The New Energy Act 2008 - Impact On Carbon Capture And Storage

On 26 November 2008 the UK Energy Bill received Royal Assent.

The new Energy Act (the "Act") implements the UK energy

policy that emerged out of the Energy Review 2006 and the Energy

White Paper 2007, namely to tackle climate change, reduce carbon

dioxide emissions and ensure secure, clean and affordable

energy.

The Act introduces new legislative measures that will affect all

areas of energy investment in the UK from Oil and Gas to Gas

Storage to Nuclear to Renewable Energy. This article summarises the

impact of the Act on the nascent carbon capture and storage

("CCS") industry (see our related Law Nows for summaries

of the Oil and Gas, Nuclear and Renewables elements of the

Act).

The provisions relating to CCS in the Act cover the following

areas:

A new regulatory regime for offshore storage of CO2

An extension of existing regimes relating to the abandonment of

offshore installations to carbon storage installations

The provisions will therefore be relevant to companies hoping to

carry out CO2 storage activities in the UKCS, whether acting as

operators, owners or developers.

Offshore CO2 Storage

Prior to the new Act, the UK's legislative regime did not

cater for the type of CO2 storage projects that the market is

looking to develop as a means of significantly reducing CO2

emissions from fossil fuel power stations. Companies wanting to

invest in CCS projects in the UK, together with prominent industry

associations, have sought a clear regulatory framework to enable

the permanent storage of CO2 offshore. The Government wishes to

create such a framework to enable private sector investment in such

CCS projects.

The Act enables the Crown to claim sovereign rights for the

storage of gas (including CO2) within its exclusive economic zone,

thus extending its ability to grant leases from the existing 12

nautical mile limit of the UK's territorial waters, to a

maximum of 188 nautical miles within the UK's continental

shelf. This is to be known as a "Gas Importation and Storage

Zone".

Under the Act, a licence will be required for carrying out one

of the following activities within the territorial sea or Gas

Importation and Storage Zone:

the storage of CO2 with a view to its permanent disposal (or as

an interim measure prior to its permanent disposal)

the conversion of a natural feature for the purpose of

permanently storing CO2 (or as an interim measure prior to its

permanent disposal)

related exploration activities and

the establishment or...