Ian Havercroft – Global CCS Institute – Long-term liability of CCS Business
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Transcript of Ian Havercroft – Global CCS Institute – Long-term liability of CCS Business
GLOBAL CCS INSTITUTE
Long-term liability of CCS Business
Japan Regional Members’ Meeting 2012
Ian Havercroft, Senior Advisor – CCS Regulations
WWW.GLOBALCCSINSTITUTE.COM
GLOBAL CCS INSTITUTE
OVERVIEW
I. Consider the role of law and regulation in addressing
liability for CCS operations.
II. Provide examples of how emerging legal and
regulatory regimes have considered operational and
long-term liability.
III. Offer some project-level perspectives on liability.
IV. Conclusions and observations.
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GLOBAL CCS INSTITUTE
ROLE OF LAW AND REGULATION
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GLOBAL CCS INSTITUTE
REGULATING LONG-TERM LIABILITIES
Law and regulation will be required to address many
factors within workable regulatory regimes.
Regulators required to strike an intricate balance, which:
- ensures a high level of environmental protection and
public confidence;
- establishes unambiguous legislation and guidance;
- enables investment decisions to be made;
- provides sufficient flexibility for operators; and
- addresses several potential categories of harm.
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GLOBAL CCS INSTITUTE
EXPERIENCE AND PRACTICE
Broad experience with components of the technology
and associated processes – capture, transport and
injection.
Historic regulation of technological and commercial
analogues.
Contemporary examples anticipate the long-term
stability of stored CO2.
Some risks and costs associated with the likelihood of
catastrophic incidents, subsurface remediation and
environmental damage are relatively well-characterised.
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GLOBAL CCS INSTITUTE
NOVEL CHARACTERISTICS AND
ASSOCIATED RISKS
Long timescales associated with the storage aspect
remain a novelty.
Regimes may be required to address:
- the remediation of leakage events far into the future;
- insolvencies or mergers of the original commercial
entities involved; and
- remediation under domestic or supra-national climate
change agreements.
Difficulty in regulating for an acceptable level of risk –
particularly from a public perspective.
Use of analogues is limited to an extent.
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GLOBAL CCS INSTITUTE
EMERGING LIABILITY REGIMES
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GLOBAL CCS INSTITUTE
DEVELOPMENT OF LEGAL AND
REGULATORY REGIMES
Development in recent years of legislation to address the
full-chain, or discrete aspects of the CCS process.
New proposals for liability regimes which govern the
operation and/or closure of a storage site.
A limited number of these regimes address the issue of
‘post-closure’ liability.
The ‘post-closure transfer’ of liability from operator to the
State has become a practical solution for some
jurisdictions.
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TYPES OF LIABILITY
Liability imposed under CCS regulatory regime.
- Compliance with a permit.
Civil or common law liabilities.
- Trespass, nuisance, personal injury.
‘Climate’ damage.
- Requiring the surrender of allowances or credits.
Environmental damage under wider laws and regulations.
- Water, soil, waste, habitats, species and public health.
Financial responsibilities under legislation.
- Provision of financial security.
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LIABILITY AND THE PROJECT
LIFE-CYCLE
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Exploration and Characterisation
Operation Closure Post-Closure
Monitoring by the operator
All liabilities borne by the operator
Responsibility of the Authority
(Some) Liabilities borne
by Authority
GLOBAL CCS INSTITUTE
EU STORAGE DIRECTIVE
Directive entered into force in 2009 and is required to be
transposed by individual EU Member States.
A legal framework aimed at managing the risks of
storage, which addresses:
- relationship of CCS with wider EU Law;
- the selection of storage sites;
- permitting of storage operations;
- monitoring and verification;
- a framework for liability; and
- post-closure responsibilities for storage sites.
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GLOBAL CCS INSTITUTE
LIABILITY REGIME – OPERATIONAL
PHASE
Operator to remain liable throughout the storage process
and to the point of transfer for:
- monitoring and ‘corrective measures’;
- preventative and remedial action;
- surrender of allowances under the EU ETS; and
- civil or common law actions.
Financial security required to meet ‘all obligations under
the permit’.
‘Closure’ obligations to be borne by the operator.
- Includes ‘post-closure’ monitoring responsibilities.
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GLOBAL CCS INSTITUTE
TRANSFER AND POST-CLOSURE PHASE
Transfer of responsibility for storage site – from the
operator to the State:
- four criteria which are to be met to enable the transfer;
and
- further clarification provided in Guidance Documents
(GD3).
However, not necessarily a transfer of all liabilities.
- Potential to recoup ‘costs incurred’.
- Liability to continue under the common law.
- Member State legislation.
For the operator, a shift from ‘strict liability’ to a ‘fault-
based’ standard.
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GLOBAL CCS INSTITUTE
AUSTRALIAN COMMONWEALTH AND
STATE REGIMES
Federal offshore legislation adopts a similar format to the
EU legislation.
- Storage activities included within the offshore petroleum
regime.
- Upon completion of injection the operator bears a
number of obligations.
- ‘Site Closure Certificate’ → ‘Closure assurance period’.
- Post-transfer the operator indemnified against specific
liabilities.
However, there may be other liabilities which fall outside
of this transfer. 13
GLOBAL CCS INSTITUTE
QUEENSLAND ONSHORE ACT
Different approach to liability from the Commonwealth
Act.
Storage formation is owned by the State of Queensland.
Whilst in possession of a GHG tenure – Operator to be
liable for any damage or injuries resulting from
operations.
Broad powers for the State to recover costs from operator
during operational phase.
Upon surrender/cancellation of authority, injected CO2 to
become property of State.
Operator will be liable under the common law in
perpetuity. 14
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PROJECT-LEVEL EXPERIENCES
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STATUS REPORT 2011
Table 1 …
Don’t use white text on coloured backgrounds
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GLOBAL CCS INSTITUTE
STATUS REPORT 2011 – PROJECT-LEVEL
OBSERVATIONS
Focusing upon long-term liability is the wrong approach –
getting site selection right is more important.
It will be more important to agree the criteria for the
transfer of liability, than the timeframe for the transfer.
Operators need to be responsible for a finite period of time
before transfer to the State.
The availability of financial guarantees and insurance for
the long term is critical.
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GLOBAL CCS INSTITUTE
INSTITUTE-SUPPORTED PROJECTS
Significance of liability reflected in many of the reports
from projects supported by the Institute.
The design of long-term liability regimes is highlighted as
critical.
- Particularly with regard to the post-closure phase.
Reports also suggest that further clarity is required in
many areas.
There may be jurisdictional-specific liabilities which
regulators will have to consider.
- Fishing rights in the maritime area.
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GLOBAL CCS INSTITUTE
CONCLUSIONS AND OBSERVATIONS
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GLOBAL CCS INSTITUTE
CONCLUSIONS AND OBSERVATIONS
CCS requires regulators to consider some innovative
approaches to liability.
Novel risks and types of harm to be addressed.
Many of the liability regimes remain at a formative stage.
- Legislation is still in a framework format.
- Inconsistent approach globally, although many
similarities.
Development of secondary legislation and guidance to
provide further detail is emerging.
- Transposition processes (e.g EU).
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GLOBAL CCS INSTITUTE
CONCLUSIONS AND OBSERVATIONS
It is clear industry will require further assurances.
- High levels of up-front investment required.
- Projects continue to cite liability as a critical issue.
A range of associated issues have yet to be fully
addressed.
- Availability of insurance products.
- The format of financial security.
- How emissions allowances/carbon credits will be
managed.
Institute has an important role in addressing these issues.
- Future and ongoing work plans.
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