Two draft bills related to carbon capture and storage (CCS) were submitted for public hearing in November and December respectively, and are expected to be brought forward in the Danish parliament during February 2022.
The first draft Bill relates mainly to geological storage of CO2 of less than 100 kilotons and the second relates to the possibility for state participation in CO2 storage licences. Both draft Bills are a part of the Danish government's plans to clarify the legal framework for CCS in Denmark. Other initiatives are also taken. The goal is to establish a commercial market by 2025 that will contribute to negative CO2 emissions and generate new markets for Danish energy firms and suppliers.
Both of the draft Bills are a part of the Danish government's strategy to enable full-scale CCS in Denmark from 2025 onwards, with the first licences for storage granted before the end of 2022. This is an ambitious goal, and a detailed roadmap has been laid out in order to be able to grant permits within the next 12 months. However a large number of legislative and legal initiatives are necessary.
Geological Storage of CO2 of less than 100 Kilotons for the purpose of Research, Development or Testing of new Products and Processes
The first draft Bill to amend the Danish Subsoil Act was submitted for public hearing on 1 November 2021 with a deadline for replies on 30 November 2021.
The Bill is expected to be brought forward for Parliament in February 2022 and an Executive Order is expected to be submitted for hearing in March 2022. Entry into force is expected by 1 July 2022.
The purpose of the bill is to promote research and development to prepare for safe and environmentally sound storage of CO2, which is important for geological storage of CO2 to take place by 2025 in order to contribute to the realization of the 70% target and thereby mitigate climate change.
The current rules on geological storage of CO2 are found in the Act on Use of the Danish Subsoil cf. Statutory Order no. 1533 of 16 December 2019 with later amendments (hereinafter the Subsoil Act) and in Executive Order no. 1425 of 30 November 2016 on geological storage of CO2 etc. (hereinafter the CCS Order), which were introduced as part of the implementation of Directive 2009/31/ EC of the European Parliament and of the Council on geological storage of carbon dioxide with subsequent amendments (hereinafter the CCS Directive).
The CCS Directive applies to geological storage of CO2 with with the exception of geological storage of CO2 of less than 100 kilotons for the purpose on research, development or testing of new products and processes, cf. Article 2 (1) of the CCS Directive.
At the Danish implementation of the CCS directive in the Subsoil Act in 2011 and subsequently in the CCS Order, Denmark chose not to distinguish between geological storage of CO2 of less than 100 kilotons for the purpose of research, development or testing of new products and processes and other geological storage of CO2.
The Subsoil Act therefore does not currently contain separate rules on geological storage of CO2 of less than 100 kilotons for the said purposes.
The Bill proposes to introduce a similar distinction in the Subsoil Act as that which follows from the CCS Directive by establishing a less comprehensive permit scheme for geological storage of CO2 of less than 100 kilotons FOR the said purposes to promote the necessary research and development in the field of geological storage of CO2.
In the draft Bill it was stated that it is currently not possible to predict all the different types of activities on geological storage of CO2 of less than 100 kilotons that may come in the future.
As this is a new area where new knowledge and new experiences are expected to come on an ongoing basis, it is therefore also important that the regulation can accommodate opportunities to deal with these, and that the regulation can be adapted to future needs. The Minister for Climate, Energy and Utilities therefore considers it appropriate that the future regulation on geological storage of CO2 of less than 100 kilotons for the mentioned purpose can be determined by executive order(s).
It is therefore proposed to introduce an authorization for the Minister for Climate, Energy and Utilities to be able to establish a separate licensing scheme for geological storage of CO2 of less than 100 kilotons.
The terms and conditions set will to a greater extent be able to match the specific activity for which permission is sought. It is expected that the Minister will authorize the Danish Energy Agency to grant the relevant licences for geological storage of CO2.
In addition, the bill proposes a number of consequential changes in the relevant common provisions in Chapter 7 a - 10 of the Subsoil Act to ensure that provisions on e.g. technical and financial capacity, nature protection, etc., also apply to permits issued pursuant to the new rules in § 23 x.
The overall amendments to the bill have the consequence that the vast majority of the common provisions in the Subsoil Act Chapter 7 a - 10, will also find application of the proposed new authorization scheme.
State Participation
The second draft Bill to amend the Danish Subsoil Act was submitted for public hearing on 10 December 2021 with a deadline for replies on 10 January 2022. The Bill is expected to be brought forward for Parliament in February 2022. Entry into force is expected by 1 July 2022.
The draft Bill starts out by stating the starting points for the award of permits for exploration and use of the subsoil for geological storage of CO2. These are governed by section 23 of the Subsoil Act, Chapter 6 of the Subsoil Act on other uses and Chapter 6 a on special provisions on geological storage and piped transport of CO₂.
In addition, the CCS Executive Order contains rules on e.g. application, issuance of permits, operation of the CO₂ storage site, supervision, closure of the CO₂ storage site, etc.
With regard to permits granted in accordance with rules issued pursuant to section 23 x of the Subsoil Act, Chapter 6 b of the Subsoil Act applies – these are the section and Chapter that becomes a part of the Subsoil Act once the first Bill to amend the Suboil Act are adopted.
In addition, the common provisions of the Subsoil Act in Chapters 7a - 10 apply to permits for exploration and use of the subsoil for geological storage of CO2 pursuant to section 23 of the Subsoil Act and permits issued in accordance with rules issued pursuant to section 23 x of the Subsoil Act – again assuming that the first draft Bill is adopted.
In this second draft Bill it is stated – correctly - that the current Subsoil Act does not allow for the granting of permits to the state or a state-owned company. State participation in permits is moreover only an option under the current Subsoil Act, section 8, subsection 1.
Pursuant to section 8, subsection 1, a permit pursuant to section 5 for exploration and extraction of raw materials (primarily oil and natural gas) may stipulate that the state or a company owned by the state under specified conditions shall have the right to enter into the activities covered by the permit.
According to the Minister, state participation in permits for exploration and use of the subsoil for geological storage of CO₂ or in permits for geological storage of CO₂ of less than 100 kilotons for research, development or testing purposes of new products or processes may be needed to ensure that there will CO₂ storage in Denmark. According to the Minister, state participation can promote technological development and infrastructure, innovation and services for CO₂.
The Ministry notes that it is not possible to determine in advance what kind of state involvement which is most appropriate. It must be decided on the basis of a concrete assessment how the consideration of the state's economic interests are taken care of in the most appropriate way.
On this basis, it is proposed that a new provision be inserted in the Subsoil Act, section 23 y, subsection. 1, according to which a permit for exploration and use of the subsoil for geological storage of CO₂ pursuant to section 23 and a permit according to rules issued pursuant to § 23 x may be awarded to the state or to one of the state owned company on specified terms, and that permission is granted for this without prior tender.
