Government plans to regulate the capture and burial of carbon emissions under Australian seabeds, in a bid to clean up the country’s coal industry, should be designed in a way that doesn’t jeopardize existing investment in Australia’s offshore petroleum reserves, a Parliamentary committee said Friday.

The federal Labor government unveiled draft legislation in May that will create a framework for carbon dioxide capture and geological storage, or CCS. The legislation – which establishes access and property rights for injecting and storing greenhouse gases into geological reservoirs located in Commonwealth waters off Australia – is expected to be introduced into parliament in the spring session, starting Aug. 26.

An inquiry by the bipartisan House of Representatives Primary Industries & Resources Committee, tabled Friday, recommends that incumbent petroleum operators be offered a one-off opportunity to incorporate a greenhouse gas assessment permit over their exploration or production license – on condition they use the permit within five years, or surrender it.

The committee also wants the legislation to be amended to allow the government to direct parties to negotiate in good faith where greenhouse gas storage and petroleum titles overlap, and to direct an outcome on those negotiations.

Proponents who can demonstrate a “readily available carbon dioxide stream for imminent injection” should receive preferential treatment when assessing bids for greenhouse gas acreage allocation, it said.

The committee also recommended the government consider further financial incentives “for the earliest movers in this new industry”.

Under the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill, up to 10 sites will be assessed for possible storage, with around half likely to be chosen.

Australia, which uses coal for the majority of its power supplies, is due to start emissions trading by 2010 to help tackle global warming. The scheme will force the country’s biggest polluters, mainly from the power sector but also from heavy emitters such as aluminum producers, to pay for their greenhouse emissions via so-called carbon permits.

There are fears the trading plan will add to Australia’s electricity prices, given its dependence on coal-fired energy, as well as affecting energy-intensive industries that can’t pass on rising input costs to their international customers.

But CCS projects, if successful, could help offset the cost of emissions trading for coal-fired energy operators.

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