Act

Enabling the Development of Commercial-Scale Geologic Carbon Storage in Ontario: The Geologic Carbon Storage Act

Regulation Number(s):
-
Instrument Type:
Act
Bill or Act:
-
Summary of Proposal:
Bill 228 Resource Management and Safety Act, 2024

The government introduced Bill 228 Resource Management and Safety Act, 2024 that will help address the challenges Ontario is facing including a projected increase in wildland fire, managing carbon dioxide emissions, hazards posed by certain deteriorating oil and gas wells, and supporting rapid infrastructure and housing development.

Details

Geologic carbon storage (further referred to as carbon storage) involves injecting captured carbon dioxide (CO2) into deep geological formations for permanent storage. Capturing CO2 and permanently storing it in deep geological formations could provide industries in Ontario with a critical tool for managing their emissions and contributing to the achievement of Ontario's emissions reduction targets.

Carbon storage is new to Ontario and developing a comprehensive framework to regulate this activity would help ensure that it is done responsibly, with measures in place to safeguard people and the environment. Establishing a clear legislative and regulatory framework for these projects would be key to managing the risks associated with geologic carbon storage, including minimizing the potential for leaks to the surface or drinking water sources, induced seismicity (seismic events from human activity), or interactions with other resource activities.

Ontario is taking a measured and phased approach to enabling and regulating geologic carbon storage in Ontario.

In the first phase of Ontario's Roadmap for enabling geologic carbon storage, and following consultation on a discussion paper posted in January 2022, changes were proposed through Bill 46, Less Red Tape, Stronger Ontario Act, 2023 to remove a prohibition on certain carbon storage activities from the Oil, Gas and Salt Resources Act. These changes received Royal Assent (approval) on March 22, 2023.

In the second phase, further amendments were made to the Oil, Gas and Salt Resources Act to enable 'special projects' to test, assess, pilot or demonstrate new technologies, methods or activities such as carbon storage and to enhance public safety. These changes received Royal Assent (approval) on June 8, 2023.

From September to October 2023, we consulted on implementing a regulation to allow proponents to seek approval for special projects, including carbon storage. Ontario Regulation 425/23 - Special Projects made under the Oil, Gas and Salt Resources Act took effect on January 1, 2024. While the framework for special projects applies equally to both public (Crown) and private lands, further legislative changes are required before public land could be used for carbon storage projects.

In Phase 3, the ministry posted a discussion paper to the Environmental and Regulatory Registries from July 9th until August 23rd, 2024, seeking feedback on the design of a regulatory framework for commercial-scale carbon storage. Thirty-six comments were submitted in response to the ministry's posting. Targeted engagement sessions were held with industry, agricultural, landowner, and municipal representatives concurrent with the Ministry's posting. Feedback obtained in response to this posting has been used to inform the development of the proposed Geologic Carbon Storage Act.

A summary of the proposed Geologic Carbon Storage Act has been provided below. A link to the proposed legislation has been provided under Supporting Materials below.

Regulated Activities

The proposed Act would prohibit undertaking research and evaluation activities and carbon storage activities unless the activities are carried out within prescribed areas and storage repositories.

Prohibitions would not apply to activities associated with enhanced oil or gas recovery, activities prescribed by the regulations, or other methods of storing carbon dioxide that do not involve the use of wells to inject and store carbon dioxide within a storage repository.

Ownership of and Rights to Pore Space

The proposed Act would clarify the common law principle pertaining to the ownership of pore space in Ontario that pore space underlying the surface of real property forms part of the surface rights estate, except for the circumstance where the pore space has been reserved or separately granted or conveyed to another person.

The Lieutenant Governor in Council (LGIC) would have the authority to make regulations enabling the Crown to, where it is in the public interest to do so, vest pore space within storage reservoirs that are located underneath both public and private lands. The LGIC would have the authority to make regulations governing compensation to be provided to owners of land whose pore space has been vested by regulation. These regulations would not grant the Crown any surface rights or rights to access the surface of land.

The Minister would be able to authorize persons to use pore space vested by the Crown by regulation. The Minister could only issue a carbon storage permit to persons proposing to store a minimum amount of carbon dioxide from a minimum number of industrial emitters as prescribed by the regulations.

Proponents would be able to request a compulsory unitization order from the Ontario Land Tribunal (OLT) joining ownership interests within a proposed carbon storage site, assigning the person or persons responsible for the construction, operation, decommissioning and oversight of the carbon site, and apportioning the costs and benefits of operation within the unit area.

In reviewing and adjudicating applications for unitization orders, the Tribunal would need to have regard for whether the unitization would facilitate the optimal use of storage repositories in Ontario, the person or persons requesting the order have:
• made a good-faith effort to obtain the consent of all pore space owners.
• have obtained consents from persons owning a majority of the storage repository's pore space; and
• all pore space owners who have not consented have been or will be equitably compensated.

Unitization orders would only take effect if the person requesting the order is issued a permit by the Minister within any prescribed timeframe that may be prescribed.

Authorizations for Use of Public Lands

The Act would enable the granting of licences authorizing persons to carry out research and evaluation activities and carbon storage activities on public lands.

Except as otherwise provided by the regulations, the Minister would be able to issue licences in respect of public lands that are already subject to a lease, licence, or other instrument under any Act, including any public lands already subject to a registered mining claim, lease, licence or other instrument under the Mining Act.

Specific requirements for obtaining a licence would be prescribed in future regulations.

Issuance of Permits

The Act would enable the Minister to issue Research and Evaluation Permits and Storage Permits provided that:
• the applicant has applied for the permit in accordance with the regulations and the Minister has found the application to be complete;
• the person has fulfilled any requirements to give notice or conduct consultation activities that are set out in the regulations; and
• in the case of a Storage Permit, the Minister has received confirmation of municipal endorsement of the proposed project in accordance with the regulations.

The Act would require that the Minister only issue an Evaluation Permit or Storage Permit if the Minister is satisfied that:
• The activities for which the permit is sought will be carried out in a manner that protects public safety and the environment.
• the activities for which the permit is sought would be permitted under the Act.
• The applicant has obtained the rights to the use of land and pore space necessary for the activities for which the permit is sought.
• Potential impacts to drinking water sources and surface or subsurface uses and activities have been assessed and suitable mitigation measures will be implemented.
• Adequate consultation with Indigenous communities has been carried out.
• Any additional requirements or conditions for the issuance of the permit set out in regulation have been met.

Permit holders would be able to seek the Minister's approval to transfer or amend a permit and the Minister would have the authority to impose terms and conditions on an approved permit, amend an existing permit or suspend or revoke a permit.

Future regulations would be developed outlining application requirements, establishing how long permits would be valid for, application fees to be paid by proponents, and any requirements to be met if a proponent wishes to transfer or amend an existing permit.

The proposed Act would allow permit holders to seek an order from the Ontario Land Tribunal (OLT) granting them the right to enter onto and use lands to carry out required monitoring, measurement, and verification activities, conduct surveys and assessments, including surveys of land; and prevent or mitigate a hazard to public safety or the environment.

Obligations, Operation and Closure of Carbon Storage Sites

The proposed Act would require persons carrying out activities authorized or required by the Act in a manner that ensures public safety and protects the environment, including taking precaution reasonable to ensure employees, agents, contractors, and subcontractors comply with the Act and the regulations and the terms and conditions of an authorization and to eliminate, mitigate and prevent potential hazards. The Act would also give the Minister the ability to issue orders to address potential hazards associated with a carbon storage site, including ordering a permit holder to cease injection activities or to close a carbon storage site.

Permit holders would need to obtain approval prior to closing a carbon storage site. The Act would establish requirements that would need to be met when closing a carbon storage site, including requiring permit holder to complete remediation and restoration activities and to monitor and maintain closed sites for an additional period as prescribed by regulation.

Responsibility for managing carbon storage sites would transfer to the Crown if the operator of a carbon storage project is deemed to be incapable of acting and permit holders would be able to seek approval to transfer responsibility for conducting long-term monitoring and maintenance of carbon storage sites to the Crown after a site has been closed and all conditions and requirements associated with closing a carbon storage site have been met.

Responsibilities that could be transferred would include responsibilities associated with:
the periodic inspection and monitoring of storage sites for leakages or significant irregularities,
the ongoing management and care of storage sites as required (e.g., the periodic re-plugging of wells, etc.), and conducting any emergency management, response and remediation activities that may be required in the event of any leakage or unforeseen event.

The Act would establish a Carbon Storage Stewardship Fund and permit holders would make payments to the fund in accordance with the regulations. Monies held with the Fund would only be used to cover costs associated with the Crown assuming responsibility for the long-term monitoring and maintenance of carbon storage sites.


Reviews and Appeals

Applications for a permit or to amend a permit would require input from the Ontario Energy Board (OEB) when drilling or using a well within an existing a gas storage area, using a well to inject carbon dioxide within 1.6 kilometres of a gas storage area, or when proposing activities which may affect operations within a gas storage area.

The Minister would be able to make referrals to the Ontario Land Tribunal (OLT) if, after the prescribed notification and consultation procedures are completed, there are unresolved concerns relating to an application for a new permit, or an amendment of a permit that would allow for the expansion of an existing carbon storage.

The Minister would provide applicants and permit holders with written notice when the Minister proposes to make certain decisions under the Act, including to refuse to issue an authorization or issue an order to cease injection or to close a carbon storage site. Reviews and appeals concerning Minister's proposals would be heard by the OLT.

Compliance and Enforcement

The proposed Act would
• enable the Minister to appoint inspectors and enforcement officers.
• define the powers of inspectors and enforcement officers under the Act.
• enable inspectors to issue orders directing compliance with the Act, regulations, conditions of an authorization or an order - including the ability to order an operator to take measures to prevent a hazard to the public or the environment.
• enable the Minister or Ministry to take or cause to be taken any action to prevent, decrease or eliminate a hazard in certain circumstances, including where the operator has filed for bankruptcy or been dissolved.
• define the actions that would constitute an offence under the Act (e.g., failing to comply with the Act, regulations, authorizations issued under the Act, etc.).

Persons who receive an order from an inspector would be able to appeal the order to the Minister and the Act would give the Minister the authority to designate persons to hear the appeal.

Persons found to have committed an offence under the Act would be liable to a fine of not more than $500,000 or to imprisonment for a term of not more than one year, or both.

Maximum fines issued under the Act could be increased based on the economic benefit gained by any person as a result of committing an offence and directors and officers could be liable for offences committed by corporations.

Charges and Fees

The proposed framework would enable the charging and collection of various fees to help to offset costs associated with administering the framework.

If approved, the Act would grant the Minister the authority to set and charge fees for processing applications associated with:
• Obtaining any approvals required under the Act (e.g., Exploration Licences, Storage Leases, Exploration Permits, Storage Permits, approval to close a storage site, and Closure Certificates)
• Requests from an operator to renew, amend or transfer existing approvals.
• Proponents would be required to pay fees in accordance with requirements prescribed by future regulations.

Operators using Crown land in connection with carbon storage projects would also be required to pay rent for the occupation and use of public land as prescribed by the regulations.


Analysis of Regulatory Impact:
This proposal represents the significant step of proposing legislation to enable the regulation of commercial-scale geologic carbon storage projects in Ontario and would play a role in enabling Ontario to become an eligible jurisdiction for the federal Investment Tax Credit for Carbon Capture, Utilization and Storage. The development and implementation of commercial-scale carbon storage projects in Ontario has the potential to preserve or create job opportunities, particularly in the construction, operation, and maintenance of facilities and related infrastructure.

No direct regulatory impacts are anticipated from this proposal until legislation is proclaimed with supporting regulations in place. The regulatory impact of future requirements would be assessed and analyzed in future regulatory proposals. The environmental, social, and economic consequences of this proposal are expected to be neutral to positive.

The proposed statute would provide for the transition of carbon storage special projects, currently subject to the Oil, Gas and Salt Resources Act, to the proposed framework so that all clients seeking to use wells to store carbon dioxide in underground geologic formations would be subject to the same statute.

As detailed above, and once legislation is proclaimed with regulations in place, the proposed framework would require proponents and operators to establish and maintain financial assurance, as well as pay fees and other charges to cover costs associated with the regulatory framework's delivery. Administrative costs associated with a commercial-scale regulatory framework would depend on the framework's final design. Where projects propose to use public land/resources in connection with carbon storage projects, they would also be subject to charges such as lease and/or rental payments.

The framework would also seek to adopt industry standards to eliminate redundant reporting requirements and facilitate harmonization of activities with other jurisdictions.

The regulatory impact of any future requirements would be assessed and analyzed in future regulatory proposals.

Further Information:
Proposal Number:
24-MNRF011
Posting Date:
November 25, 2024
Comments Due Date:
January 9, 2025