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


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.

1


ROLE OF LAW AND REGULATION

2


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.

3


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.

4


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.

5


EMERGING LIABILITY REGIMES

6


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.

7


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.

8


LIABILITY AND THE PROJECT

LIFE-CYCLE

9

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


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.

10


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.

11


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.

12


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


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


PROJECT-LEVEL EXPERIENCES

15


STATUS REPORT 2011

Table 1 …

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16


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.

17


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.

18


CONCLUSIONS AND OBSERVATIONS

19



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).

20



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.

21


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ian havercroft – global ccs institute – long-term liability of ccs business

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