A dawn for new regulations on CCS
The idea of Carbon capture and storage (CCS) on an industrial level may soon become a reality in Norway. In line with its outspoken climate policy, the Norwegian government follows in the wake of EU and is preparing new regulations to govern activity related to large scale CCS. The objective is to create a new commercial market where transportation and storage capacity for CO2 is the merchandise.
After EU adopted its new directive on CCS in April, Norwegian authorities have been working on new regulations for the same in Norway. Apart from adding some new provisions to the Petroleum Act, separate regulations to govern CCS in general are on the drawing table. At the moment, storage of CO2 in old petroleum reservoirs on the Norwegian continental shelf (NCS) seems to be the main focus for the legislation, including third party access to such.
CCS activity today
Injection and storage of CO2 in geological formations is presently not done on a large and industrial scale in Norway. However, a few examples of more limited activity exist on the NCS. One is the Statoil operated Sleipner field, where CO2 is re-injected into the Utsira formation in connection with the processing of extracted gas. Another one is the Snøhvit development in the Barents Sea, where the Norwegian Authorities imposed a CCS requirement before approving the development. Here, CO2 is re-injected into the Tubenå formation after having been separated from the extracted gas in the onshore processing facility at Melkøya.
The present reason for conducting CO2 injection is basically two-fold. First, the gas extracted from the underground may contain too much CO2 to meet the market specifications; hence reduction of CO2 is required before the produced gas is shipped to the marked. Second, by capturing and re-injecting such CO2, instead of discharging it, the duty to pay CO2 tax is avoided. In addition, injecting of CO2 back into the formation may also provide pressure support in order to extract more petroleum from the reservoir.
Expected CCS activity in the future
A future objective is that CCS activity shall be commercially attractive and that it may be possible to profit from the provision of CCS services in the open market.
Based on recent years directives adopted in the EU and the decisions made by Norwegian authorities to pursue CO2 injection on the NCS, e.g. the decision to build large scale facilities for CO2 capture on the petrochemical plants Mongstad and Kårstø, there is every reason to expect that CO2 capture and storage will be highly relevant in a few years time on NCS.
However, contrary to what tend to be the general impression, use of existing oil and gas infrastructure, such as pipelines and facilities, may not be possible for CCS activity. The required specifications for pipes and associated processing devices are unfortunately too different from that required for oil and gas handling. Hence, both new pipelines and facilities needs to be constructed and installed before any large scale transportation of CO2 may be undertaken from land to the reservoirs offshore.
The Legal Framework and Third Party Access
The development of the legal framework governing handling of CO2 in Norway is still in progress, and it is expected that Norwegian authorities in the next years will be developing a more detailed framework resulting in a legislative basis for an efficient capture, transport, storage and trade of CO2. One of the many questions arising in relation to large scale CO2 capture and injection into formations on the NCS is how to regulate third party access to transportation networks and storage facilities.
The newly adopted EU directive of 23 April 2009, Directive 2009/31/EF, aims at establishing the legal framework for a secure environmental geological storage of CO2, where third party access is regulated in Chapter 5 of the directive. The basic message as to third party access in this directive is that the member states have a duty to check that possible users, in a fair and open way, may have access to transportation networks and storage facilities with a particular focus on geological storage of CO2. Relevant criteria for granting access to third parties will be the following:
a) The extent of the transportation and storage capacity.
b) The international CO2 liabilities for Norway.
c) The necessity of denying access if the technical mutual specifications are incompatible and the problem is
hard to solve.
d) The necessity of complying with adequate and reasonable needs of the owner and the operator of the storage facilities
or the transportation network, as well as the interests of all other users of the storage localities, the net or relevant
preparatory or handling facilities.
The Ministry of Petroleum and Energy (MPE) is presently implementing the directive into Norwegian law based on Norwegian EEA liabilities. This work has already brought about changes to Section 4-8 in the Petroleum Act concerning third party’s right to use petroleum facilities and installations, ref. the newly added third paragraph which stipulates that:
“The Ministry may, on equivalent terms as stipulated in first section, first sentence, decide that facilities may be used by others in connection with handling, transportation and storage of CO2. Second paragraph applies correspondingly”.
This new provision does however only apply to the scope and extent of the Petroleum Act, which implies that capture and transportation of CO2 for sole purpose of storage is not included; however so that Section 4-8, third paragraph, may apply if the facility in subject for CO2 capture and/or storage is governed by the Petroleum Act.
New General Regulations on CCS
The MPE is also preparing new separate and general regulations governing capture, transport and storage of CO2, including provisions regulating third party access. Most likely, this will lead to a folded system being established under Norwegian law; one set of rules which apply in general and one set of rules which apply for CO2 injection in connection with petroleum related activity. Good reasons exist to harmonize these two sets of rules.
In relation to the development of the new general regulations, it is a question if the Facilities Regulations of 2005, which today governs petroleum related activity, should be used as a base template for the entire CCS legal framework. The motives for adopting the EU directive, among others the paramount environmental objectives and consideration for fair competition, together with how the directive is drafted, implies that it may not be recommendable to solely copy the provisions set out in the Facilities Regulations. However, there is every reason to believe that many of the provisions in the Facilities Regulations are relevant and will be passed on to the new general CCS regulations.
With regard to third party access, we assume that the idea under the Facility Regulations of negotiating agreements for the
use of facilities between the parties on certain conditions, i.e. a system of “negotiated access”, combined with the duty
to pay for the use according to scale of rates, will be followed.