amount to some 2.7 million tonnes of CO2 per year. A similar project at a relatively advanced stage of development is the CO2CRC Otway Project in the Victoria’s Otway Basin.

The potential capacity for removing CO2 that would otherwise enter the atmosphere by means of CCS is very large, as the following table shows:

These figures can be compared with an estimate of the amount of CO2 that is expected to be emitted worldwide during the period of 2000–2010: close to 30 gigatonnes (Gt) per year.¹

Issues summary

Currently, Australia (like other nations) does not have a comprehensive regulatory and legal regime designed to enable the use of CCS. However, the Federal Government and some state governments have begun moves to address certain legal aspects of CCS, as will be discussed below.

Onshore CCS raises legal issues in relation to:

• property in the various elements of CCS from capture, through transportation and injection, to storage
• interaction with land law
• access to appropriate sites and facilities
• interaction with non-CCS petroleum and minerals titles
• monitoring and liability in the long term after closure of the injection site, and
• the place of CCS in the planned Australian emissions trading system.

Offshore CCS raises many of the same issues and, in addition, issues which arise in relation to the obligations that Australia has undertaken under international treaties relating to the protection of the marine environment.

This paper will deal briefly with the principal issues that arise specifically in relation to offshore CCS, but will concentrate primarily on onshore CCS.

Offshore CCS: The international dimension

The primary international legal instruments which are engaged in any proposal for offshore CCS are the following:

• United Nations Convention on the Law of the Sea 1982 (UNCLOS)
• Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 1972 (London Convention)
• Protocol to the London Convention 1996 (London Protocol), which entered into force on 24 March 2006, and
• the United Nations Framework Convention on Climate Change 1992 (UNFCCC) and the Protocol to the UNFCCC 1997 (Kyoto Protocol).

In addition, the Convention for the Protection of the Marine Environment of the North-East Atlantic 1992 (OSPAR or Oslo-Paris Convention) is relevant for states bordering on the North Atlantic Ocean.

These international treaties affect the subject matter of CCS in the following broad ways.

UNCLOS is concerned principally with laying down the broad principles of international law applying to the oceans, and in particular with the definitions of a state’s territorial sea (from the coast out to 12 nautical miles), its exclusive economic zone or EEZ (out to 200 nautical miles), and the high seas (beyond 200 nautical miles).

The UNFCCC and the Kyoto Protocol are principally concerned with the stabilisation of the concentration of greenhouse gases in the atmosphere, and the latter imposes obligations on developed-nation signatories (which do not include the United States and Australia) to achieve, during the 2008–2012 compliance period, stated reductions in emissions of those gases relative to 1990 levels. However, neither the UNFCCC nor the mechanisms under the Kyoto Protocol presently deal with CCS. The technology is neither expressly included or excluded, in part because of a lack of agreed greenhouse accounting methodologies which would be applicable to CCS.

The London Convention is concerned to protect the marine environment from human activities. However, the London Convention applies primarily to the water column itself and not to the seabed or its subsoil, so it may have little application to CCS (unless the storage of CO2 in the seabed is thought to pose a risk to the water column).

The London Protocol extends the provisions of the London Convention so as to prohibit, amongst other things, the storage of ‘wastes or other matter’ in the seabed. ‘Wastes or other matter’ is defined as ‘material and substance of any kind, form or description’. The Protocol includes in its Annex 1 a ‘reverse list’ of exceptions, substances that are not subject to the Protocol’s prohibitions.

Until November 2006, Annex 1 to the London Protocol did not include CO2. At that time, on Australia’s proposal, the parties to the London Protocol unanimously adopted an amendment that placed within the list of excepted substances: ‘Carbon dioxide streams from carbon dioxide capture processes for sequestration.’ The amendment came into force in February 2007. On 4 September 2007, President Bush transmitted to the United States Senate a message recommending the ratification of the London Protocol.

It is expected that the passage of this amendment will facilitate a similar amendment to the OSPAR Convention, at which point, a rudimentary international framework allowing for offshore CCS will be in place.

There remain, however, deficiencies and areas of lack of clarity under the London Protocol.

One is that the London Protocol applies only to dumping from vessels, aircraft, and man-made structures at sea, such as platforms. It does not apply to ‘sub-seabed repositories accessed only from land’. In other words, offshore CCS in the seabed via a pipeline from land would not fall under the London Protocol.

Also excluded from the operation of the London Protocol is the disposal or storage (whether in the seabed or the water column itself) of wastes associated with the offshore processing of seabed mineral resources. It is this carve-out which allowed the Sleipner Project in the North Sea to operate since 1996, before the entry into force of the amendment which allows for under-seabed CCS. The Sleipner Project was an exception because the CO2 sequestered in the seabed was a byproduct of natural gas retrieval.

It can be expected that these anomalies will be the subject of further negotiation between states.

The remainder of this paper will not consider any further issues specifically raised by offshore CCS.

Capture

The capture of CO2 from point sources such as power stations is at present one of the primary economic barriers to the large-scale deployment of CCS.

In legal terms, however, the main issue will be to clarify the ownership of the captured CO2. There do not seem to be any particular difficulties in the way of parties making appropriate provisions for this among themselves. However, as noted below, there may be merit in an across-the-board regulated approach to the ownership of CO2 and the associate sites and facilities that are involved in CCS.

Transportation

The transportation of commercial quantities of CO2 from point sources such as power stations to the geological formations in which the CO2 will ultimately be stored can realistically be done only via pipeline.

Pipelines are a form of ‘linear infrastructure’ and such receive special legislative treatment so that their construction and maintenance is not entirely dependant on voluntary agreements between their operators and the landowners over whose land the pipelines must pass. Without such special legislative treatment, it would be difficult and risky to commit to constructing a pipeline of any considerable length.

The various state and territory jurisdictions differ as to whether their legislation to facilitate the construction and operation of pipelines is specifically keyed to particular substances (in particular, petroleum including gas). In New South Wales, for example, the Pipelines Act 1957 is not tied to the transportation of any specific substance. On the other hand, prior to its amendment by the Barrow Island Act 2003 (WA), the applicable Western Australian legislation, the Petroleum Pipelines Act 1969 (WA), applied only to pipelines for the transportation of petroleum. Those amendments changed the definitions of ‘petroleum’ and ‘pipeline’ so as to bring within the legislative regime a pipeline specifically for the purpose of transporting carbon dioxide from the Gorgon Field to Barrow Island, in furtherance of the Gorgon Project. By way of contrast, the South Australian Petroleum Act 2000 (SA) now includes CO2 as a regulated substance which can be transported by licensed transmission pipeline.

Clearly, then, harmonisation and generalisation of the laws relating to pipelines will be required in several jurisdictions, but no serious impediment to pipeline transportation for the purposes of CCS appears to exist.

Injection and short-term storage

Injection of CO2 into underground geological formations raises issues in relation to ownership, access, and competing uses.

Ownership

Ownership of sequestered CO2 will be an important issue as it will underpin important legal and regulatory issues such as liability for environmental incidents, responsibility for monitoring and any future rights to access the sequestered CO2 (if this were desirable at some future time).

The general rule in most Australian jurisdictions is that ownership of minerals and petroleum in the ground vests in the Crown, and not any private owner of the relevant land. Specific legislative regimes are then created which allow for exploration and extraction, and ultimately title to the extracted material to be transferred to the relevant operator.

Some jurisdictions have made specific provision for the case where ‘petroleum’ or ‘minerals’ have come to be under the ground because they were placed there. For example, under the Victorian Petroleum Act 1998 (Vic), the Crown owns all petroleum on or below the surface of any land in Victoria that came to be on or below that surface without human assistance.

An important issue, therefore, will be to ensure that the various jurisdictions are harmonised so that geologically sequestered CO2 either does or does not, uniformly, fall within the definition of ‘petroleum’ or ‘minerals’ and therefore does, or does not, automatically vest in the Crown.
If title to the sequestered CO2 does not automatically vest in the Crown, then, unless express legislative provision is made, title will presumably vest in the relevant landowner under the common law of fixtures. If title is to vest instead with (say) the injector of the CO2, legislation will be necessary to accomplish this.

This gives rise to another question: What if more than a single operator wishes to inject CO2 into the same geological formation? In that case, arrangements will need to be made so as to effect an appropriate identification or apportionment of the CO2 injected by different entities.

Access

An entity wishing to sequester CO2 underground would need to obtain a right to access and use the necessary land, for example by buying it or by acquiring some right of access from the owner. This would be necessary in the case of land that includes the geological formation in which the CO2 will be sequestered and (where different) also land that includes the injection site.

While such private arrangements may be sufficient in the case of relatively small-scale demonstration projects, for large-scale commercial CCS it is unlikely that such arrangements will be satisfactory.

Accordingly, consideration will have to be given to establishing a regulatory regime which gives CCS proponents some certainty of access while at the same time achieving a balance with the rights of landowners. Presumably, the types of arrangements that are seen in state mining and petroleum production regimes could provide the basis for appropriate arrangements. The regime might include provision for compulsory access, with compensation, to CCS sites in much the same way as petroleum and mining exploration and production licences provide for such compulsory access, with appropriate carve-outs for residential sites and the like.

As with the regimes controlling access to sites for mining and petroleum activities, consideration will also have to be given to providing a mechanism for determining priority between parties competing for access to CCS sites and facilities.
It has been suggested in a submission to a Victorian inquiry looking into the prospects for CCS in relation to Latrobe Valley brown coal, for example, that priority in this regard should be given to existing oil and gas companies.²  Obviously, other arrangements could be made as well.

Competing uses

It has already been noted that many of the sites that would be seem to be suitable for CCS are also sites where oil, gas and coalseam methane exploration and production activities are being undertaken.

The issue is already addressed in some state legislation that provides for competition for access to land as between explorers and producers of petroleum on the one hand and coal on the other. For example, in Queensland the Petroleum and Gas (Production and Safety) Act 2004 (Qld) provides a regime for determining priority among competing coal and natural gas resource development applications in respect of an underlying parcel of land. Likewise, in New South Wales, the Mining Act 1992 (NSW) and the Petroleum (Onshore) Act 1997 (NSW) contain provisions which allow the relevant minister to arbitrate disputes as between petroleum and coal explorers and producers.

Consideration will therefore have to be given as to whether CCS should be brought within the ambit of existing mining and petroleum legislation or whether separate arrangements for CCS should be made.

One proposal: Regulated ownership

One proposal that has been made to address several of the issues mentioned above is that special-purpose regulation should provide for the separate ownership (or rights of use) of each of the following:³

• the CO2 itself (both before and after injection)
• the pipelines and associated facilities used to transport the CO2
• the geological formation or pore space into which the CO2 is injected, and
• the plant and equipment used to inject the CO2.

Arguments made for such a regulated separation of ownership include the following:

• without express legislative arrangements, the ownership of injected CO2, and quite possibly also of the plant and equipment used to inject it, will pass to the owner of the land under the common law doctrine of fixtures
• persons investing in plant and equipment for the purpose of injecting CO2 will wish to be able to finance their activities by granting security over that plant and equipment, and will also wish to be able to depreciate their equipment and take advantage of other taxation benefits
• separate ownership would assist in establishing third-party access arrangements to pipelines, geological formations, and injecting plant and equipment, and
• separate ownership of the stored CO2 would facilitate arrangements for removing the CO2 if that ever proves necessary (for example, because of problems with the storage facility) or desirable (for example, for the purposes of scientific testing of the interaction between the stored CO2 and its environment).

This proposal is interesting as much for the potential problems that it highlights as for the solutions that it proposes.

Liability for long-term storage

Perhaps the most contentious issue in relation to CCS concerns long-term responsibility for the sequestered CO2. As mentioned above, CO2 sequestered in geological formations is expected to remain there for geological periods of time. This is so for at least two reasons:

• as a response to mitigating climate change, CCS would be pointless if the sequestered CO2 were re-released into the atmosphere at any time in the relatively near future, and
• any rapid release of substantial amounts of CO2 could have disastrous effects on health and the environment, as shown by the outgassing of 1.6 million tonnes of CO2 from Lake Nyos in Cameroon on 21 August 1986, which suffocated approximately 1,700 people within 20km of the lake, as well as injuring many others.⁴
  Apart from in extremis scenarios such as the Lake Nyos disaster, other potential long-term problems from CCS sites include:
• slower leakage contributing to global greenhouse gas emissions
• pressure from the stored CO2 pushing salt and water upwards, effectively raising the water table, and
• pressure causing toxic minerals in the soil to move until they become exposed and capable of causing harm.

Because of the long timeframes involved, this is an area where comparisons with mining and petroleum regimes are not particularly apt. In those cases, the operator’s responsibility for a site generally ends once the site has been rehabilitated to the satisfaction of the regulator, after which government assumes responsibility for the site (perhaps subject to a requirement for some form of financial security to manage post-closure risks and liabilities). As CCS does not have any definite closure date, there is no exact parallel to the mining and petroleum situation.
It seems clear nevertheless that, other things being equal, governments would prefer that proponents of CCS projects take responsibility for them from start to finish. Equally, it is clear that few proponents would be happy to accept responsibility over such a long period. Indeed, there is nothing so far in historical experience to suggest the continued existence of a corporation over the periods involved, so that assigning responsibility to the proponent or operator might prove to be a purely theoretical move in any event. (One might add that there is likewise no experience of the continued existence over such long periods of the nation-state itself.)

Long-term responsibility may involve not merely a ‘passive’ acceptance of liability in the event that some harm comes about, but an active duty to perform ongoing monitoring. Such ongoing monitoring would involve ongoing costs.

In addition, and especially if proposals for separate ownership and/or access along the lines of those suggested above are adopted, there will arise the question of long-term liability between and amongst the owners of the CO2, the geological formation, the underlying land tenure, and perhaps even the injecting plant and machinery (for example, if an accident is found to result in a flaw in the injecting process itself).

Clearly, many strategies can be devised for dealing with this set of contingencies. For example, the report of the House of Representatives’ inquiry into the science of geosequestration recommended that financial liability and monitoring at CCS sites should be divided between three phases:⁵

• util the end of injection operations, and for some subsequent length of time, responsibility should rest entirely on industry operators
• for a further period to be determined, responsibility should be shared equally between industry operators and government, and
• after that intermediate period, responsibility should be transferred to government in perpetuity.

Unsurprisingly, other submissions to that inquiry expressed different views. For example, several private corporations expressed a preference for government to assume responsibility as soon as a site is closed for injection. On the other hand, several non-government groups expressed a preference for private operators to assume responsibility in perpetuity. These issues will need to be settled, and in a way that bolsters public confidence but at the same time does not provide an insuperable hurdle to investment, before any large-scale CCS activities can be undertaken in this country.

CCS and emissions reporting and trading

Both sides of Federal politics are now committed to the introduction of an Australia-wide emissions trading system. Partly with that end in view, the current Federal Government has also secured the passage of the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act), which:

• obliges a range of corporate entities to disclose their greenhouse emissions and their consumption and production of energy above certain thresholds, and
• allows entities to report on activities that remove or reduce greenhouse gases.

These moves, and particularly the introduction of an emissions trading system, will have important legal implications for CCS activities.

In particular, it seems inevitable that under an emissions trading system, the sequestration of CO2 will be a valuable economic resource. The question that will therefore arise is, who obtains the benefit (from an emissions trading perspective) of the sequestered CO2?

It can be anticipated that various players in the CCS chain will vigorously contest this issue.

For example, the operators of a coal-fired power plant to which a CO2-extraction unit is attached will presumably wish to claim the benefit of the abatement due to that unit: that is, they will claim that the CO2 captured by that process is not being emitted into the atmosphere and therefore should not be accounted a relevant emission from their operation.

But if that is so, then, under the general principle that emissions abatement cannot be counted twice, none of the other operators in the CCS chain (including the operators of the pipelines and injecting equipment and the owners of the sequestered CO2, the CCS site, the underlying land tenure, and so forth) will be able to claim for themselves as an emissions offset the CO2 sequestered as a result of the CCS activity. Clearly this would have an important impact on the economics of CCS.

At present, while inquiries and consultation processes concerning the details of emissions reporting and trading are underway but have been effectively stalled because of the Federal election, there is a great lack of clarity around issues such as these. They will need to be resolved in the relatively near term.

Recent and current governmental inquiries and processes

There have recently been within Australia a number of government inquiries and processes designed (sometimes only in part) to facilitate, or at least explore, various aspects of CCS. They include the following:

• In October 2007, the Federal Government released its discussion paper National Greenhouse and Energy Reporting System: Regulations Discussion Paper, concerning the drafting of regulations under the NGER Act and dealing tangentially with CCS.
• In September 2007, the Department of Industry, Tourism and Resources released a draft of its Report on the Consolidation of Regulations under the Petroleum (Submerged Lands) Act 1967.
• In August 2007, the House of Representatives Standing Committee on Science and Innovation released a paper entitled Between a rock and a hard place: The science of geosequestration as the culmination of its inquiry into scientific, environmental, economic and regulatory aspects of geosequestration technology.
• Also in August 2007, the Victorian Department of Primary Industries released an issues paper, Strategic Policy Framework for Near Zero Emissions from Latrobe Valley Brown Coal, which considered (among other things) options for facilitating the use of CCS to enable continued exploitation of Victoria’s brown coal resources with minimum greenhouse gas emissions.
• Also in 2007, the Queensland Department of Mines and Energy released a discussion paper, Carbon dioxide geosequestration tenure administration, which proposed for discussion a legislative model and possible tenure mechanisms to support CCS under the relevant Queensland legislation.
• In December 2006, the Government of South Australia released a Green Paper on Proposed Amendments to the Petroleum Act 2000, where the proposed amendments are designed to address CCS.

While these initiatives and processes are important, it is notable that no inquiry is currently underway or proposed that would examine in a global way the whole range of legal issues that must be addressed before commercial CCS in Australia will be feasible.

Endnotes

1.   Source: ‘Prospects for CO2 Capture and Storage’, International Energy Agency (OECD), 2004.
2.   Submission dated 2 October 2007 by Santos Limited in response to the Victorian Department of Primary Industries’ issues paper Strategic Policy Framework for Near Zero Emissions from Latrobe Valley Brown Coal.
3.  Submission by Stanwell Corporation Limited to the House of Representatives Science and Innovation Committee Inquiry into the Science and Application of Geosequestration, 22 August 2006. Available at http://www.aph.gov.au/house/committee/scin/geosequestration/subs/sub32.pdf, accessed 15 November 2007.
4.  ‘ P J Baxter, M Kapila and D Mfonfu, ‘Lake Nyos disaster, Cameroon, 1986: the medical effects of large scale emission of carbon dioxide?’ (1989) 298(6685) BMJ 1437–1441.
5.  Between a Rock and a Hard Place, House of Representatives Standing Committee on Science and Innovation, August 2007, page 100.

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