Implementation of the CCS Directive into the Dutch mining legislation (CO2-storage)

In September 2011 the Mining Act and subordinate legislation were amended in order to implement the CCS-Directive (2009/31/EC) and the OSPAR Decision 2007/2. The Act of 6 June 2011 on the amendment of the Mining Act and the Decree of 29 August 2011 on the amendment of the Mining Decree came into force on 10 September 2011. Subsequently, the Regulation of 13 September 2011 on the amendment of the Mining Regulation came into force on 16 September 2011. This article describes the most important elements of these amendments.

Objective and Scope

CCS, or Carbon Capture and Storage, is aimed at the capture and permanent underground storage of CO2 emitted from industrial installations. The objective is to reduce the emission of greenhouse gasses with the aid of this technology and to mitigate climate change. Three different stages can be distinguished in the CCS storage chain: the capture, transport and storage of CO2. The CCS Directive specifically regulates the storage of CO2. In addition, the CCS Directive introduces several amendments to existing European legislation concerning the capture and transport of CO2, including the MER Directive (85/337/EC) and the Large Combustion Plants Directive (2001/80/EC). To the extent necessary, these amendments have also been implemented with the above-mentioned Decree of 29 August 2011.

The OSPAR Decision 2007/2 on the storage of carbon dioxide streams in geological formations ('OSPAR-Decision') also regards CO2-storage and was implemented into the mining legislation at the same time as the relevant elements of the CCS Directive. The OSPAR-Decision aims to prevent that the permanent inclusion of CO2 has an adverse impact on the marine environment of the northeastern part of the Atlantic Ocean, including the North Sea. In conjunction with the OSPAR Guidelines for Risk Assessment and Management of storage of CO2 streams in geological formations, the OSPAR-Decision regulates the storage of CO2 and the management of environmental risks that could arise following the closure of storage sites; it does not include any regulations relating to the capture and the transport of CO2 to storage sites.

Contents

With a few exceptions, the current amendments of the mining legislation merely aim to ensure the strict and correct implementation of the CCS Directive in Dutch law. This approach seems to have been inspired by the implementation deadline (25 June 2011), since the legislator recognises that the current legal framework is probably insufficient for successful CCS and expects that additional mining legislation shall be required with respect to aspects that do not directly follow from the CCS Directive. Such additional legislation could, among others, include provisions on the preconditions for CCS, financial commitments and liability for damages to people and property. In its implementation of the CCS Directive, the legislator has, as far as possible, followed the structure and the licensing system of the existing mining legislation.

CO2 Storage

The Mining Act already contained a (general) permit obligation for the storage of substances - including CO2. With the implementation of the CCS Directive provisions specifically pertaining to the storage of CO2 have been included in the Mining Act. This includes, among others, requirements in relation to the contents of the permit (application) and regulations pertaining to the transfer to the State of the responsibility for stored CO2 after it has been established that this substance has been safely and permanently stored. To a certain extent these CO2 specific amendments differ from the general provisions relating to the storage of substances. For example, the monitoring plan, the termination plan and the provision of financial security will have to form part of the CO2 storage permit (integral permit), whilst, in case of the storage of substances other than CO2, these elements only need to be agreed at a later stage. Another difference is that the European Commission shall have a consultancy role in relation to the issuance of CO2 storage permits. Its opinion is however not binding; the final decision on the permit application is taken by the Minister of Economic Affairs, Agriculture and Innovation and may deviate from the opinion of the Commission, provided that it includes the reasons for such decision.

The Mining Decree further elaborates on the elements that must be regulated in the integral storage permit. It includes, among others, provisions on risk management, closure of a storage complex and financial security. The Mining Regulation in particular contains further requirements in relation to the contents of the CO2 storage permit application procedure.

Exploration of storage sites

In the context of the implementation of the CCS Directive, the Mining Act introduces a new element: the permit for the exploration of potential CO2 storage sites ('CO2 exploration permit'). Consequently, drilling activities to gather information on the suitability of a geological formation for the storage of CO2 or for the exploration of suitable storage sites, have become activities that require a permit. The application procedure for a CO2 exploration permit is set out in the Mining Regulation.

It is expected that CO2 exploration permits will primarily be necessary in case storage of CO2 in so-called aquifers (underground layer of water-bearing rock) is envisaged; on the depleted Dutch gas fields there will in general be sufficient information available, so that the exploration phase can be skipped and a CO2 storage permit can be applied for immediately.

Exclusivity

Holders of a CO2 exploration permit or a CO2 storage permit shall have the exclusive right to develop the activities that fall under the scope of the relevant permit, without encountering any conflicting utilisation. Any conjunction with an identical permit or with a permit for other activities (such as exploration, production or storage) is therefore ruled out. Even when the permits are held by the same party. As a consequence, the holder of a regular exploration, production or storage permit, who wishes to store CO2 in the relevant storage complex, must first (partially) return the regular permit before a positive decision can be taken regarding his application for a CO2 storage permit.

Access to Permitting Procedure

In principle anyone with the necessary capacities has equal access to the permitting procedure for a CO2 exploration permit and CO2 storage permit. However, there is one exception: the holder of the CO2 exploration permit who has demonstrated the suitability of a given site, has priority when it comes to the award of the CO2 storage permit. This way his earlier investment pays off.

Third Party Access

Because not all member states have sufficient storage facilities at their disposal, the CCS Directive requires a national arrangement for so-called third-party access. Pursuant to the Mining Act the holder of the CO2 storage permit and the operator of a transport network will in principle be obliged to store and/or to transport CO2 for third parties. When sufficient experience has been gathered on CO2 storage, more detailed rules on third party access may be implemented by governmental decree.

Liability

In relation to CCS, four types of damage can be distinguished: climate and environmental damage and damage to people and property. Pursuant to the CCS Directive climate damage resulting from CO2 leakage shall be addressed by the Emissions Trading Directive (2003/87/EG) and the liability for environmental damage as a result of CO2 storage shall be addressed by the Environmental Liability Directive (2004/35/EG). The member states are free to regulate the civil liability for damage to people and property. In the Netherlands this type of liability is based on the existing liability regime set out in the Mining Act and the Dutch Civil Code (DCC).

Pursuant to article 6:177 DCC operators of storage sites are subject to strict liability for damage resulting from mineral emissions or ground movement. As far as related to ground movement, this article also applies to the storage of CO2 and the exploration of CO2 storage facilities. Because of fears that the lack of a specific liability regime for damage resulting from CO2 leakage or ground movement due to CO2 storage could lead to legal uncertainty for operators and injured parties, an amendment to the Dutch Civil Code is currently being prepared, incorporating specific provisions for damage resulting from CO2 storage into the Dutch Civil Code. These provisions will address who is liable, the type of damages that can be claimed, the absence of a party that can be held liable and the applicable limitation period.

Conclusion

For the time being the amended Mining Act and subordinate legislation described above shall only apply to deep-sea CO2 storage. According to the Minister of Economic Affairs, Agriculture and Innovation public support for onshore storage is proven to be insufficient (Barendrecht and Noord-Nederland), and storage at sea provides sufficient possibilities for the required level of CO2 reduction (20% by 2020 in comparison with 1990). Therefore, the government shall merely support the development of CCS in the Netherlands through large-scale demonstration projects that pertain to deep-sea CO2 storage.

At present one demonstration project is being planned for CO2 storage at sea, the so-called ROAD-project - Rotterdam Opslag en Afvang Demonstratieproject (Rotterdam Capture and Storage Demonstration Project). This project is aimed at capturing part of the CO2 emitted by E.ON's Maasvlakte Power Plant 3 (MPP3), which is currently under construction, after which the CO2 will be transported via an underground pipeline to a platform in the North Sea. From this platform the CO2 will be pumped into depleted gas reservoirs of P-18 in the North Sea, off the coast of Rotterdam. The integral CCS chain is expected to be operational by 2015.

In addition, it is worth mentioning that on 9 May 2011 the government submitted a project proposal known as 'Green Hydrogen' under the NER-300 European subsidy scheme. The project proposal regards the construction of a CO2 capture facility adjacent to the new hydrogen plant of Air Liquide in Rozenburg. The captured CO2 shall be transported via pipelines to a CO2-hub, which is still to be built in Maasvlakte 2. Once the CO2 has been converted to a liquid state it will be transported by ship to the Danish Continental Shelf where it will be injected into offshore oil fields in order to extend local oil production. The European Commission's decision on the subsidy application is expected mid 2012. In this project the first capture of CO2 is envisaged in 2016.

When successful, these projects shall lead to other initiatives for deep-sea CO2 storage that can contribute to the mitigation of climate change. In this respect also the envisaged future amendments of the mining legislation will be relevant. Since CO2 storage involves a learning curve for the legislator, these amendments shall - to a certain extent - depend on the lessons that shall be learned from these pilot projects. Although the current amendments of the Mining Act and subordinate legislation (as well as the CCS Directive itself) do not always provide sufficient clarity, a start has been made. Now practice will show what is required.