Is there a need for a Hydrogen Act in Queensland?26 May 2021
For the first time in Queensland, following the October 2020 election, the portfolio of Minister for Hydrogeni has been created with the remit of driving the development of an economically sustainable and competitive hydrogen industry.
While a Minister for Hydrogen exists, there is currently no special purpose legislation that facilitates or regulates the development and operation of the hydrogen industry in Queensland. In particular, there is currently no “Hydrogen Act”. The absence of a commodity or resource specific Act sets hydrogen somewhat apart from other mineral resources and energy sources which have their own special purpose legislationii.
So why isn’t there a Hydrogen Act and should there be one? Various elements of a regulatory regime for hydrogen could benefit from specific purpose legislation for this emerging industry. Hydrogen operators will need access to land on which to operate. They will be producing a resource and/or energy source (depending on how it is categorised) and will need raw feedstocks, whether water or natural gas or something else, to convert to hydrogen. The industry’s activity will undoubtedly warrant environmental regulation. The end product will need to be transported to market, whether by pipeline or in hydrogen safe vessels or by some other mode. And the whole process will need to be done safely with an appropriate safety regime. On top of that remains an unanswered question about whether any kind of royalty will be payable on any hydrogen produced and also whether any sort of subsidy will be available for generating green hydrogen to make it more cost competitive in the short to medium term.
In addition, other participants in a hydrogen industry, such as project financiers, may feel more comfortable investing in and supporting hydrogen projects if there is a clear regulatory regime and set of approvals which demonstrate that a project is ripe for investment and primed for production.
Should this line of regulatory thinking stop at hydrogen? Is there a need to think even further ahead towards a “Chemical Energy Act”?
The Queensland Hydrogen Industry Strategy identifies a strategy action of evaluating and monitoring Queensland’s regulatory environment and undertaking reforms required to streamline the safe and sustainable development of a hydrogen industry. A Hydrogen Act or Chemical Energy Act would certainly support this strategy action. The opportunity exists now for the Government to shape the industry and the legal framework supporting it while giving the industry consistency and the best chance for success.
Any Act regulating hydrogen or chemical energy would need to recognise that hydrogen exhibits some qualities that are akin to mineral resources and other qualities that more closely resemble energy. Therefore, any Hydrogen Act or Chemical Energy Act could not simply adopt the existing resources framework or energy framework in totality. Any such Act would need to adopt and adapt the relevant elements of existing frameworks to achieve a result tailored to hydrogen.
This article considers the potential utility of a Hydrogen Act or a Chemical Energy Act, including land, environmental, transport, safety, royalties and other factors.
Any hydrogen enterprise will need land on which to operate and will need approvals to condition the activities. Given the likely high cost of establishing plant and equipment, a hydrogen operator will need certainty and security of tenure to be able to carry out its activities and attract financial investment.
This could be done by a dedicated tenure regime similar to resource authorities for minerals and petroleum. In particular, a regime involving hydrogen facility licences, similar to petroleum facility licences, could provide a means for hydrogen operators to secure access to land for their operations.
While there is less need for hydrogen production activities to be located on specific land (unlike mining or petroleum authorities which need to be located where the resource is situated), there may nonetheless be considerable advantages for hydrogen operators to have some degree of control around where their production facilities are located. For example, co-location of hydrogen production facilities with other facilities such as renewable energy generation sites and wastewater treatment plants, would facilitate the physical interface between hydrogen producers and their key input providers. Similarly, locating hydrogen production facilities proximate to pipelines and/or ports and/or markets, may also be beneficial for hydrogen industry participants.
In the absence of a tenure regime tailored for hydrogen, the security and certainty of land access for hydrogen projects will need to be dealt with under the Planning Act 2016 (Qld) (Planning Act) and will require either purchase of the land or entry into a lease arrangement with the relevant landowner as well as obtaining the grant of a development approval. Planning issues such as zoning and limitations on use of the land as well as (potentially) restrictions that could potentially arise under the Regional Planning Interests Act 2014 (Qld) will also be necessary considerations. In other words, under the existing regime, not every parcel of land can or will be suitable (or legally convenient) for hydrogen production. A lack of standardised tenures for hydrogen projects could potentially change the economics for new projects and it may mean that there is no consistency across the industry.
A Hydrogen Act could facilitate and provide additional flexibility for locating hydrogen operations and open up possibilities that may not be available under the Planning Act . Vagaries of individual negotiations between hydrogen proponents and individual landowners could hamper the establishment of hydrogen projects. Another consequence of an approval regime built around the Planning Act is potentially for different local governments to have different views about hydrogen projects, which may lead to inconsistent conditioning of projects in different local council areas. The State Government may wish to have a more consistent regulatory regime for the industry by ensuring a standardised system of land access and conditioning of approvals for hydrogen projects. A Hydrogen Act would be one avenue for the State Government to achieve that objective.
It is surely axiomatic that the general public would expect hydrogen production activities to be environmentally regulated.
If a tenure regime for hydrogen was introduced, a corresponding environmental approval regime could be introduced in the Environmental Protection Act 1994 (Qld) in the same vein as exists for mining activities, petroleum activities, geothermal activities and GHG (greenhouse gas storage) activities.
It may be the case that hydrogen production needs to be introduced as a new prescribed environmentally relevant activity (ERA) but it may also be covered by existing regimes relating to chemical production.
Whether the existing regime, a new regime or a modified existing regime is adopted, any regulator will need to consider that hydrogen itself, as well as the process used to produce it, may well have their own quirks and characteristics which will need to be addressed by conditioning specific to hydrogen. So specific purpose environmental conditioning, even in the absence of a Hydrogen Act, may still be needed.
The Government may also want to consider whether the environmental chain of responsibility regime for resources projects should also apply to hydrogen projects.
Some consideration will also need to be given as to whether hydrogen projects will need to go through the Environmental Impact Statement (EIS) process. This may depend on the scale of the project and its location. If the ultimate position of the Government is that an EIS is required for some hydrogen projects, then the need for any hydrogen specific guidelines, terms of reference and conditions will need to be considered.
Transport, pipelines, delivery and storage
Hydrogen has different physical and chemical qualities to most minerals and to petroleum and gas with hydrogen being the lightest element, in gaseous form under normal conditions, difficult and energy intensive to liquefy, and extremely flammable. It may be the case that specific legislation is needed to regulate and/or facilitate transportation, delivery and storage of hydrogen within Queensland and Australia including storage at supply depots and delivery through export terminals.
Hydrogen in Australia could potentially be transported by pipeline, whether in a stand-alone dedicated hydrogen pipeline or as an addition to natural gas pipelines. It could also be transported by tanker truck, railway and potentially by other means. Unlike several other energy sources, it has the capacity to be stored for later use in which case regulation of dedicated storage tanks and vessels pending use, final delivery and export may also be needed.
These methods of transportation and storage, including pipelines, are similar in nature to transportation methods for petroleum and gas (which also include smaller tanks for LPG products).
When it comes to pipelines, in the absence of facilitating legislation, securing access to all the parcels of land which the pipeline is to traverse could potentially be a very difficult task if agreement with every landowner is required. An access regime for hydrogen pipelines may also be needed.
It would therefore seem inevitable that a considerable measure of regulation will be needed in relation to hydrogen, particularly for pipelines and also other modes of transport and storage vessels and facilities. A legislative regime for the transportation and storage of hydrogen by pipeline or in gas cylinders could therefore look very similar to the petroleum and gas regime for pipelines and LPG for example, and therefore could adopt (or be included within) the existing petroleum and gas legislative frameworks.
Alternatively, where transportation of hydrogen is to occur by way of tanker truck, a notifiable road use regime (similar to that used for minerals) may be appropriate, particularly if large numbers of vehicle movements are anticipated. In this instance, existing transportation chain of responsibility obligations may also be applicable to a hydrogen industry.
It therefore seems that transportation and storage of hydrogen would benefit from a Hydrogen Act.
Given its flammable (and explosive) nature, a safety regime for any hydrogen industry is essential. The Government will need to consider whether the regime under the Work Health and Safety Act 2011 (Qld) is to be preferred, or whether a hydrogen safety regime should borrow heavily from the regime that exists under the Petroleum and Gas (Production and Safety) Act 2004 (Qld) as the latter system already deals with a range of safety processes and issues for gas. But before any safety regime can be applied to a hydrogen industry, more detailed consideration will need to be given to whether the peculiar properties of hydrogen require additional regulation or different regulation.
A Hydrogen Act (or Hydrogen (Production and Safety) Act) could include an industry specific safety regime, which would properly protect persons involved in the hydrogen industry and also members of the general public.
Most commentators expect that hydrogen will be a sizeable industry with significant demand globally. It is not clear what financial benefits the State Government expects to receive from any hydrogen industry or what form those financial benefits may take.
The State has previously legislated to (in general) make all minerals, petroleum, geothermal energy and greenhouse gas storage reservoirs in Queensland the property of the State and also vested all rights to the use, flow and control of all water to the State. Essentially, the State has historically reserved ownership or control (or both) of significant resources to itself. This reservation of ownership founds the regulation of these things. These ownership and control rights also found the State’s rights to levy royalties for the exploitation of these things. Could there be a royalty regime on hydrogen, and would a Hydrogen Act facilitate this?
The resource/energy duality of hydrogen again must be considered in this context. The production of hydrogen is different from the extraction of minerals, petroleum and gas, and different again to the production of geothermal energy, and different yet again to the use of greenhouse gas storage reservoirs. Arguably, the production of hydrogen is more akin to the manufacture of chemicals than to the extraction of natural resources.
These differences, and the unanswered legal question about whether the State has the power to reserve ownership of all hydrogen in the State to the Crown, may warrant a different treatment of hydrogen so that royalties are not payable on its production. This is surely an issue that the State will need to grapple with, particular as it considers its expectations about financial benefits from a hydrogen industry.
If the State chooses to go down a route of reserving ownership of hydrogen and imposing royalties on hydrogen production, it is likely to be unpopular with industry and could be seen as a disincentive for a hydrogen industry in Queensland.
Consideration will also need to be given as to whether the general public will have rights to object or make submissions on any future hydrogen project. While the public reaction to hydrogen has, on the whole, seemingly been positive, when it comes time to develop individual projects, particular impacts may be felt, and concerns may need to be raised. Any regime for hydrogen, whether new or a modification of an existing regime, will need to appropriately address public consultation, submission and objection rights.
Hydrogen proponents will need large quantities of water or natural gas (and potentially other raw inputs) from which hydrogen can be produced. Hydrogen producers will need to secure rights to these raw inputs which may necessitate the granting of water rights and the acquisition of quantities of natural gas. A Hydrogen Act could potentially deal with the interface of approvals processes or purchase of water or natural gas and the production of hydrogen.
Any regime for hydrogen will also need to be consistent with any national regime with benefits potentially arising from a uniform national treatment of hydrogen. But as the majority of regulation relating to a hydrogen industry falling within state jurisdictions, states may ultimately pursue strategies and implement legislation, which is best suited to that state.
An eye on the future
The emergence of a hydrogen industry in such a short period of time, coming so hard on the heels of large scale solar and wind industries, shows the rapid pace of change in the energy sector. It is likely that this change will not end abruptly with the advent of hydrogen. Rather, additional technologies and industries are conceivably just around the corner. So, any consideration of the utility and potential for a Hydrogen Act needs to have one eye on these future technologies.
With some commentators already talking about the potential for an ammonia energy industry, might a Hydrogen Act have better application as a Chemical Energy Act which could regulate all such future energy fuels?
The cornerstone of a hydrogen industry in Queensland, the first and primarily pillar, must necessarily be the ability of Queensland to produce hydrogen in commercial quantities for domestic consumption and for export. All of the other benefits of a hydrogen industry and hydrogen economy rely on production. A Hydrogen Act or Chemical Energy Act could help to achieve that.
Just as the wave/particle duality of light exists in quantum mechanics, any Act regulating hydrogen or chemical energy would need to recognise the resources/energy duality of hydrogen and chemical energy sources. Any legislation to drive the development of a hydrogen industry would need to be crafted with the specific qualities of hydrogen in mind.
A Hydrogen Act does not appear to be essential for the development of a hydrogen industry in Queensland. Nevertheless, there are a number of benefits that could arise from a dedicated Hydrogen Act or Chemical Energy Act over trying to fit a new hydrogen industry into a number of pieces of existing legislation.
Land access, appropriate and consistent conditioning (for both production and environmental regulation), transportation, safety management, community input, investor confidence and financial returns could all arise from clear, industry specific, unambiguous, purpose designed legislation relating to the hydrogen industry. Public consultation on a Hydrogen Act or Chemical Energy Act could also assist with identifying industry specific issues so that they can be properly addressed in any regulatory regime.
i The Minister’s full title is the Minister for Energy, Renewables and Hydrogen and Minister for Public Works and Procurement.
ii For example, minerals (including coal) are regulated by the Mineral Resources Act 1989 (Qld), petroleum and gas are regulated by the Petroleum and Gas (Production and Safety) Act 2004 (Qld) and the Petroleum Act 1923 (Qld) and geothermal energy is regulated by the Geothermal Energy Act 2010 (Qld).