Explanatory Note

(This note is not part of the Regulations)

These Regulations make provision for implementing Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide (“the Directive”). They also make provision for implementing an amendment to Directive 2004/35/EC of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage (“the Environmental Liability Directive”).

Part 1, Chapter 3, of the Energy Act 2008 (c. 32) (“the Act”) establishes a licensing regime for the storage of carbon dioxide in areas within UK territorial waters, and in areas beyond those waters which have been designated as a Gas Importation and Storage Zone within the meaning of section 1(5) of the Act (“the offshore area”). Section 17 of the Act prohibits the storage of carbon dioxide (with a view to its permanent disposal) except in accordance with a licence granted under section 18. For that purpose, the licensing authority is either the Secretary of State or (for storage within territorial waters adjacent to Scotland) the Scottish Ministers. With the exception of regulation 9, these Regulations relate solely to licences granted by the Secretary of State (“the authority”) for activities which take place in the offshore area (but wholly outside territorial waters adjacent to Scotland) and installations which are in the offshore area (but outside territorial waters adjacent to Scotland). These Regulations do not apply to the category of licence which authorises the exploration of the offshore area generally, by means of such relatively non-intrusive methods such as seismic surveys and shallow drilling. Such licences will be issued in conjunction with the corresponding licences granted under section 4 of the Act and section 3 of the Petroleum Act 1998.

The Directive establishes a legal framework for the environmentally safe storage of carbon dioxide in underground geological formations, as a means of preventing emissions of carbon dioxide into the atmosphere and thereby combating climate change. These Regulations implement the requirements of the Directive concerning: (1) the licensing of carbon dioxide storage (and related exploration activities); (2) the obligations of the storage operator (for example in relation to monitoring, reporting and corrective measures) whilst storage activities are taking place; and (3) the operator's continuing obligations for a period after the closure of the store until the licence is terminated. The subsequent transfer of liabilities from the operator to the authority, on termination of the licence, is to be the subject of a separate instrument. Until the provisions of the Act are extended to cover the entire territory of the United Kingdom, both onshore (including internal waters) and offshore, the requirements of the Directive are implemented with respect to storage within the offshore area only. Again, such an extension is to be made by a separate instrument.

Regulation 1(3) and (4) provides definitions for terms used in the Regulations. For the most part, the terminology followed coincides with that of the Directive, and the Directive definitions are incorporated accordingly. However, in these Regulations the “exploration permit” referred to in the Directive becomes the “appraisal term” of a licence granted under the Act; and the “storage permit” becomes a consent to carry on the relevant storage activities granted under the provisions of such a licence.

Regulation 2 prevents the licensing of carbon dioxide storage in the water column. The power of the Secretary of State to grant licences under section 18(1) of the Act is accordingly expressly limited by this regulation (see the definition of “licence” in regulation 1(3)).

Regulation 3 sets out the requirements for applying for a licence. The application may be for a licence with, or without, an “appraisal term” (during which the holder will have the right to carry on exploration activities with view to selecting a site for carbon dioxide storage). If an application is made for a licence without an appraisal term, reasons must be given in the application.

Regulation 4(1) and (2) limits the length of the appraisal term to the minimum necessary. By regulation 4(3), a licence without an appraisal term must instead have an “initial term”; any application by the licence holder for a permit to store carbon dioxide must be made before the end of the appraisal term or (as the case may be) the initial term.

Regulation 5 requires a licence to include the provisions set out in Schedule 1.

Regulation 6 sets out requirements for an application for a permit to store carbon dioxide.

Regulation 7 sets out conditions for the grant of a storage permit, and regulation 8 sets out minimum requirements for the content of such permits. In particular, a storage permit must designate a single licence holder as the operator of the storage site, provide details of the storage site and surrounding complex, and of the operational requirements for injection and storage. Also to be included are the provisions set out in Schedule 2.

Regulation 9 prescribes the information to be included on the public register maintained under section 29 of the Act. This will be information about storage licences and storage permits, and about storage sites both before and after the closure of the site. The register is maintained by the Secretary of State, but will include information about all storage sites licensed under section 18 of the Act; it will therefore include information about licences and permits granted by the Scottish Ministers (and about the corresponding storage sites).

Regulation 10 enables the licensing authority to direct the operator to take corrective measures, in the event of a significant irregularity or leakage, and enables (or in some cases requires) the authority to take such measures itself and to recover the costs from the operator. This is in addition to the operator's obligations to take corrective measures under the storage permit, and to the authority's powers under section 24 of the Act (which allow directions to be given following the breach of a licence). Such measures also include measures for the protection of human health.

Regulation 11 enables the licensing authority to modify or revoke the storage permit in certain circumstances. By regulation 11(1) such a modification may be made where a change is planned by the operator, and by regulation 11(2) a modification must be made where the change appears to the authority to be substantial; alternatively in such a case the authority may prohibit the change. (Such planned changes are required to be notified under paragraph 4 of Schedule 2.) Regulation 11(5) and (6) sets out circumstances in which the authority must consider whether to modify or revoke the permit. This duty arises where the authority receives certain information – for instance that permit conditions have been breached or that there have been leakages or significant irregularities – and in any event five years after the grant of the permit (and then every ten years).

Regulation 12 deals with the consequences of a storage permit being revoked. The authority may either close the storage site immediately, or first consider applications for a new licence and a new storage permit in respect of the site. If a new storage permit is granted, the existing licence terminates and with it the previous operator's obligation to meet the authority's costs. In all other cases that obligation continues in respect of the store that is now closed, but the authority takes over responsibility for performing the post-closure obligations.

Before a site is closed, the definitive version of a “post-closure plan” must be approved by the authority under regulation 13.

Regulation 14 deals with liabilities of the operator after the site has been closed. Its obligations to remedy environmental damage under the Environmental Liability Directive will continue, as will those to surrender allowances under the greenhouse gas emission trading scheme established by Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003. Such obligations continue until the licence is terminated, as does the obligation to maintain a financial security (see paragraph 7 of Schedule 2).

Regulation 15 amends the Environmental Damage (Prevention and Remediation) Regulations 2009 (S.I. 2009/153), which implement the Environmental Liability Directive in England, surrounding waters and in marine areas where the United Kingdom has jurisdiction beyond the territorial sea.

Schedule 1 contains provisions which must be included in any licence granted by the authority. These are provisions concerning the circumstances in which the storage site is to be closed by the operator, the preparation of the post-closure plan and the liabilities of the operator after the site has been closed. Closure takes place either under the conditions laid down in the storage permit, or on application to the authority (paragraph 2). The proposed post-closure plan submitted by the operator to the authority for approval must be based on the provisional version that was approved when the storage permit was granted, updated as necessary (paragraph 3). The operator must continue to monitor the site, and to comply with its reporting and notification obligations and its obligations to take corrective measures (paragraph 4). The operator must seal the site and remove the injection facilities in accordance with its decommissioning obligations under Part 4 of the Petroleum Act 1998 (c. 17) (paragraph 4).

Schedule 2 contains provisions which must be included in any storage permit granted by the authority. These are provisions concerning: the composition of the carbon dioxide streams that may be injected into the store, including the obligation of the operator to maintain a register of the quantities and properties of the streams injected (paragraph 1); the monitoring of the storage complex and injection facilities, including the drawing up and approval of a monitoring plan (paragraph 2); the submission of periodic reports on monitoring, injection, financial security, and any other information that the authority considers relevant, and the notification of leakages or significant irregularities (paragraph 3); the notification and implementation of changes concerning the operator or the operation of the storage site (paragraph4); the review and modification or revocation of the permit (paragraph 5); the measures that are to be taken in the event of leakages or significant irregularities (paragraph 6); and the financial security that is to be maintained by the operator (paragraph 7).

As regulation 1(2)(b) makes clear, it is not necessary for the provisions included in a licence or storage permit to be verbally identical to the specified provisions, as long as they have the same legal effect.

An Impact Assessment has been prepared, and is available on the website of the Department of Energy and Climate change at:

http://www.decc.gov.uk/en/content/cms/consultations/co2_storage/co2_storage.aspx

A Transposition Note setting out how these Regulations implement the relevant provisions of the Directive is annexed to the Explanatory Memorandum that is available alongside the instrument on the OPSI website at: http://www.opsi.gov.uk/stat.htm

Copies of the Impact Assessment and Transposition Note are also available from Ricki Kiff, Energy Development Unit, Department of Energy and Climate Change, 3 Whitehall Place, London SW1A 2AW. Tel: [phone]; email: [e-mail].