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In brief

On 5 May 2021, the federal government released draft amendments to its National Greenhouse Energy Reporting (NGER) emissions reporting scheme, and a supporting discussion paper. Referred to as the “2021 NGER Amendments”, the following changes are proposed:

  • new methods will be introduced to provide explicit reporting guidance for hydrogen production facilities (i.e. facilities that produce hydrogen for use outside the facility);
  • existing methods will be expanded to provide guidance on estimating the fugitive emissions from the transport and injection of greenhouse gases for the purpose of enhanced oil recovery (EOR); and
  • methods for estimating the fugitive emissions from oil and natural gas facilities will be updated.

The Department of Industry, Science, Energy and Resources are seeking submissions from all interested stakeholders on the proposed amendments. Submissions opened on 4 May 2021 and will close on 21 May 2021.


Contents

  1. Recommended actions
  2. Inmore detail
  3. New method for hydrogen production facilities
  4. Inclusion of enhanced oil recovery
  5. Update for oil and gas fugitive emissions methods
  6. Submissions

Recommended actions

We recommend that industry participants undertake the following:

  • Review the proposed amendments;
  • Ensure their measurement and reporting processes will comply with the proposed new methods; and
  • Consider making submissions on the proposed amendments before 21 May 2021.

Should an industry participant require further information on the proposed amendments or submissions process please do not hesitate to contact our team.

In more detail

On 5 May 2021, the federal government announced its intention to make amendments to the National Greenhouse and Energy Reporting Regulations 2008 (the NGER Regulations) and National Greenhouse and Energy Reporting (Measurement) Determination 2008 (the Measurement Determination).1  The NGER Regulations outline the requirements for reporting entities under the NGER scheme and the Measurement Determination provides methods for estimating GHG emissions and the production and consumption of energy.

The proposed amendments are expected to commence on 1 July 2021 and will apply to NGER reports that are due to be submitted by 31 October 2022.

New method for hydrogen production facilities

The 2021 NGER Amendments propose to introduce a new method which provides explicit reporting guidance for hydrogen production facilities that rely on fossil fuel feedstocks (e.g. coal, natural gas) to produce hydrogen. The method will apply to facilities with a primary product of hydrogen for use outside the facility (e.g. for use in transport, or international export).

Specifically, the method provides guidance for estimating Scope 1 emissions from steam reforming processes used to produce ‘blue’ or ‘brown’ hydrogen. Facilities will be required to report on production volumes by type of production method. The method allows for the deduction of carbon dioxide that is captured and transferred for permanent storage or for use in another facility.

If no fuel Is used as a feedstock in the production of hydrogen (e.g. hydrogen is produced by electrolysis instead), the emissions from the production of hydrogen from the facility will be zero, although we note that other emissions from the facility may need to be reported.

Importantly, this emissions data will provide critical data to hydrogen certification schemes, which the Australian Government is currently pursuing both domestically and internationally in collaboration with the International Partnership on Hydrogen and Fuel Cells in the Economy. The purpose of these schemes is to certify the carbon footprint of hydrogen produced by different facilities.

Inclusion of enhanced oil recovery

The 2021 NGER Amendments propose to require that EOR facilities report on fugitive emissions from the transport of captured carbon dioxide to injection site, and also from the injection of carbon dioxide for the purpose of EOR. This builds on existing methods in Divisions 3.4.2 and 3.4.3 of the Measurement Determination, which provide guidance on estimating fugitive emissions from the transport and injection of carbon dioxide for the purpose of permanent storage (i.e. carbon capture and storage (CCS) operations).

EOR technologies inject compressed carbon dioxide into depleted oil or gas reservoirs to extract more hydrocarbons. A significant proportion of the carbon dioxide injected as part of the EOR process is recovered during the production of hydrocarbon and recycled. Although not currently used commercially in Australia, the amendments aim to allow for EOR to be accurately reflected in Australia’s national greenhouse gas inventory should EOR be implemented in the future.2

The 2021 NGER Amendments propose to amend the NGER Regulations by introducing a requirement that the annual reports of EOR facilities include the amount of GHGs captured and imported for EOR, as well as the amount of GHGs injected at EOR sites. More specifically, reports are to include the following information:

  • the amount of emissions that occurred during the transportation of greenhouse gases to the enhanced oil recovery site;
  • the amount of emissions that occurred when greenhouse gases were being injected into the enhanced oil recovery site;
  • the type of the source of the emissions;
  • the methods in the Measurement Determination used to estimate the emissions from the source;
  • the total amount of greenhouse gases emitted from the source, in CO2-e.

The amendments to the Measurement Determination propose to define EOR as “a greenhouse gas is captured for enhanced oil recovery if it is captured and transferred to the holder of an enhanced oil recovery authority for injection into a geological formation, such as a natural reservoir, to further oil or gas production activities and is not captured for permanent storage (emphasis added)”. An “enhanced oil recovery authority” is defined to include a licence, lease or approval under Commonwealth, State or Territory legislation which authorises the injection of greenhouse gases into geological formations to further oil or gas production.

Importantly, the discussion paper expressly states that the proposed amendment “does not imply EOR is a form of permanent geological storage, and does not provide methods for losses of any injected CO2 via leaks in the geological formation, as there are no provisions under existing oil and gas production licencing regimes for such monitoring activities (emphasis added)”.3 Accordingly, the amendments do not allow for the deduction of any carbon dioxide that may be permanently stored as a result of EOR activities.

Update for oil and gas fugitive emissions methods

Finally, the 2021 NGER Amendments propose to update existing methods for estimating and reporting on fugitive oil and gas emissions.

The proposed amendments will bring existing oil and gas reporting provisions in line with estimation methods applied in Australia’s National Inventory Report submitted under the United Nations Framework Convention on Climate Change and its Kyoto Protocol. They also reflect the latest available research and developments in empirical evidence.4

The proposed amendments will allow reporters to apply per-component ‘leak’ and ‘no-leak’ emissions factors based on the results of Leak Detection and Repair (LDAR) programs applied at specified types of facilities.5 This will allow active leak management efforts to be accurately accounted for.

The specified facilities that may take the results of LDAR programs into account are onshore and offshore natural gas production, natural gas gathering and boosting, natural gas processing, natural gas storage, and natural gas liquefaction, storage and transfer facilities.

The proposed amendments also delineate the different types of emissions sources that may occur within the existing emissions source of “natural gas production or processing”. This will enable companies reporting on such facilities to be more specific as to whether leakage or venting/flaring occurred from onshore natural gas production, offshore natural gas production, natural gas gathering and boosting, natural gas processing, natural gas storage, natural gas liquefaction, storage and transfer, or produced water.

Submissions

The Department of Industry, Science, Energy and Resources are seeking submissions from all interested stakeholders on the proposed amendments. Submissions opened on 4 May 2021 and will close on 21 May 2021.Any submissions should be lodged electronically via the consultation website (here) or sent by email to [email protected].


Microsoft Word – 2021 NGER amendments- Departmental commentary (industry.gov.au)
New NGER guidance proposed for CO2 injection with oil recovery (footprintnews.com.au)
Microsoft Word – 2021 NGER amendments- Departmental commentary (industry.gov.au)
Microsoft Word – 2021 NGER amendments- Departmental commentary (industry.gov.au)
Microsoft Word – 2021 NGER amendments- Departmental commentary (industry.gov.au)

Author

Ilona Millar is a partner in the Environmental Markets team at Baker McKenzie's Sydney office. Ilona is an environmental and projects lawyer with a diverse range of experience in domestic and international climate change, carbon markets, environmental law and policy, and a strong background in all aspects of water management, planning and projects. She joined the Firm in 2008 from the Foundation for International Environmental Law and Development, and International Institute for Environment and Development, in London. Ilona regularly writes, teaches and presents on environmental topics — she has lectured on environmental law, environmental markets and international climate change law at UNSW, Sydney University and University College London and for the past six years has co-coordinated the international climate change law course at ANU where she is a visiting fellow at the College of Law. Ilona's extensive pro bono work includes advising a number of developing country governments and non-government organizations on international climate change negotiations, and advising the Wentworth Group of Concerned Scientists on water and natural resource management law. She is listed among the best lawyers for Climate Change by Best Lawyers Australia 2016.

Author

Aylin Cunsolo is a Partner in Baker McKenzie's Energy and Resources in Melbourne.

Author

Author

Raymond Lou is a partner in the Sydney office of Baker McKenzie where he advises on mergers and acquisitions (public and private), major projects and China inbound transactions.

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Guy Dwyer is a senior associate in Baker McKenzie's Sydney office, practising primarily in environmental, planning and climate change law. He is valued for his ability to effectively identify the key environmental and planning law issues arising from a client's proposed course of action. Guy draws on his deep knowledge and experience in environment and planning matters to clearly and efficiently communicate advice in a manner that suits the needs of the client.

Author

Sophie Whitehead is an associate in the Environmental Markets team at Baker McKenzie, Sydney. Sophie is an environmental lawyer who specialises in domestic and international climate change law and policy, carbon markets and environmental compliance. She joined Baker McKenzie in 2015. Sophie advises governments and corporations on matters relating to the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement, including on their participation in the international climate change negotiations, engagement with carbon markets and the implementation of Nationally Determined Contributions (NDCs). Sophie also advises on legal and policy issues associated with Australia's Emissions Reduction Fund and Safeguard Mechanism. Sophie advises corporations on environmental compliance and planning approval pathways.

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