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Wednesday, 24 September 2008
Page: 5471

Senator HURLEY (12:15 PM) —I was chair of the Senate committee that considered the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and related bills. It followed on from the House of Representatives committee, chaired by the Hon. Dick Adams, which had extensive hearings on these bills and produced a very comprehensive report. These bills are very significant and, as has been pointed out by Senator Bishop, it is groundbreaking legislation in world terms.

The bills allow for the sequestration of carbon dioxide in offshore areas around Australia. Critically, they provide for a uniform national approach, which is something that is vital both for the industries that the bills will apply to and for the governments involved. It means that everyone understands the parameters of carbon capture and storage and that we have nationally uniform legislation to provide for safe and secure storage.

But we must remember in this debate that this is only one element of the government’s comprehensive plan for dealing with carbon. There are also the Carbon Pollution Reduction Scheme, which is being developed, the low-emissions coal scheme and we have also had an announcement by the Prime Minister on 19 September of a global carbon capture and storage initiative. It is very important that we recognise that this is part of a comprehensive strategy by the government, because this is not of course the sole answer to carbon emissions, and the government does not pretend that it is.

During our inquiry we received many submissions that talked about the problems of the amount of carbon being emitted—principally, we are talking in this instance of that from coal-fired power stations—and the comparative shortage of suitable areas for geological carbon sequestration. Indeed, the Victorian government were very concerned that they have access to suitable sites for their carbon sequestration needs. There were tensions between competing proposals to use the Australian sites that are suitable for this purpose.

Several pilot plants are already operational around the world and in Australia, principally Sleipner in Norway, which has been used for over 10 years for sequestering carbon from petroleum operations around Norway. That has been operating very well and without incident for over 10 years. It provides a good example of what is possible. We also have a pilot project here in South Australia in the Otway Basin. CO2CRC is operating that.

It appears that the technology for carbon sequestration is reasonably well understood. It has been operating at a pilot level and it has been operating as part of other chemical plant operations. For example, Senator Johnston, I think it was, referred to one in the United States, which was an onshore facility. We do know that this technology is possible and practical. The important thing now is to set in place the framework legislation that ensures everyone’s interests as much as possible. This is what the government has attempted to do. As was mentioned earlier, the previous minister, Mr Macfarlane, began this process and Mr Ferguson is now completing it.

The tension between the petroleum licence holders already operating in the offshore areas that are most likely to be prospective suitable geosequestration sites and others, particularly coal fired power station operators who may want to use this sequestration facility, is something that has occupied the attention of both the House committee and the Senate committee. The House committee went into quite a lot of detail about this. Therefore, in many ways, the Senate committee that I chaired did not have to go over that ground. It was clear that it was important that the operator shared information, that the government had expert advice and that there was fair distribution of the available sites. Whereas the legislation had to some extent provided that, I think the recommendation of both the House committee and the Senate committee that the government look to expert advice to deal with these competing interests is undoubtedly the best way to go, and the government was very open to that point of view.

I will not go back over ground that some of the other speakers have covered, but it is important to understand that existing petroleum and gas explorers that already have these offshore sites have their own carbon dioxide emissions and they are being given priority to ensure that they are able to sequester their own carbon dioxide if they have suitable sites on their exploration permits. Clearly, this is a logical step. In the Senate hearings we heard quite clearly from Woodside about the way in which they deal with the carbon dioxide which they need to remove from their gas in order to conduct their operations properly. It needs to be removed in order for them to produce LNG. So it makes sense that those operators can take their own carbon dioxide and sequester it in their own basins. That is clearly the most efficient way in terms of their technical operations and it also makes sense from an economic point of view.

We also had a great deal of evidence from other companies, and, indeed, from the Victorian government, that it was also important that petroleum and gas offshore operators did not unnecessarily withdraw from open source those areas that were potential carbon sequestration sources and that those other power stations and other operators who wanted to use those basins could have a way to get in there and not be shut out by the existing licence holders. We did hear from some licence holders that there may be a problem that if other people are operating in their exploration and operation areas then it may impact on their own operations. It may create safety considerations or it may cause some leakage into the area that they were looking in, whether for gas or petroleum.

So there are a number of competing interests here and it is certainly clear that the minister and the government need expert advice from a technical point of view and from a geological point of view about how to best resolve these competing interests. It seems clear that the best way to achieve this is for a minister to have expert advice through some kind of committee structure, which ensures that there is fair access for everyone.

Also it is important to ensure that when the operation is closed down it is closed down in the best way possible to ensure the safety and security of the basin which is used to store CO2 and perhaps other kinds of gases as well. It is important that, before the government gives that basin a closure certificate, the government has the expert advice that that is done in the best way possible. This basin may be there for a very long period of time and people need to be protected against possible accidents or adverse events or leakage from that basin.

That brings us to the very vexed issue of liability. The Senate committee were happy to accept most of the House committee’s report, but part of our reference pointed specifically to these issues of liability and that is what occupied a lot of our attention. Long-term liability was an issue of great contention and we heard evidence on both sides of the argument about whether the Commonwealth should assume the liability or whether the company should assume liability. Senator Milne made very well, I think, the arguments about why it is a problem. Companies must understand that it is their responsibility when making the application, first of all, to ensure that the carbon dioxide can be sequestered securely and that there are no long-term consequences from it. Once the closure certificate has been issued, it is also up to the company to ensure that that is maintained in the way described. Obviously where the company no longer exists—and we are looking at very long periods of time—and where there are problems then it would clearly fall to the government to address these issues. But the Senate inquiry specifically recommended that the government makes very clear that it will not under normal circumstances accept long-term liability for any problems that arise after the closure certificate.

In doing that, the committee clearly accepted that this may cause difficulties for companies. This is a technology that is clearly not operational other than in a pilot phase at this time—and hopefully it will move as quickly as possible into a fully operational system. But we do not yet know a lot of the difficulties companies will face—the cost of building pipelines, of drilling down, of doing environmental assessments, and of making the sites secure and safe; and that will be a costly process. They then have to look at getting insurance for a liability that will continue for a long time into the future. We did hear from the Otway Basin carbon dioxide CRC that they had some difficulty in getting insurance for their project.

This was not a decision that the committee took lightly, but in the end we did accept that the precedent of the Commonwealth accepting long-term liability for this kind of venture might have unforeseen consequences and we did also accept that the common law in this instance is well accepted, well developed and should cover the kinds of situations that we may be looking at well into the future. It is indeed very difficult, as has been suggested, to set any kind of time limit on when the companies might have liability which would then be taken over by the Commonwealth. Twenty years has been suggested. But we are looking at a very long-term project, and it is difficult to know what kind of situation we may be looking at in 50 to 100 years time. I think the common law is the kind of law which is flexible enough, which includes those kinds of negligence provisions and which would see us able to deal with any incidents into the future.

This is the one strong instance where the Senate committee differed from the House committee, in recommending that the government makes very clear that it will not be accepting this liability, that it is the companies who are involved right from the beginning in applying for these permits that should, right at the end, after the closure certificate has been issued, also be responsible for ensuring that that remains a safe and secure site.

I commend the government for putting forward this legislation. Now that the legislation is going through the federal parliament, I think the states should be able to follow fairly quickly behind. It is certainly my hope that the states do very quickly follow with their own legislation dealing with carbon capture and storage so that we do have a very clear legislative regime applying around Australia, because we understand that many companies are willing to proceed with this technology as soon as possible.

In that respect, I also commend the government on the carbon capture and storage initiative announced by the Prime Minister. As I said previously, I think the carbon storage technology is really fairly well understood. It is in the area of the most effective and efficient means of carbon capture and transport that we need quite a lot work to be done. To join in the knowledge and technology from around the world in this global initiative is, I think, very definitely the way to proceed. Everyone in the world has these problems with carbon emissions. We certainly have excellent people involved in the research and technology in Australia, but it is an excellent measure to get involved with other people around the world in a group effort to try to ensure that we can put in place these very important technologies as soon as possible.

Senator Milne was expressing concern that this technology could not be implemented fast enough. I think the money that the Australian government is putting into this global initiative, which will be headquartered in Australia, of coordinating national centres around the world is indeed money well worth being spent. We do have a number of coal fired power stations around Australia and we do need to deal as urgently as possible with the carbon emissions from those coal fired power stations, and the quickest and most efficient way to do that is for Australia to use world technology to deal with technology gaps that we have and to develop collaborative research on this project and collaborative technology so that we can implement this technology as soon as possible. Whether or not we lead the world is not important as long as Australia is doing as much as it possibly can to deal with carbon emissions from coal fired power stations.