Carbon Capture and Storage ("CCS") is the process of capturing the Carbon Dioxide ("CO2") produced by power stations and transferring it to sub-seabed storage sites.

The Department of Energy and Climate Change has issued a Consultation document which sets out a proposed licensing framework. Regulations implementing the proposals contained in the Consultation are expected to enter into force in the second quarter of 2010.

The Consultation was opened on 25 September 2009 and will close on 30 December 2009. This can be viewed by clicking here.

Should you have any queries on the CCS Licensing Regime Consultation, including any assistance required in framing a Consultation response, or if you have a query relating to existing measures, please contact Martin Sales or Neil Amner for an initial discussion and indication of whether fuller advice might be appropriate.

Existing CCS law

A framework CCS legal regime already exists under:

  • Part 1 (Chapter 3) of the Energy Act 2008 (the "Act"); and
  • the Gas Importation and Storage Zone (Designation of Area) Order 2009

which between them make provision for CCS activities to be carried out in:

  • the territorial sea (up to 12 nautical miles out to sea); and
  • between 12 and 200 nautical miles out to see sea within the boundaries of the Gas Importation and Storage Zone (GISZ).

Project-specific legal regime

In brief, the legal regime for a CCS project will involve two main strands:

  1. Crown Estate Leases (in respect of the territorial sea) and Crown Estate Authorisations (in respect of the GISZ); and
  2. CO2 Storage Licences granted under the draft Storage of Carbon Dioxide (Licensing) Regulations 2010 which are set out as Annex B to the Consultation and which are expected to be the instrument that transposes the Carbon Capture and Storage Directive (2009/31/EC) into UK law.

The Consultation states that a Lease and corresponding Storage Licence will not be formally granted until the terms of each are agreed. This means negotiations with the Crown Estate and the licensing authority will need to be carried out contemporaneously.

Crown Estate Leases and Authorisations

The Crown Estate has the right to grant leases for activities occurring within the territorial sea and to grant authorisations for CCS activities within the GISZ. The Consultation document uses the term "Lease" to refer both to leases and authorisations. A developer would apply to the Crown Estate for a grant of contractual rights to carry out CCS activities on and underneath the sea-bed. The Consultation document confirms a Lease will be conditional upon the developer also applying to the licensing authority for a Storage Licence.

The Crown Estate's website states that draft standard leases can be requested from it by developers of proposed CO2 storage projects and that "rental ranges" are expected to be published "in the next few months."

The website further narrates how the Crown Estate intends to approach lease options for the various types of viable site. To locate this information, select "Marine" from the "Quick Find" option on the website's main page and then select "Offshore Gas Storage."

CO2 Storage Licences

Paragraph 5 of the Consultation's executive summary narrates the following regarding Storage Licences: "The proposed licence would have a similar structure to existing petroleum production licences. The licence once granted would convey a general permission to conduct intrusive exploration, subject to specific consent for the drilling of any well. It would convey an exclusive but time-limited right to apply for a storage permit. The storage permit in turn would convey permission to construct facilities, including any offshore installation which might be necessary, and to conduct storage operations. It would also provide the necessary legal framework for obligations to ensure that the storage operations will secure permanent geological containment of the carbon dioxide, that the facilities are properly decommissioned after use, and that the behaviour of the stored material is adequately monitored during and after storage operations"

The ability to obtain a Storage Licence for a specific site will be affected by the type of site in question (hydrocarbon or non-hydrocarbon) and whether it is a petroleum licensed hydrocarbon site or unlicensed hydrocarbon site. For example, the licensee of a site within an oil field that is still in production is expected to be able to seek a Storage Licence on an exclusive basis, provided they instigate the procedure "sufficiently early."

In any event, the Consultation document narrates the four stages of activity involved in a carbon storage development, the first two of which are optional (depending upon the developer's proposals and the type of site in question) and the third and fourth of which are mandatory in all cases. The Consultation document narrates each of these stages in greater detail

  1. Non-intrusive exploration;
  2. Intrusive exploration and test injection;
  3. Carbon Storage; and
  4. Post-closure phase.

It should also be noted that some form of financial Security for all of the obligations contained in a Storage Licence will need to be effected prior to injection of CO2 commencing.

Further details of proposed terms and conditions to be contained within a Storage Licence are provided within the Consultation document.

Licensing Authorities

The Scottish Ministers are licensing authority for the territorial sea adjacent to Scotland in respect of:

  • Carbon dioxide storage as an interim measure prior to disposal or for actual disposal
  • Conversion of a natural feature for storage of CO2, whether as an interim measure or for its actual permanent storage

The licensing authority for sites which "straddle" the boundary of the Scottish territorial sea can be either the Scottish Ministers or the Secretary of State. The Secretary of State is the licensing authority for all other relevant waters.

The Secretary of State and the Scottish Ministers can transfer their functions to a public body and it might be that Marine Scotland is a body to which the Scottish Ministers choose to transfer a number of functions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.