Picking Up on What's Going Underground: Australia Should Exempt Carbon Capture and Geo-Sequestration from Part Iiia of the Trade Practices Act

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Abstract: Australia has identified carbon capture and geo-sequestration ("CCS") as a partial solution to the problem of global warming. CCS involves capturing carbon dioxide from large point-source emitters, such as power plants, and injecting it deep below ground level for disposal. Australia has not yet enacted CCS-specific regulations. As it stands now, Australia's third-party access law, Part IIIA of the Trade Practices Act, creates regulatory uncertainty for CCS infrastructure projects and will deter investment in the industry. This regulatory uncertainty results from the ambiguous criteria used to determine whether a piece of infrastructure is appropriate for third-party access.

Legislators could address the ambiguity of Part HIA by creating an industry specific third-party access regime for CCS. However, doing so would be difficult without foreknowledge of how the industry will develop, would generate significant compliance costs, and would also likely deter investment. In the near term, CCS should be exempted from Part IIIA altogether to encourage private companies to invest in CCS. Exemption would provide investors with the expectation that they can recoup the costs of their investments without submitting to mandatory access requirements.

I. INTRODUCTION

Australia has identified a process called "carbon capture and geosequestration" ("CCS") as a viable way to both address the problem of global warming and continue to use fossil fuels for energy. 1 CCS is the process of first trapping flue gases from large point-source emitters, then capturing the carbon dioxide from those gases, compressing that carbon dioxide, transporting it, and finally, injecting it deep underground for disposal.2 CCS depends upon established science but has not yet been implemented on a significant scale.3 The cost of capturing carbon dioxide remains a serious obstacle to widespread adoption of CCS, but in the minds of many scientists and politicians this obstacle is surmountable when considered against the backdrop of the alternatives.4 Because world energy forecasts predict continued global reliance on fossil fuels for decades to come,5 CCS stands as an important mitigation strategy over the medium term.6

Many CCS projects around the world are in development.7 The largest of these projects will be the Gorgon development just off the northwest coast of Australia, expected to be operational in 2010.8 The natural gas fields there contain between 12% and 14% carbon dioxide.9 Normally, a natural gas developer would simply vent that carbon dioxide into the atmosphere. Instead, the petroleum companies operating Gorgon will sequester the carbon dioxide into a saline aquifer deep below nearby Barrow Island.11

Australian lawmakers have begun to develop state and federal legal frameworks to govern the nascent CCS industry. At the federal level, the Commonwealth issued a set of Guiding Regulatory Principles to give direction to the various states in developing consistent laws for CCS.12 More recently, the Commonwealth suggested that federal CCS legislation will be based on the Offshore Petroleum Act.13 Amending the Offshore Petroleum Act would be in line with developments at the state level in Queensland and South Australia.14 In drafting future laws, legislators face the dilemma of how to regulate a new industry.

This Comment considers the application of Part IIIA of Australia's Trade Practices Act ('TPA") to the CCS industry. Part IIIA is Australia's default third-party access law and could be applied to infrastructure in any industry.15 Part IIIA regulates a third-party private company's access to critical infrastructure, and allows for the creation of specific access regimes for industries prone to natural monopolies.16 This Comment argues that Part IIIA creates regulatory uncertainty for CCS investors and will deter investment in the CCS industry. Part IIIA was enacted to support competitive marketplaces. …

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