This article appears in our Energy Playbook: 2023 Year in Review. Download the free ebook.
Across Western Canada, the regulatory environment varies for carbon capture and storage (CCS) projects.
CCS projects are largely subject to the underlying oil and gas regulatory regime within each province. Specific CCS project requirements are set out either by legislation, regulation or through discretionary powers of overseeing regulatory bodies – with the exact approach and robustness varying between provinces.
British Columbia
The underlying oil and gas framework applies to CCS projects in B.C. – this framework was revised in 2015 to address CCS projects. To provide greater clarity, the B.C. Energy Regulator published a Carbon Dioxide Storage Application Guide which indicates that CCS projects are treated similarly to acid gas disposal wells. CCS projects would be considered a Section 75 Special Project under the Energy Resource Activities Act (British Columbia) and highlights that Section 80 Storage Reservoirs in the Drilling and Production Regulation states well permit holders that are part of special projects for carbon dioxide must construct and operate wells in accordance with CSA Standard Z741. As well, amendments to The Petroleum and Natural Gas Act (British Columbia) (PNGA) in 2022 specifically establish ownership of pore space by the B.C. government, subject to certain exceptions and establish a specific licence for CCS projects.
Permits, leases and licences
The B.C. government has the right to explore for, access, develop and use storage reservoirs for the purpose of storing or disposing of carbon dioxide, without compensation. A proponent can apply to government for an exploration licence to gather the necessary scientific information to demonstrate that a target formation is suitable for long-term CO2 containment. Once they acquire the necessary information, the proponent of an identified carbon storage site has two choices. They can apply to the Crown for a petroleum and natural gas lease or a storage reservoir licence.
Either approach grants the proponent the right to store and dispose of CO2 into a storage reservoir. The PNGA deals with the resolution of certain disputes over surface rights associated with a storage facility. The proponent must also apply to the B.C. Energy Regulator for a permit to drill a well. The B.C. government recently completed a public consultation on a draft protocol on CCS. If finalized, the protocol will provide additional certainty about the process and requirements.
Key legislation and requirements:
- The Petroleum and Natural Gas Act
- The Storage Reservoir Regulation
- The Energy Resources Activities Act
- The Mining Right of Way Act
- The Mineral Tenure Act
- The Mineral Tenure Act Regulation
- The Environmental Assessment Act
Alberta
Given the volume of CCS project activity that is ongoing or proposed within Alberta, the province has developed a comprehensive and clear regulatory regime for CCS projects, building off its existing oil and gas regime. Alberta’s regulatory framework for CCS is well-developed and provides greater clarity than is present in other Canadian jurisdictions.
Permits, leases and licences
The Mines and Minerals Act (Alberta) (MMA) and the Carbon Sequestration Tenure Regulation (CO2 Regulation) govern the granting of Evaluation Permits which provide the right to evaluate a subsurface area’s potential for CO2 sequestration. Carbon Sequestration Leases provide the right to inject CO2 by the Ministry of Energy. Evaluation Permits and Carbon Sequestration Leases are required to access pore space while the Oil and Gas Conservation Act (Alberta), Pipeline Act (Alberta) and Regulator Directives set out well, facility and/or pipeline licences and approvals, as well as general CCS injection scheme approvals by the Regulator (which are sent to the Minister of Energy for final approval).
Key legislation and requirements:
- The Mines and Minerals Act
- The Carbon Sequestration Tenure Regulation
- The Oil and Gas Conservation Act
- The Environmental Protection and Enhancement Act
- The Pipeline Act
- The Public Lands Act
- The Surface Rights Act
Saskatchewan
In Saskatchewan, CCS projects are subject to the same legislative and regulatory requirements and oversight as oil and gas projects. These projects are primarily governed by the Oil and Gas Conservation Act (Saskatchewan) (OGCA). In practice, the Minister predominantly relies on its general authorities to make orders with respect to CO2 storage as well as its broad discretion to specify licensing application requirements under the Act. Effectively, the same licensing application process applies, with additional authorization and steps required for the CCS project as a whole and subject to distinctions set out by directives and guidelines. For example, Directive PNG009 establishes public notice requirements that apply to certain oil and gas activities (including with respect to CCS projects).
The OGCA empowers the Minister to make orders on its own motion, or on the application of an interested person with respect to the containment, storage, handling, transportation, treatment, processing, recovery, reuse, recycling, destruction and disposal of oil and gas waste anywhere in Saskatchewan and non-oil-and-gas substances at a licensed facility, well or associated site.
Licensing and permits
As set out above, the regulatory obligations specific to CCS projects in Saskatchewan are predominantly set out via Ministerial orders contained in Directives. On this note, a licence is required for the CCS project itself in addition to licences required for the facility, wells and pipelines. A permit is also required to use gas for the intended purpose. A well licensee is required to survey a potential site for a well. The applicant supplies supporting information such as a well list, third-party engineering report and seismic data. A facility licence is required to construct and operate a facility and to undertake preparatory operations.
In addition, no gas can be used, consumed or otherwise disposed of in Saskatchewan until a permit authorizing the use, consumption or disposition granted by the Minister. Wells are subject to administrative levies. There is a separate licence process if the applicant is seeking approval for enhanced oil. Any surface rights required by the proponent are governed by the Surface Rights Act (Saskatchewan).
Key legislation and requirements:
- The Oil and Gas Conservation Act
- The Oil and Gas Conservation Regulation
- The Pipelines Act
- The Crown Minerals Act
- The Surface Rights Act
- The Clean Air Act
- The Environment Assessment Act
- The Environmental Management and Protection Act
- The Saskatchewan Watershed Authority Act
Manitoba
Manitoba does not have regulatory requirements specific to CCS projects. Instead, CCS projects remain wholly governed by existing oil and gas legislation, and general guidelines from Manitoba Agriculture and Resource Development. This is reflective of how, of the four western Canadian provinces, Manitoba has experienced the least CCS project activity to date. That said, Manitoba has significant CCS potential, and projects such as the Minnedosa Ethanol Plant CO2 Sequestration Project by Cenovus demonstrate that it is possible to navigate Manitoba’s existing system.
In 2023, Manitoba announced a plan to build out its regulatory framework. This could include, for example, putting in place a guideline similar to the existing Manitoba Petroleum Guideline 10 – EOR Project and Voluntary Unitization. Building out Manitoba’s regulatory framework would increase certainty for investors in CCS projects, as well as providing businesses access to the federal CCUS capital investment tax credit and other federal advantages.
Permits, leases and licences
The Oil and Gas Act and its Regulations sit at the centre of the oil and gas regulatory regime in Manitoba, including licensing, lease, and permitting requirements. The Gas Pipe Line Act (Manitoba) further establishes the process and requirements for pipelines. The Minister has authority to issue a storage permit to develop and operate a storage reservoir in Manitoba. A storage reservoir is defined as a reservoir that is developed and operated for the storage of hydrocarbons, and a reservoir is defined as a subsurface area that is or might be suitable for the underground storage of hydrocarbons. That said, there could be uncertainty as to whether CO2 is considered to be a hydrocarbon and, as a result, there is some uncertainty of the extent to which CCS projects fall subject to these provisions. A proponent may apply to the Minister for a well licence, and upon completion of the well, for a storage permit. A storage permit conveys the exclusive right to develop and operate a storage reservoir within a designated storage area. Storage projects may also require approval from the Clean Environment Commission.
Key legislation and requirements:
- The Oil and Gas Act
- The Gas Pipe Line Act
- The Surface Rights Act
- The Oil & Gas Production Tax Act
- The Environment Act
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.