Applying for the EC opinion on the draft CCS permit does not require the applicant to have concluded:
1. financial security arrangements,
2. environmental impact assessment procedures.
Financial security – not so important?
The legal basis for requirements concerning the financial security or other equivalent with respect to the CCS deployment are Articles 8(1)(a), 7 point 10, 9 point 9, 19 of the Directive 2009/31/EC of 23 April 2009 on the geological storage of carbon dioxide (CCS Directive).
The issue of financial security is key in economical terms for the viability of the CCS project given the scale of required collateral support and the timescales involved.
Article 9(9) of the CCS Directive stipulates that the storage permit should contain “... the requirement to establish and maintain the financial security or any other equivalent...”
Articles 10(1) and (2) of the CCS Directive require that Member States make the CCS permit applications available to the Commission within one month after receipt. They should also make available other related material that will be taken into account by the competent authority when it seeks to make a decision on the award of a storage permit.
The said provisions provide, furthermore, for issuing by the Commission of a non-binding opinion on the draft storage permit. The timeline for the issuance of the opinion is four months after receipt thereof.
The legal effect of the said procedure is that the competent authority “notify the final decision to the Commission, and where it departs from the Commission opinion it shall state its reasons."
It is generally understandable, given the said timelines, that it is in the best interest of the investor, the draft permit application to be submitted by the Member State concerned to the Commission as early as possible. Such a step enables the investor to gain knowledge at an early stage of the procedure of the Commission’s views on the CCS project, and the possible Commission’s additional requirements with respect to it.
It seems to be difficult, however, to issue a coherent opinion where key points required to be accounted for in the submission are lacking. The European Commission in its opinion of 28 February 2012 (C(2012) 1236 final) relating to the draft permit for the permanent storage of carbon dioxide in block section P18-4 of block section P18a of the Dutch continental shelf, in accordance with Article 10(1) of Directive 2009/31/EC of 23 April 2009 on the geological storage of carbon dioxide (see: http://ec.europa.eu/clima/news/index_en.htm) was able to cope with this problem.
It may be helpful to recall in this place some provisions of the CCS Directive which underline the importance and absolute character of the financial security presented by the investor:
- Article 8(1)(a) - stipulating that the competent authority will issue a storage permit only if the competent authority, on the basis of the application submitted and of any other relevant information, is satisfied that all relevant requirements of this Directive and of other relevant Community legislation are met;
- Article 7 point 10 – requiring that applications to the competent authority for storage permits should include at least “proof that the financial security or other equivalent provision ... will be valid and effective before commencement of the injection”;
- Article 19(1) - Member States should ensure that proof that adequate provisions can be established, by way of financial security or any other equivalent, on the basis of arrangements to be decided by the Member States, is presented by the potential operator as part of the application for a storage permit. This is in order to ensure that all obligations arising under the permit issued pursuant to this Directive, including closure and post-closure requirements, as well as any obligations arising from inclusion of the storage site under Directive 2003/87/EC, can be met. This financial security shall be valid and effective before commencement of injection.
Read against this legal background the relevant passage of the Commission’s opinion:
“The development of the financial security for the project appears to be at a very early stage. Some evidence has been provided that a bank would take a request to issue a bank guarantee from TAQA Energy B.V. into consideration. It is recommended that this is reflected in the final permit under consideration 15, bullet 3. On the other hand, the draft storage permit contains clear requirements to establish and maintain the financial security or any other equivalent, as required by Article 9 point 9. It provides a breakdown of financial security amounts for different obligations and by yearly period. Based on this breakdown and as far as could be deduced from the documents submitted by the Dutch authorities, it seems that all potential obligations under Directive 2009/31/EC, as well as under Directive 2003/87/EC are adequately covered.
If the financial security proves inadequate, adjustment of the financial security at the initiative of the Minister is regulated under the Dutch Mining Act.
Adjustment of the financial security after each five-year period is regulated under the Dutch Mining Decree. The type of financial instrument will be determined and approved by the competent authority at least six months prior to commencement of CO2 injection. The permit requirements of the draft storage permit states that a bank guarantee and an escrow account are the preferred types of financial instruments. These two instruments involve independent third parties and can therefore be considered to allow compliance with the requirements as set out in the draft storage permit which is to ensure that the funds available under the financial security will be available to the Dutch authorities under all circumstances independently and without the cooperation of the permit holder, the former permit holder or third parties.”
The whole case raises mixed feelings. On the one side it seems appropriate, given the current state of the deployment of the CCS projects and technology, that the Commission apparently makes efforts to facilitate the procedure and avoid blocking it.
On the other side the expressions used in the Commission’s opinion “... as far as could be deduced from the documents submitted by the Dutch authorities, it seems that all potential obligations under Directive 2009/31/EC, as well as under Directive 2003/87/EC are adequately covered” evoke wonder.
The questions appear whether the requirement that “all potential obligations under Directive 2009/31/EC, as well as under Directive 2003/87/EC are adequately covered” in the CCS permit is the matter with respect thereto the words “it seems” or “as far as could be deduced” are appropriate. Shouldn’t this important point be proved without any ambiguity and with the support of the necessary documentation in the permit application?