Summary

Western Australia EPA recommendation

The Western Australia EPA has recommended to the Minister for Environment that the proposed Griffin Power Bluewaters coal power station expansion only be approved if it is:

  • Carbon Capture and Storage (CCS) ‘ready’ and retrofitted for CCS when the EPA concludes that CCS is economically and technically proven, and
  • at least equivalent to benchmarked best practice for greenhouse gas (GHG) intensity.

Those requirements would apply until the EPA and Minister for Environment determine that they are non complementary to any Commonwealth GHG emissions trading scheme (ETS) in force in Western Australia.

Business implications

The EPA’s recommendation demonstrates its intent to directly regulate climate change issues, including CCS, at least prior to a Commonwealth ETS. It may provide guidance for regulator approaches in other states, with Queensland previously outlining a similar approach.

Businesses planning GHG intensive projects must carefully consider legal issues, including:

  1. uncertain Commonwealth GHG regulation, be it the government’s troubled ETS the Carbon Pollution Reduction Scheme (CPRS), the Coalition’s alternative Emissions Reduction Fund or other, and
  2. the environmental impact assessment process and how it sits with future Commonwealth GHG regulation.

Bluewaters proposal

The Griffin Power 3 Pty Ltd Bluewaters phases III and IV expansion is for the construction and operation of two nominal 229MW (208MW sent out) subcritical coal-fired base-load generation plants with approximately 36% plant thermal efficiency.

The proposal would emit approximately 3.1 million tonnes CO2 equivalent per annum, equivalent to a 4.1% increase in Western Australia’s GHG emissions.

Griffin Power is a member of the troubled Griffin Group, but is not itself in voluntary administration.

Western Australia environmental approval regime

The EPA1 has made its recommendations on the proposal to the Minister for Environment. The Minister then makes the final approval decision and is not obliged to follow the EPA’s recommendations.

The EPA’s recommendations can be appealed within 14 days. The Minister’s final decision will also be subject to appeal.

CCS ready

Griffin Power proposed that the new Bluewaters expansion be designed and constructed to be CCS ready. The International Energy Agency’s definition of CCS ready includes that:

‘Developers of capture-ready plants should take responsibility for ensuring that all known factors in their control that would prevent installation and operation of CO2 capture have been eliminated.

This might include:

  • A study of options for CO2 capture retrofit and potential pre-investments.
  • Inclusion of sufficient space and access for the additional facilities that would be required.
  • Identification of reasonable route(s) to storage of CO2.’

The EPA did not give any consideration to the first poin t in its report. It is unclear from the EPA’s report whether Griffin Power had adequately addressed that matter or if the EPA required it.

While Griffin Power had stated an intention to make sufficient space available on land immediately adjacent to the new generation plants, it had not clearing indicated this in the proposed layout. The EPA recommended an approval condition that Griffin Power submit a plant layout figure clearly delineating the land set aside for CCS plant and equipment, which it must quarantine. Failure to do so would be a breach of condition.

Griffin Power had identified the Lower Lesueur Formation (onshore, south of Lake Preston) and Gage Sandstone (offshore from Perth) geological formations as potential geosequestration sites. However, it has not been confirmed that those sites could hold the expansion’s GHG emissions. The EPA noted that considerable additional work was required to determine the viability of the sites. Also Griffin Power had not provided any information regarding the identification of potential transport routes.

Thus the EPA concluded that insufficient information was provided to allow it to judge whether the expansion would be CCS ready. Therefore it recommended approval conditions to require Griffin Power to:

  • advise the EPA of progress made towards the implementation of CCS every five years, and
  • retrofit the plants within five years of the EPA concluding that CCS is economically and technically proven.

The EPA noted that it considered it unlikely that CCS will be technically and commercially viable in Western Australia in the ‘near future’. It did consider CCS technology to be technically feasible, but the full CCS chain of capture, transport and storage had yet to be demonstrated for the full capacity of a coal-fired power station in Australia.

The EPA also noted the importance of a joint government/industry focus on developing real options for geosequestration in Western Australia. The EPA encouraged a joint initiative between the Commonwealth Government, Western Australia Government and Industry to jointly invest in the Collie South West Hub Geo-sequestration Project, to research and develop carbon sequestration options for coal-fired power stations in Western Australia. That project has been shortlisted for the Commonwealth Government’s $2 billion CCS Flagships Program.

Uncertainty will also remain until Western Australia passes legislation for the onshore management of GHG storage in Western Australia. Commonwealth legislation for offshore CCS was passed in 2008. The Western Australia Department of Mines and Petroleum (DMP) has undertaken consultation for comments on Western Australia onshore GHG storage legislation. The DMP website2 provides that:

  • it is proposed that the Western Australia onshore CCS legislation will reflect many of the provisions of the Commonwealth’s Offshore CCS legislation
  • it is also proposed that the Western Australia onshore CCS legislation will be incorporated into the existing Western Australia onshore oil, gas and geothermal energy legislation, and
  • following Cabinet approval, it is anticipated that the legislation will go to Parliament in 2010.

GHG abatement

The EPA considered that relying on CCS to constrain emissions from the Bluewaters expansion is considerably risky, given the likelihood that CCS would be technically and commercially viable in the near future is uncertain.

The EPA also recommended a condition that Griffin Power submit a GHG abatement report prior to construction, in part supported by the continued uncertainty for the Commonwealth Government’s proposed CPRS.

The GHG abatement report would need to meet the following objectives:

  • demonstrate that maximising energy efficiency and opportunities for future energy recovery have been given due consideration in the design of the power station
  • ensure that the GHG intensity (i.e. quantity of CO2 equivalent produced per MWh of electricity produced) is equivalent to, or better than benchmarked best practice, and
  • achieve continuous improvement in GHG intensity through the periodic review, and if practicable, adoption of advances in technology and process management.

This condition is broadly inline with those previously recommended by the EPA under its Guidance Statement 12 ‘Minimising Greenhouse Gas Emissions’ October 2002.

EPA’s climate change approach

The recommended approval conditions regarding CCS retrofitting and the GHG abatement report would only continue to have effect until the EPA and Minister for Environment determine that they are ‘non complementary’ to any Commonwealth ETS in force in Western Australia.

The recommended approval conditions regarding the GHG abatement report and CCS reporting would continue.

This approach is broadly consistent with the EPA’s draft Climate Change Environmental Assessment Policy which considered the EPA’s role in climate change regulation both pre and post a CPRS. The draft policy is designed to replace Guidance Statement 12 and was released by the EPA for stakeholder comment in 2009.

In the draft policy the EPA noted that:

‘The introduction of an emissions trading scheme, the CPRS with broad coverage across most Australian industry sectors will largely eliminate the need to regulate greenhouse gas emissions in Western Australia.’

and recognised:

‘...the requirement for climate change conditions on proponents to be complementary to the CPRS.‘ However, the EPA then disclosed an intention to continue to regulate some climate change mitigation issues even post a Commonwealth ETS:

‘This simply means that conditions imposed on project proponents for the purposes of greenhouse gas reduction must not seek to address the same market failure as the CPRS (ie pricing greenhouse gas emissions).‘

The EPA in particular noted that:

‘Regardless of the economic implications of the CPRS on project proponents, the EPA considers that the EP Act requires that best practice technology and operational practice be implemented in development projects.’

It is therefore not surprising that the GHG abatement report was recommended for the Bluewaters expansion, but somewhat inconsistent with the draft Climate Change Environmental Assessment Policy that this condition could cease to have effect if there is a Commonwealth ETS.

We understand that after the release of this draft Climate Change Environmental Assessment Policy the EPA was instructed by the Western Australia Department of Premier and Cabinet to review the policy and release a further draft, presumably re-assessing its stated approach. It is uncertain when a further draft will be released and what approach it would propose.

Importantly the EPA’s draft Climate Change Environmental Assessment Policy and report on the Bluewaters’ expansion seem to only consider the possibility of a broad based Commonwealth ETS. The possibility of an alternative Commonwealth approach, such as the Coalition’s proposed Emissions Reduction Fund is not expressly considered. Therefore it is likely that the recommended approval conditions regarding CCS retrofitting and the GHG abatement report and the EPA’s climate change regulatory approach would continue even if the Coalition’s Emissions Reduction Fund comes into place given that fund would not have the same broad economic impact of the CPRS. This could create even more difficulties for business with multi-tiered regulation.3

Given the uncertain future of Commonwealth GHG regulation there is therefore considerable uncertainty for how climate change issues will be approached in state-based environmental impact assessment. The EPA’s Bluewaters recommendations demonstrate its intent to directly regulate climate change issues, including CCS, at least prior to a Commonwealth ETS.

The EPA did present an opinion in its Bluewaters expansion report that closed cycle gas turbine power stations represent best practice technology for large-scale base-load power generation, and also noted that Western Australia emissions will need to fall substantially to achieve Australia’s stated 60% emissions reduction target by 2050. This questions whether other coal-fired power stations can be approved in Western Australia in the future.

Offsets

No other climate change focused offsets were recommended by the EPA, not even pre-CCS feasibility. Griffin Power had submitted that it should not be required to do so as credits for any such offsets would not be recognised under the CPRS.

On the CPRS information available it appears that regulation required offsets would not be recognised under the CPRS, other than from forestry.

Other environmental issues

Several other environmental issues were given close attention by the EPA for the Bluewaters expansion, including:

  • an approval condition was recommended that stack emissions concentrations be limited to the EU standard, and
  • noise issues be regulated through the expansions’ Works Approvals and Environmental Licences.