Chevron, Exxon, Shell Sidestep Long-Term CO2 Storage Liability in Gorgon Deal

Chevron is no stranger to liability.

The super major energy company faces a $27 billion lawsuit over allegations of environmental pollution in Ecuador's Amazon. Exxon Mobil and Royal Dutch Shell also have grappled with a number of costly lawsuits over the years.

It's safe to assume all three energy companies want to avoid liability, especially with a project as large as the Gorgon liquefied natural gas project in Western Australia.

And it turns out, that's what they managed to do.

Bloomberg reported today, the three companies agreed to invest in the $37 billion Gorgon venture only after Australia's government assumed any long-term liability for potential damages incurred from carbon storage.

This means the Australian government will accept any liability if carbon dioxide captured from the project and injected underground, escapes storage hundreds of years from now.

Chevron and its partners are not dodging the liability bullet altogether.

The energy companies are liable for carbon storage during the project's construction, operation and at least 15 years after its closure, according to the Bloomberg report. Chevron plans on exporting gas in 2014 and expects the Gorgon to operate for 40 years. So, their liability would end around 2069.

And to be clear, the carbon dioxide isn't being housed in some shed around the back of the facility. It will be stored more than 6,600 feet under Barrow Island, where the Gorgon project is located, off the western coast of Australia.

The Gorgon storage project received environmental approval from Australia's state and federal governments. Still, some risk remains including the presence of geologic fault lines, Bloomberg noted in its story.

A few questions come to mind. Is the potential economic boon to Australia, which will mean thousands of jobs and a AU$64 billion net boost to its gross domestic product, worth the risk, even if its highly unlikely anything will go awry?

And how long is too long for an energy company to remain liable for a project? 100 years? 1,000?

What if the project involves capturing and storing carbon dioxide, a process that will help reduce greenhouse gas emissions?

Gorgon project map from Chevron