We previously produced a Practical Primer on Carbon Capture for Business and we continue to actively monitor developments in the regulatory environment relating to carbon capture use and sequestration. In that light, we note the following proposed changes to the regulations.
On March 22, 2023, the Oil, Gas and Salt Resources Act (the “Act”) was amended, removing the prohibition on carbon capture, utilization and storage (“CCUS”) in Ontario. The Ontario government is proposing additional amendments to the Act in order to authorize and regulate projects that will test, assess, pilot or demonstrate an activity, method or technology that is new or innovative in Ontario. The amendments aim to establish a process for designating these projects as special projects, allowing the Act to apply to projects that would not have been covered otherwise. Carbon storage is one example of this type of project.
If approved, these amendments would add new authorities and tools for modifying authorization processes and requirements, providing flexibility to address special projects. This strategy will better support decarbonization efforts, innovation, technological advancements, Ontario’s evolving energy needs and the reduction of greenhouse gas emissions.
Background
The Ministry of Natural Resources and Forestry (the “Ministry”) currently regulates activities related to the drilling and operating of wells and related structures or equipment (collectively, referred to as “works”). These activities include the exploration and production of oil and gas, salt solution-mining, underground storage of hydrocarbons (e.g. natural gas) and initiatives for compressed air energy storage. Both Crown lands and privately owned lands are covered by the Act.
Regulating these activities ensures they take place in a safe, efficient and orderly manner, while safeguarding the environment and the general public. To create, operate or perform any work on or in a well, as defined by the Act, a licence is currently required. For some projects, injecting substances into a well also requires a permit.
In recent years, businesses interested in testing, assessing, piloting or demonstrating new activities have expressed a preference for established regulatory frameworks, appreciating the business clarity they provide. Consequently, changes to the Act and regulations have been made to address new activities like compressed air energy storage projects and geologic carbon storage projects.
Special projects
Designating proposed projects as special projects
The proposed changes involve the designation of special projects in Ontario, allowing the Ministry to designate a proposed project as a special project at the request of the project proponent.
The eligibility criteria for special projects include the following examples:
- the purpose of the project is to test, assess, pilot or demonstrate an activity, method, or technology that is new or innovative to Ontario
- the project would involve the use of one more new or existing wells to access underground geologic formations of Cambrian age or younger
- the Minister believes that the project can be designed, constructed, operated and decommissioned in a manner that protects people and the environment
The Minister would have the authority to specify project-related details such as the designation’s term, or to exclude any structures or equipment connected to a well as part of the special project designation. The Minister will also consider any potential adverse effects on the exercise of treaty or Aboriginal rights when determining whether to designate a project as a special project.
Special projects related to carbon storage would initially only be taken into consideration on private land. Although the Act covers both Crown land and privately-owned land, additional changes to other legislation would be necessary before granting access to Crown land for carbon storage projects.
Authorizing special projects
Designating a project as a special project would not authorize said project. Rather, according to the Act, separate authorizations, such as licences and injection permits would be required for special projects. The same rules regarding fees, reporting, compliance, issuance, transfer, referral, hearing and appeal provisions would apply.
The proposed amendments will provide flexibility to the Minister in modifying the existing authorization procedures and requirements as necessary to address special projects. If the Minister determines that an existing requirement is not suitable for the special project and that the exemption or substitution of any requirement would appropriately protect public safety and the environment, the Minister may substitute an alternative requirement or exempt an existing requirement.
Enhancing protection of the public and the environment
The proposed amendments also include measures to enhance public safety and environmental protection. These changes include:
- Granting inspectors the authority to issue orders to operators of wells to test, monitor or assess potential hazards, to eliminate or decrease the likelihood of the hazards occurring, or to stop using the well altogether, in order to prevent or reduce the dangers of hazards occurring.
- Establishing new authority for a court that convicts a person of an offence under the Act to make orders against that person. The orders could, in addition to any other penalty, require the person to address any damage resulting from the offence to pay the Crown for costs incurred to remedy or avoid any hazard to the public or to the environment that resulted from the offence.
- Explicitly noting the authority to consider non-compliance when making designation or authorization decisions under this Act. The consideration may include past convictions, non-compliance with the Act, its regulations, or orders made under it by a person, a corporation, or the officers and directors of a corporation.
- Amending three offence provisions to make it an offence to create a hazard to the natural environment (in addition to creating a hazard to public safety).
Acceptance of public comments to the proposed amendments to the Act closed on May 18, 2023.
Should you have any questions or concerns, please feel free to reach out to a member of Miller Thomson’s ESG and Carbon Finance group.
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