Picking Up on What's Going Underground: Australia Should Exempt Carbon Capture and Geo-Sequestration from Part Iiia of the Trade Practices Act
Andrews, Adam M., Washington International Law Journal
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.17 For a new industry like CCS, any benefits to competition in the future are highly speculative, while the negative impacts for the investment climate are current and concrete. The uncertainty created by Part IIIA heaps risk on an industry whose future is already plagued with unknowns.
This Comment makes two basic assumptions. First, it assumes that Australia will establish a carbon tax or cap-and-trade scheme that attaches a price to emitting carbon dioxide.18 Until emitting carbon dioxide costs money, there cannot be any significant market for services that avoid emissions. Without a market, Part IIIA cannot promote market competition through third-party access.19
Australia will likely establish a carbon tax or cap-and-trade scheme. In December of 2007, Kevin Rudd, Australia's new Prime Minister, ratified the Kyoto Protocol, signaling to the world that Australia will redouble its efforts to address climate change.20 The new government announced that by 2050 it will reduce emissions by 60%.21 The centerpiece of that strategy is a nationwide emissions cap-and-trade scheme that Rudd will put in place in 2010.22 Rudd also renewed the government's pledge to pursue clean coal.
The net effect of these policies will be to put a price on emitting carbon dioxide and to encourage zero-emission electricity production, for example, burning coal for electricity in combination with CCS. …