Licence for permanent carbon storage
Third-party access
Closure and withdrawal
Entry into force
On August 19 2011 an act amending the Dutch Mining Act in order to implement the EU Carbon Storage Directive (2009/31/EU) and the Ospar Decision (2007/2) on the storage of carbon dioxide streams in geological formations was published in the State Bulletin of Laws. This update considers the key points of the new legislation.
Licence for permanent carbon storage
The act introduces a new licence for permanent carbon storage. Applicants must demonstrate their financial and technical capability for such activities and must submit a monitoring plan. In order to obtain a licence, a licensee must provide any financial security that the minister may deem necessary to safeguard the legal execution of the activities under the storage licence.
Holders of an exploration and production (E&P) licence cannot apply for a permanent carbon dioxide storage licence for the same reservoir at the same time. In order to obtain a permanent carbon dioxide storage licence, former E&P licensees must submit a new application. The holder of an E&P licence for minerals or geothermal heat has no priority status in obtaining a licence for permanent storage or for the exploration of reservoirs for the purpose of permanent storage. This deviates from the system under the existing Mining Act, whereby the holder of an E&P licence has priority status when obtaining a storage licence for the same reservoir. The legislature wanted to ensure that third parties have equal opportunities to engage into carbon dioxide storage. When a production licensee wishes to engage into permanent carbon dioxide storage activities, it must first surrender its production licence (partly or in whole) and then apply for a permanent carbon dioxide storage licence for that reservoir; such application shall be published to allow other parties to apply too. Under the new act, enhanced hydorcarbon recovery is not regarded as permanent storage.
The act requires the holder of a permanent carbon dioxide storage licence to arrange for non-discriminatory third-party access against reasonable and transparent conditions to the storage facility. Such third-party access is also mandatory for the transport network to which the storage facility is connected.
A storage licence can be withdrawn at the request of the licence holder or operator, provided that:
- it is demonstrated that the carbon dioxide has been captured safely and permanently;
- the reservoir has been closed and the injection equipment has been removed;
- 20 years have lapsed; and
- a financial contribution by the licence holder or operator is made to cover the monitoring expenses to be incurred by the state for a maximum period of 30 years following closure.
This financial contribution replaces the financial security provided upon granting of the licence. From the moment that the licence is withdrawn, the state assumes monitoring of the reservoir. If there is any negligence on the part of the (last) licensee, it will be held liable for the costs incurred by the state through monitoring activities and for corrective, preventive and reparative measures following such withdrawal.
The minister may also decide to withdraw the licence:
- in the event of leakages, irregularities or non-compliance with the licence provisions;
- if it appears that the financial security granted is insufficient; or
- when closure is necessary as a result of new technological insights.
In such case, the minister shall assume the obligations under the licence until a new licence is granted. If no new applicant appears, the facility will be shut down. The minister will recover the costs from the last licensee or from the financial security provided.
Although the directive was due to be implemented by July 25 2011, the effective date of the new legislation has not yet been set. In line with Dutch state policy, it is expected to enter into force on January 1 2011. Draft amendments to the Mining Decision and the Mining Regulation were published on September 15 2011.(1)
For further information please contact Roland de Vlam or Max WF Oosterhuis at Loyens & Loeff NV by telephone (+31 20 578 5785), fax (+31 20 578 5800) or email ([email protected] or [email protected]).
Endnotes