UK: Carbon Capture And Storage: An Update

Last Updated: 14 October 2011
Article by Munir Hassan and Judith Aldersey-Williams

The Energy Act 2008 ("Energy Act") established a legislative basis in the UK for permitting the offshore storage of carbon dioxide. On 25 September 2009, the Department of Energy and Climate Change ("DECC") issued a consultation document setting out proposals for an appropriate licensing system, together with draft licensing regulations, which also implemented much of the Carbon Capture and Storage Directive (2009/31/EC) ("CCS Directive").  The resulting legislation was The Storage of Carbon Dioxide (Licensing etc.) Regulations 2010 ("2010 Regulations"), which came into force in October 2010.

The 2010 Regulations establish a licensing regime for offshore carbon capture storage activities within the territorial sea and the gas importation and storage zones. Scotland has adopted a separate licensing framework for carbon capture storage operations undertaken in its territorial waters. The 2010 Regulations partially fulfil the UK's obligation to transpose the CCS Directive into UK law.  In general, the 2010 Regulations transpose: the requirements to be fulfilled for the granting of a storage licence and a storage permit by the Secretary of State and the scope of these permissions; the information to be included in the public register, and; the obligations of the storage operator and financial security requirements.

There have since been further regulatory developments in this area which were not the subject of formal consultations by DECC.  These are the Storage of Carbon Dioxide (Termination of Licences) Regulations 2011 and the draft Storage of Carbon Dioxide (Inspections) Regulations 2011. 

Recent Developments

The Storage of Carbon Dioxide (Termination of Licences) Regulations 2011

Towards the end of 2010, DECC issued an informal consultation (DECC Informal Consultation: The Carbon Dioxide Storage Licence Termination Regulations) setting out proposals for transposing certain provisions of the CCS Directive yet to be addressed in the UK.  On 11 July 2011, the Storage of Carbon Dioxide (Termination of Licences) Regulations 2011 ("Termination Regulations") came into force.  The Termination Regulations transpose Articles 18 (Transfer of Responsibility) and 20 (Financial Mechanism) of the CCS Directive into UK domestic law.

The Termination Regulations set out the provisions relating to the transfer of responsibility to the competent authority (in this case the Secretary of State) and sets out various obligations that must be met before the authority takes over responsibility for the storage site from the operator, e.g. a minimum period of 20 years must have lapsed after closure of the storage site unless the authority is convinced that the stored carbon dioxide has been completely and permanently contained before this period.  The Termination Regulations also provides that the operator must make a financial contribution to the competent authority before transferring responsibility, which should cover as a minimum, monitoring costs for a period of 30 years.

Please click here for a copy of the regulations 

The draft Storage of Carbon Dioxide (Inspections) Regulations 2011

DECC has now progressed with the draft Storage of Carbon Dioxide (Inspections) Regulations 2011 ("Draft Regulations"), which amend the 2010 Regulations by implementing Article 15 (Inspection) of the CCS Directive into UK law.  The Draft Regulations require the competent authority to carry out routine inspections and non-routine inspections of all storage complexes.  Inspections must include an examination of the surface installations and the effects on the environment and on human health.  Routine inspections must be carried out at least once a year until three years after closure of the storage site and every five years until responsibility for the site has been transferred to the competent authority.  Following each inspection, the competent authority is required prepare a report (to be publicly available) setting out the results of the inspection.  Equivalent amendments will also be made to the Scottish carbon dioxide storage licensing regulations.

Please click here for a copy of the Draft Regulations 

In addition, another regulation concerning third party access under Chapter 5 of the CCS Directive has been agreed, but has not yet been passed and the Government has yet to publish further detail certain aspects of the CCS regime, for example concerning financial security.

The deadline for the transposition of the CCS Directive passed on 25 July 2011. The European Commission has recently suggested that it may bring enforcement proceedings against member states who have failed to implement the CCS Directive fully. Although not conclusive, the national provisions taken by member states which have been communicated to the European Commission indicate that the UK is well ahead of some other member states in implementing the CCS Directive, in line with Government policy to be at the forefront of the new technology.

Please click here for the national provisions communicated to the European Commission 

Funding

Applications for the New Entrant Funding for CCS and renewable projects provided by the European Investment Bank ("NER300") closed in May 2011.  The funds will be raised by the European Commission granting 300 million EU emissions allowances. Seven UK CCS projects applied for NER300, representing over half of the CCS applications received. The UK was the only country to have applications across all three power generation categories, namely pre-combustion, post-combustion and oxyfuel. In fact, the three UK projects were the only applications received in the pre-combustion category.  The decision on the NER 300 funding is expected in the last quarter of 2012, with the selected projects expected to commence from 2016 onwards.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 07/10/2011.

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