The North Sea Transition Authority (NSTA) has mooted plans for a new industry levy to help fund its oversight of the carbon capture and storage (CCS) sector.
As part of a consultation launched on Monday the regulator is seeking views on “potential principles, design and timing of a possible future levy” that could be enacted to help its management of the UK’s carbon dioxide stores.
While the call remains an “early evidence-gathering exercise” at this stage, the NSTA says it is necessary to help inform its thinking around how the industry could move towards a “user pays” model for the services it provides in the long term.
It suggests those services should be funded by the sector once it is on “a more established and self-sustaining footing.”
The result could mirror the petroleum levy, which is paid by the oil and gas sector and used to fund the management of exploration and production licences and asset stewardship, with additional fees charged for specific services.
Explaining the approach, the consultation notes that the amount of work undertaken by the NSTA in carbon storage has increased, and it is now responsible for some 27 licences currently held by industry. Further preparations to train staff to assess carbon storage permit applications are also in progress, which are required to support CO2 injection.
That includes oversight this year of the country’s first storage licensing round, in which 21 permits were dished out to 14 firms.
The NSTA has said that as many as 100 storage sites could be needed to meet the requirements for reaching net zero.
“The NSTA does charge fees for some aspects of this work – such as processing applications for licences and permits – but such fees can only cover the direct costs of providing those services,” it notes.
“Wider costs, including some of those around stewardship activity, guidance and process development, policy and regulatory coordination, are not covered by those fees, but are instead predominantly funded by government.”
Several options for levy design are considered, ranging from a single levy rate for all storage licences, to different rates depending on the category of licence holder.
Other options include a combined single levy for petroleum and carbon storage licences, or a levy based on acreage or amount of carbon dioxide stored.
The department is seeking input on all of the approaches.
The timeline for enacting any policy depends on “careful analysis” and a range of factors, the NSTA notes, including how well established UK CCS policy and regulatory frameworks become, and how well established the wider industry is.
The call for evidence was launched on 4 December 2023 and will remain open until 26 January 2024.
