13 July 2012
Sorting out your reporting obligations and carbon liabilities
Recent amendments to the Clean Energy Act have provided clearer guidance for coal mines, especially those formed under joint venture partnerships. The opportunity exists to consolidate and thereby simplify carbon liability and reporting obligations. Given the new provisions, JV owners should take steps to align contractors to reduce their carbon liability, which in turn lowers costs and ensures that limited onsite resources are used more efficiently.
Understanding Joint Ventures under the Clean Energy Act
There are two types of joint ventures under the Clean Energy Act - Mandated Designated Joint Ventures (MDJV) and the Declared Designated Joint Ventures (DDJV). From 1 July 2012, the term ‘responsible entity’ will be removed in relation to joint ventures. Under the revised regulations, group members will be able to nominate operational control.
Mandated Designated Joint Venture
A MDJV occurs where no one person has operational control. There is no application required but rather a notification to the Regulator.
All participants will share the liability which will be determined by the Participating Percentage Determination (PPD). This is the ratio of each participants’ liability and must be based on valid methodology (e.g. percentage ownership, basis for distributing income, etc.) and declared when the MDJV notification occurs.
Where a MDJV exists, all participants must register and report under Section 19 of the NGER Act and Section 22A of the Clean Energy Act.
It can be agreed between the participants that one entity reports on 100% of the emissions and the PPD and the remaining entities refer to the report submitted rather than re-entering data for the same facilities. The aim of this is to reduce the reporting burden. MDJVs cannot transfer carbon liabilities to other group members using LTCs.
Declared Designated Joint Venture
The DDJV mechanism allows for transfer of carbon liability between joint venture participants. It applies where one participant in the DDJV has sole operational control of a facility however all participants have elected to take on their share of the liability. Participants must jointly apply for declaration of a designated JV and will be required to register individually under the NGER Act and will be liable under the Clean Energy Act. Each participant of the DDJV will have to report on 100% of the emissions and their PPD portion unless one group member is nominated to be the sole reporter.
The total percentages of the PPDs from the JV participants must equal to 100% of the emissions of the JV facility
A designated joint venture cannot transfer carbon liability to other group members using LTCs.
Liability Transfer Certificates (LTC)
The default carbon liability for a facility falls on the person/entity with operational control of the facility. Liability Transfer Certificates (LTCs) can be used to transfer liability for covered emissions via the following mechanisms:
Corporate Group LTC - transfers liability between group members within a corporate group (note that one member must have operational control and the applicant must be the person wanting to take on the liability); and
Financial Control LTC - transfers liability from one group member with operational control to a group member in a different corporate group that has financial control of the facility.
Group members must apply to the Regulator for Corporate Group or Financial Control LTCs. A LTC can be backdated from the date of approval but only within the financial year to which it relates.
LTCs are not used to transfer reporting obligations under the NGER Act, only liability under the Clean Energy Act. If a group member has Corporate Group LTCs in place, an agreement can be made for the group member to report on the facilities for which it has LTCs (Section 22A reporting). In this instance, the controlling corporation would not be required to report on those facilities in their Section 19 report (i.e. their “regular” NGER annual). LTCs cannot be used to transfer indirect liabilities through mechanisms such as OTNs.
The mechanism for transferring NGER reporting obligations for a facility where a Financial Control LTC is in place is via Reporting Transfer Certificates (RTCs). These transfer reporting obligations from a group member that has operational control to the group member that has financial control.