Environmental Protection: The Storage of Carbon Dioxide (Termination of Licenses) Regulations 2011 No. 1483

Jurisdiction(s)
Instrument Date
2011
Effective Date
11 July 2011
Instrument Type
Secondary
Relevant Regulatory Authority
Department of Energy and Climate Change
Purpose and Context
The UK CO2 Storage Licence Termination Regulations set out the rights and obligations of holders of exploration licenses and storage permits in relation to licence termination and the transfer of certain obligations and liabilities to the state, as well as the obligations of the state in effecting such termination and transfer.
Associated instruments

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 (EU Environmental Liability Directive)

 

Instrument Access Date
29 August 2012
I. Regulatory scope and definitions
Definitions

Article/Section No.

Regulation 3
Associated legislation:
EU CO2 Storage Directive
UK Licensing Regulations

Instrument Text

Interpretation

3.—(1) In these Regulations—

(a)     any reference to a numbered section is to that section of the Energy Act 2008; and

(b) subject to paragraph (2), any reference to an EU instrument, or a provision of such an instrument, is to that instrument or provision as amended from time to time.

(2) Paragraph (1)(b) does not apply to the definitions referred to in paragraph (4), regulation 14(3) or regulation 15(3)(c).

(3) In these Regulations—

“abandonment programme”, in respect of a licence, means the abandonment programme (within the meaning of section 29(1) of the Petroleum Act 1998(a)) applicable to an installation established or maintained in accordance with that licence for the purposes of an activity mentioned in section 17(2)(a), (b) or (c);

“applicant” means a licence holder who has made a termination application; “authority” means either— (a)     the Secretary of State; or (b)  the Scottish Ministers,

as licensing authority in accordance with section 18(2);

“CO2” means carbon dioxide;

“the Directive” means Directive 2009/31/EC of the European Parliament and of the Council on the geological storage of carbon dioxide and amending Council Directive 85/337/EEC, European Parliament and Council Directives 2000/60/EC, 2001/80/EC, 2004/35/EC, 2006/12/EC, 2008/1/EC and Regulation (EC) No 1013/2006(b);

“licence” has the meaning given to it in the licensing regulations (and “licence holder” is to be construed accordingly);

“licensing regulations” means the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010(c) or, in respect of licenses issued by the Scottish Ministers, the Storage of Carbon Dioxide (Licensing etc.) (Scotland) Regulations 2011(d);

“notice” means notice in writing (and “notification” and “notify” shall be construed accordingly);

“operator”, in relation to a storage permit, means the person who carries on or (where different) controls activities at the storage site or, where a storage permit has been terminated or revoked, the person who carried on or (where different) controlled activities at the storage site immediately before such termination or revocation;

“post-transfer costs” means the costs for which the authority will be liable as a result of the transfer of obligations and liabilities to the authority pursuant to regulations 14 and 15;

“storage permit” has the meaning given to it in the licensing regulations;

“termination application” means an application under regulation 4 for termination of a licence;

“termination notice” means a notice served by the authority as required by regulation 11(2)(a) or regulation 12(2);

“transfer report” means a report that complies with Article 18(2) of the Directive.

(4) In these Regulations, the following expressions have the meanings given by Article 3 of the Directive (and cognate terms shall be construed accordingly)—

“closure”;

“leakage”;

“storage site”.

II. The scope and management of rights
III. Permitting storage site exploration, project development and CO2 injection
IV. Operating and closing storage facilities
Monitoring, reporting and verification

Summary

Under regulation 17 of the UK CO2 Storage License Termination Regulations, licence holders must provide the authority (as defined in regulation 3) with any information it requests for the purpose of determining whether:

  1. to request a transfer report from the operator under regulation 5; or
  2. to exercise any other function of the authority under the Regulations. 

Article/Section No.

Regulation 17

Instrument Text

Compliance

Information

17. The licence holder must (to the extent it is not obliged to do so under the licence), provide the authority with such information as the authority may from time to time request for the purpose of determining whether— (a) to request a transfer report from the operator pursuant to regulation 5; or (b) to exercise any other function conferred on the authority by these Regulations.

Enforcement

Summary

For the purposes of section 24 of the Energy Act 2008, the following are deemed under regulation 18(1) of the UK CO2 Storage License Termination Regulations to constitute a breach of a licence, even where the licence has been terminated:

  1. failure by an operator to comply with regulation 5(2) (relating to requests for transfer reports) or regulation 10(5) (relating to provision of financial security); and
  2. failure by a licence holder to comply with regulation 13(2) or regulation 17 (each relating to provision of information).

 Regulation 18(2) specifies the following offences, each of which is subject to a fine as well as corporate officer and partner liability:

  1. knowingly or recklessly making a false statement in order to obtain a transfer report or termination of a licence; and

failing to disclose information relevant to service of a termination notice.

Article/Section No.

Regulation 18
Regulation 19

Associated legislation:
Energy Act 2008

Instrument Text

Enforcement

18.—(1) A failure by— (a)        the operator to comply with regulation 5(2) or 10(5); or (b) a licence holder to comply with regulation 13(2) or 17,

is deemed, for the purposes of section 24 (licensing authority’s power of direction), to be a breach of a provision of the licence, even where a licence has terminated.

(2) It is an offence for—

(a)     a person to make a statement which the person knows to be false or recklessly to make a statement which is false—

(i) in order to obtain the termination of a licence; or (ii) in a transfer report;

or

(b)     a licence holder to fail to disclose information which the licence holder knows, or ought to know, to be relevant to the authority’s decision to serve a notice under regulation 11(2) or 12(2).

(3) A person guilty of an offence under paragraph (2) is liable—

(a)     on summary conviction—

(i) in England and Wales or Northern Ireland, to a fine not exceeding the statutory maximum; or

(ii) in Scotland, to a fine not exceeding £5,000; or (b)       on conviction on indictment, to a fine.

(4) Where an offence under paragraph (2) is committed by a body corporate and is proved to have been committed with the consent or connivance of an officer of the body corporate, that officer (as well as the body corporate) is guilty of the offence and is liable to be proceeded against and dealt with accordingly.

(5) Where an offence under paragraph (2) is committed by a Scottish partnership and is proved to have been committed with the consent or connivance of a partner, that partner (as well as the partnership) is guilty of the offence and is liable to be proceeded against and punished accordingly.

(6) In this regulation— (a)         “officer”, in relation to a body corporate, means

(i) any director, manager, secretary or other similar officer of the body corporate; or (ii) any person who was purporting to act in any such capacity;

(b)     “partner”, in relation to a Scottish partnership, includes any person who was purporting to act as a partner in the partnership.

(7) In paragraph (6) “director”, in relation to a body corporate whose affairs are managed by its members, means a member of the body corporate.

Criminal proceedings 19.—(1) Proceedings for an offence under regulation 18(2) may not be instituted in England and

Wales except— (a) by the Secretary of State or a person authorised by the Secretary of State; or (b)   by or with the consent of the Director of Public Prosecutions.

(2) Proceedings for an offence under regulation 18(2) may not be instituted in Northern Ireland except—

(a)        by the Secretary of State or a person authorised by the Secretary of State; or (b)       by or with the consent of the Director of Public Prosecutions for Northern Ireland.

Site closure

Summary

The UK CO2 Storage License Termination Regulations provide that, where a storage site has been closed in accordance with the terms of a licence, either:

  1. the licence holder can apply under regulation 4 for termination of the licence, which application must include a transfer report (as defined in regulation 3); or
  2. if no such application is made, under regulation 5 the authority (as defined in regulation 3) can request the operator to provide a transfer report.

Under regulation 6, the authority must provide the European Commission with a copy of each transfer report received, within one month after receipt.

Article/Section No.

Regulation 4
Regulation 5
Regulation 6

Instrument Text

Applications and information

Applications for termination 4.—(1) Where a storage site has been closed in accordance with the terms of a licence, the

licence holder may apply to the authority for the licence to be terminated. (2) An application for termination of a licence must—

(a)     be made in writing to the authority; and (b)    include a transfer report in respect of the storage site permitted under the licence.

Request for a transfer report

5.—(1) Where— (a)        a storage site has been closed in accordance with the terms of a licence, and (b)       no termination application has been made to the authority,

the authority may request the operator to provide a transfer report within the period specified in the request.

(2) Where the authority requests a transfer report under paragraph (1), the operator must, within the specified period, provide to the authority—

(a)     a transfer report; or (b)     a statement of the reasons why the operator is unable to provide a transfer report.

Information to be provided to the European Commission 6. Where the authority receives a transfer report under regulation 4(2)(b) or 5(2)(a) the authority

must provide to the European Commission—

(a)     a copy of the transfer report (within one month after receipt); and

(b) when it complies with subparagraph (a), or as soon as practicable thereafter, any other related material that the authority proposes to take into account in considering whether or not to prepare a draft termination notice under regulation 9(2).

V. Management of long-term responsibilities and liabilities
Allocation of long term responsibilities & liabilities

Summary

Draft termination notices

Where a transfer report is submitted under regulation 4 or 5 of the UK CO2 Storage License Termination Regulations, and the authority (as defined in regulation 3) is satisfied that:

  1.  the report complies with Article 18(2) of the EU CO2 Storage Directive; and
  2. the conditions set out in regulation 8(a) and 8(b) have been met,

regulation 9 requires that the authority first prepare a draft termination notice, as well as certain other closure-related materials, and submit these documents to the European Commission.

The conditions under regulation 8(a) and 8(b) are:

  1. that all available evidence indicates that the stored CO2 will be completely and permanently contained; and
  2. that the minimum period determined under regulation 7 has elapsed.

Regulation 7 requires that, where the authority approves a proposed post-closure plan for a storage site under the UK Licensing Regulations, the authority must determine the minimum period that must elapse between the date of site closure and the termination of the licence. This minimum period must not be less than twenty years, unless a reduced period is approved under regulation 7(3).

Where the authority prepares a draft termination notice in accordance with regulation 9, under regulation 10 the authority must also determine the financial contribution from the operator considered sufficient to cover the expected post-transfer costs (as defined in regulation 3), and notify this to the operator. Subject to the terms of regulation 9, the operator must provide this contribution to the authority in accordance with the notification.

Once the authority has prepared a draft termination notice under regulation 9 and submitted it to the European Commission, it must then:

  1. consider any opinion on the draft notice issued by the Commission; and
  2. determine whether each of the transfer conditions in regulation 8 have been met.

Regulation 8 requires, in addition to the conditions mentioned above, that:

  1. the operator has provided the financial contribution notified under regulation 10;
  2. the storage site has been sealed and the injection facilities removed; and
  3. the abandonment programme has been carried out in accordance with Part 4 of the Petroleum Act 1998.

Service of a termination notice

If the authority determines that each condition in regulation 8 has been met, under regulation 11 it must serve a termination notice in accordance with regulation 13, and provide a copy of the notice to the Commission. If the authority determines that these conditions have not been met such that a termination notice is not issued, the operator is entitled to return of its financial contribution.

If a storage permit is revoked and the relevant storage site closed pursuant to the UK Licensing Regulations, the authority is required under regulation 12 of the UK CO2 Storage License Termination Regulations to serve a termination notice in accordance with regulation 13, provided it is satisfied that:

  1. all available evidence indicates that the stored CO2 will be completely and permanently contained; and
  2. the storage site has been sealed and the injection facilities removed.

Transfer of obligations and liabilities

Where a licence is terminated by service of a termination notice in accordance with regulation 13, the following obligations and liabilities will immediately transfer from the licence holder to the authority, by operation of regulations 14 and 15:

  1. the licence holder’s obligations in relation to monitoring pursuant to articles 13 and 18(6) and Annex II of the EU CO2 Storage Directive;
  2. the licence holder’s obligations in relation to corrective measures;
  3. the licence holder’s obligations under the EU ETS Directive in relation to the surrender of allowances in the event of leakage;
  4. the licence holder’s obligations in relation to preventive and remedial action under the EU Environmental Liability Directive; and
  5. any leakage liabilities incurred by the licence holder prior to termination of the licence, other than the leakage liabilities specified in regulation 15(2).

However, under regulation 16 the authority can recover from the operator any costs it incurs as a result of the above transfer of obligations and liabilities, to the extent that such costs arise due to fault on the part of the operator.

Article/Section No.

Regulation 7
Regulation 8 Regulation 9
Regulation 10
Regulation 11
Regulation 12
Regulation 13
Regulation 14
Regulation 15
Regulation 16

Associated legislation:
EU CO2 Storage Directive
UK Licensing Regulations
Petroleum Act 1998
EU ETS Directive
EU Environmental Liability Directive

Instrument Text

Termination where a storage site has been closed in accordance with the terms of a licence

Minimum period

7.—(1) When the authority approves a proposed post-closure plan in respect of a storage site in accordance with the licensing regulations, the authority must determine the minimum period (the “minimum period”) that must elapse between the date of closure of the storage site and the termination of the licence.

(2) Subject to paragraph (3), the minimum period must be no less than twenty years from the date of the closure of the storage site.

(3) Where the minimum period has not elapsed and the authority considers that the condition set out in regulation 8(a) has been met, the authority may reduce the period determined under paragraph (1), which reduced period becomes the minimum period.

(4) The authority must notify the licence holder, as soon as reasonably practicable, of the minimum period determined under paragraph (1) or (3).

Transfer conditions 8. For the purposes of regulations 9 to 11, the transfer conditions are that—

(a)     all available evidence indicates that the stored CO2 will be completely and permanently contained;

(b)     the minimum period (determined under regulation 7) has elapsed;

(c)     the operator has provided the financial contribution notified to it under regulation 10(4);

(d)     the storage site has been sealed and the injection facilities have been removed; and

(e) the abandonment programme has been carried out in accordance with Part 4 of the Petroleum Act 1998(a).

Issuing a draft termination notice 9.—(1) Paragraph (2) applies where the authority receives a transfer report under regulation

4(2)(b) or 5(2)(a).

(2) Where this paragraph applies, the authority must prepare a draft termination notice if it is satisfied that—

(a)     the transfer report complies with Article 18(2) of the Directive; and

(b)     the conditions listed in regulation 8(a) and (b) have been met in respect of the storage site.

(3) Where a draft termination notice is prepared under paragraph (2), the authority must prepare a statement of—

(a)     the method by which the authority will determine whether or not the conditions listed in regulation 8(d) and (e) have been met; and

(b)     whether any part of the abandonment programme remains to be carried out.

(4) No later than 28 days after the authority completes the preparation of a draft termination notice, the authority must forward to the European Commission—

(a)     a copy of the notice and of the statements prepared under paragraph (3); and

(b)     any material taken into consideration by the authority in preparing the notice that has not already been provided to the Commission under regulation 6(b).

(5) Where the authority is not satisfied under paragraph (2), the authority must as soon as reasonably practicable notify the licence holder of the reasons for its decision.

Financial obligations

10.—(1) Where the authority prepares a draft termination notice under regulation 9(2), it must determine the amount and form of financial contribution from the operator that the authority considers will be sufficient to cover the expected post-transfer costs.

(2) In determining the amount and form of financial contribution, the authority must— (a)   take into account the factors set out in Article 20(1) of the Directive; and (b)  consider any representations received from the operator pursuant to paragraph (3).

(3) The authority must—

(a)     notify the operator of the determination it intends to make;

(b) in that notification give the operator at least 28 days in which to make written representations to the authority.

(4) The authority must notify the operator of— (a)   the authority’s determination of the amount and form of the financial contribution; and (b)        the date by which the financial contribution must be provided to the authority.

(5) The operator must provide the financial contribution to the authority in accordance with the notification made under paragraph (4).

Serving a termination notice 11.—(1) Where the authority has prepared a draft termination notice under regulation 9(2), it

must—

(a)     consider any opinion on the draft notice issued by the Commission under Article 18(4) of the Directive; and

(b)     determine whether or not each transfer condition set out in regulation 8 has been met. (2) Where the authority determines that each transfer condition set out in regulation 8—

(a)     has been met, it must serve a termination notice in accordance with regulation 13(1); or

(b)     has not been met, it must notify the licence-holder of that determination and the reasons for it.

(3) No later than 28 days after issuing a termination notice under paragraph (2)(a), the authority must—

(a)     provide a copy of a termination notice to the European Commission; and

(b)     state to the European Commission the reasons for any departure from the Commission’s opinion issued under Article 18(4) of the Directive.

(4) Where—

(a)     paragraph (2)(b) applies;

(b)     the operator has provided the financial contribution notified to it under regulation 10(4); and

(c)     the operator requests the return or release of that contribution, the authority must comply with that request within 90 days of receipt of the request.

Termination where a storage site has been closed after the revocation of a storage permit

Serving a termination notice after revocation of a storage permit

12.—(1) Paragraph (2) applies where a storage site is closed pursuant to regulation 13(2)(a) or (3)(a) of the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010 or regulation 12(2)(a) or (3)(a) of the Storage of Carbon Dioxide (Licensing etc.) (Scotland) Regulations 2011.

(2) Where this paragraph applies, the authority must serve a termination notice in accordance with regulation 13(1) if it is satisfied that in respect of the storage site—

(a)     all available evidence indicates that the stored CO2 will be completely and permanently contained; and

(b)     the storage site is sealed and the injection facilities have been removed.

Content and effects of a termination notice

Termination notices and the provision of information 13.—(1) A termination notice must be served on the licence holder and must specify the time

and date when the licence terminates.

(2) Where the authority serves a termination notice, the authority may by written notice to the licence holder require the licence holder to provide the authority with all records, returns, plans, maps, samples, data and other information that the licence holder holds in respect of the storage site.

(3) The authority may use any information provided to it under paragraph (2) for the purposes of carrying out the obligations transferred to it under regulation 14 or discharging the liabilities transferred to it under regulation 15, or such of its other functions as the authority considers appropriate.

Transfer of obligations 14.—(1) Except as provided in paragraph (2) and regulation 15, the termination of a licence

does not affect any obligation imposed upon, or liability incurred by, the licence holder.

(2) Immediately on the termination of a licence, there are transferred from the licence holder to the authority the licence holder’s obligations in relation to—

(a) (b) (c)

(d)

monitoring, pursuant to Articles 13 and 18(6) and Annex II of the Directive;

corrective measures;

the surrender of allowances in the event of leakages under legislation implementing Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC(a); and

preventive and remedial action under legislation implementing Articles 5(1) and 6(1) of 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(b).

(3) In Directive.

this regulation, “corrective measures” has the meaning given to it by Article 3 of the

Transfer of liabilities

15.—(1) Immediately on the termination of a licence, there are transferred from the licence holder to the authority any leakage liabilities incurred by the licence holder prior to termination of the licence, subject to paragraph (2).

(2) There is no transfer to the authority of any leakage liabilities that, on the termination of the licence, constitute a debt or a judgment debt for a liquidated sum where that debt—

(a)     was payable by the licence holder before the termination of the licence; or

(b)     is payable by the licence holder after the termination of the licence but at a time which is certain.

(3) In this regulation— (a)         “judgment debt” has the meaning given to it in section 104 of the Tribunals, Courts and

Enforcement Act 2007(a);

(b)     “leakage liabilities” means any liabilities, whether future or present, actual or contingent, arising from leakage from the storage complex to which the relevant licence relates and includes liabilities for personal injury, damage to property and economic loss; and

(c)     “storage complex” has the meaning given to it by Article 3 of the Directive.

Recovery of costs

16.—(1) The authority may recover from the operator any costs which the authority incurs in consequence of the transfer of obligations or liabilities under regulation 14 or 15, to the extent that such costs arise due to fault on the part of the operator.

(2) For the purposes of paragraph (1), fault includes negligence, deceit, or a failure to exercise due diligence.

(3) Sums due by the operator pursuant to this regulation are recoverable by the authority as a civil debt.

Financial contributions to long term stewardship

Summary

Regulation 10 of the UK CO2 Storage License Termination Regulations stipulates that, where the authority (as defined in regulation 3) prepares a draft termination notice in accordance with regulation 9, the authority must determine the financial contribution from the operator considered sufficient to cover the expected post-transfer costs (also as defined in regulation 3), taking into account Article 20(1) of the EU CO2 Storage Directive and representations concerning the matter received from the operator.

The amount and form of the contribution must be notified to the operator, and the operator must provide the contribution to the authority in accordance with the notification.

However, where the authority ultimately determines that the transfer conditions under regulation 8 have not been met such that a termination notice is not issued, the operator is entitled under regulation 11(4) to return of the contribution.

Article/Section No.

Regulation 10
Regulation 11(4)

Instrument Text

Financial obligations

10.—(1) Where the authority prepares a draft termination notice under regulation 9(2), it must determine the amount and form of financial contribution from the operator that the authority considers will be sufficient to cover the expected post-transfer costs.

(2) In determining the amount and form of financial contribution, the authority must— (a)   take into account the factors set out in Article 20(1) of the Directive; and (b)  consider any representations received from the operator pursuant to paragraph (3).

(3) The authority must—

(a)     notify the operator of the determination it intends to make;

(b) in that notification give the operator at least 28 days in which to make written representations to the authority.

(4) The authority must notify the operator of— (a)   the authority’s determination of the amount and form of the financial contribution; and (b)        the date by which the financial contribution must be provided to the authority.

(5) The operator must provide the financial contribution to the authority in accordance with the notification made under paragraph (4).

Serving a termination notice 11.

[…]

(4) Where—

(a)     paragraph (2)(b) applies;

(b)     the operator has provided the financial contribution notified to it under regulation 10(4); and

(c)        the operator requests the return or release of that contribution, the authority must comply with that request within 90 days of receipt of the request.