Comments on ERO 019…

Comments on ERO 019-7507Proposed regulatory provisions for ‘special projects’ using wells to test or demonstrate new and innovative activities, including carbon storage, and to remove well security caps and exemptions for all types of wells under this legislation going forward

General Support
The deployment and development of CCUS in Ontario is important to the continued economic viability and future economic growth of the Province of Ontario. The world, including importantly our fellow Canadians and our neighbours to the south, has necessarily made the decision to decarbonize and, as a result, Ontario has little alternative but to decarbonize our lives and our economy if we wish to participate in activities on this planet. Our task is to try to minimize the cost of that transition and to take advantage of the opportunities it presents.
One high-cost way to decarbonize is through deindustrialization, “decarbonization through deindustrialization” as some have so aptly tagged that choice. Precluding the growth of Ontario’s emission intensive industries and indeed forcing many of them to shrink or shutter is not desirable as it threatens the production of value, jobs, revenues and investment in Ontario. This risk is particularly present with respect to industrial operations in Ontario that have high, almost unavoidable, emissions from the production process and not exclusively from the combustion of fossil fuels.
To escape that alternative, CCUS seems to be very high on the desirability list of alternatives. This is driven by the very rapid acceptance and implementation of CCUS around the world and in particular in Canada and the US and the support for that implementation at the federal and some provincial government levels in Canada, the federal and some state governments in the US and throughout the private sector, including financial services and the high intensity emissions businesses present in Ontario such as steel, cement, lime, oil and gas, electricity generation and chemicals.
Moreover, the development of a significant role for hydrogen and other green fuels appears to be enhanced if CCUS is in use and thus its implementation will be supported by a broad range of manufacturers as well as those in the transportation sector. The intense focus on “green hydrogen” produced in conjunction with CCUS in the US in the Inflation Reduction Act (IRA), hydrogen that can be very net negative in CO2 emission if produced in a manner involving “bioenergy with carbon capture and storage” (BECCS), makes this an issue that involves the continued competitiveness of the Ontario economy.
At the same time, CCUS offers the opportunity for the deployment of new technologies relating both to the geological storage of C02 but also the use of C02 to produce alternative products which will generate wealth. The presence of a CCS system in Ontario would encourage the focus on such use. It could also support the development of Direct Air Capture of CO2 as mentioned below.
For the reasons above and in light of the specific considerations below, a clear statement by the Ministry and the Province of Ontario that it will implement a CCS system in Ontario on an urgent basis is required.
Specific Considerations
Opposed to Delay in Proclaiming Bill 91 changes relating to special projects
The posting indicates that “the changes relating to special projects [in Bill 91] will not come into effect through proclamation until regulations are in place to support their implementation.” That means that there will be continued uncertainty as to whether those provisions will become effective for a considerable time. It will be very difficult for a private sector proponent to move forward with that uncertainty. Moreover that means that the eligibility for federal government ITCs is unlikely for several years, dealing a blow to the viability of any CCUS proposals in Ontario due to uncertainty and reduced benefits of the ITCs over time. Further, the opportunity to benefit from learnings from pilot projects will be deferred and potentially lost completely; Ontario cannot afford to be a learner only from projects in other jurisdictions as Ontario has its own unique characteristics that need to be understood. It is worth noting that Alberta has introduced Small-Scale and Remote (SSR) Carbon Sequestration Tenure by way of a Mineral Rights Information Bulletin on September 14, 2023; that approach, permitting the development of smaller projects and avoiding the complexities of the “hub approach” could be useful in Ontario (recognizing of course the very different circumstances arising from the questionable move by Alberta to nationalize pore space.
Support for Accommodation of Interests of First Nations
The Ministry has noted that it will engage with interested Indigenous communities on proposals to develop a regulatory framework for testing and demonstration projects. This is positive in that it recognizes the obligation of the government of Ontario to ensure adequate consultation AND ACCOMMODATION of First Nations’ interests takes place, both at the planning of the framework stage and, as indicated below, at the project stage.
The following are positive statements:
“Please note that in addition to any proposed requirements outlined below, prior to making decisions relating to a special project (e.g., designating a special project or issuing, transferring or amending associated licences or permits) the ministry would assess the potential for adverse impacts on the exercise of Aboriginal or treaty rights and ensure that any required consultation or accommodation is carried out.” and
“Where the Ministry determines that additional consultation concerning potential impacts to Aboriginal or treaty rights of Indigenous communities is necessary, further requirements may be identified by the Ministry. A separate summary of notification and engagement with Indigenous communities and organizations would be required.”
However the commitment should extend to seeking the involvement of First nations on a basis that advances reconciliation with First Nations.
The Near-term High Cost of Uncaptured CO2 Emissions Seems Inevitable
The starting point I think is the high probability that the cost of CO2 emissions for industrial concerns in Ontario will be increased rapidly through the application, directly or indirectly, of the requirement of the federal government for emitters to pay a “price” of $170 per tonne by 2030 for a significant portion of their C02 emitted into the atmosphere. For many Ontario industries which are larger emitters, that price will be unacceptably high and is likely to generate a lack of investment, and even disinvestment which will lead to the diminution of economic activity in Ontario with the loss of jobs and wages and revenues that goes with that. It should be noted that a high price on carbon emissions is a growing phenomenon around the world and the implementation of border carbon adjustment mechanisms, beginning with the Eu and likely followed by others, is likely to continue.
It Is a welcome sign that the Ministry has identified CCUS as a part of the answer to that problem. The comments below should not be seen as any diminution in overall support for the intention of the Ontario government generally and the Ministry particularly to develop and deploy CCUS in Ontario.
2030 is significant in that it leaves very little time to implement CCUS which is widely perceived as likely requiring a significant lead time to be effective. Thus, there is urgency in implementing the needed requirements for a CCUS system in this province.
Government Agency or Crown Corporation to Manage the Implementation of CCUS in Ontario
Given the severity of the challenge and the very short timeline for CCUS implementation, it is far from clear that a program to investigate the geological possibilities of sequestration in Southwestern Ontario as outlined below and in other submissions on this proposal is at all sufficient to deal with the need to move forward rapidly with CCUS. Some have suggested a commission or investigatory group to try to determine the best course of action. It appears from where I sit that that that is not likely to achieve success by 2030, given the tendency to want to investigate and find the best answer, without any focus on implementation. One suggestion is that there be a provincial agency or Crown corporation created with a mandate to both investigate CCUS and also implement CCUS on an rush basis if CCUS can be shown to be economically feasible for the province. In the Second World War, Polymer Corporation was created with a view to producing the artificial rubber that was necessary for the war effort. Earlier Ontario created the Hydro-Electric Power Commission of Ontario as a publicly owned electricity utility in the Province of Ontario with a view to moving rapidly to electrify Ontario. The Government of Ontario could usefully look at the possibility of such an agency or Crown corporation being created, with appropriate financial capability, to ensure that CCUS is carefully reviewed and implemented in the best interests of the province of Ontario.
Geological Information on Sequestration of CO2 Needed
CCUS requires a number of things to safely sequester CO2, either geologically or in other ways.
Geological sequestration may be possible in Ontario. There is sufficient information to be excited about that possibility in Southwestern Ontario, but time is very short. This needs to be dealt with immediately and with urgency through a program conducted by the Ontario Geological Survey and/or through private industry collaborating in a program run or supervised by the Ministry. Adequate financing and a commitment to accomplish such a program in a year or less seems essential.
The limitation of CCS projects to private lands is hard to support. The best geological sequestration locations may well be on lands owned or controlled by the Ontario government (or even other governmental entities like the federal government, municipalities of First Nation governmental units. Those “public” lands should be included from the beginning of any consideration of CCS in Ontario for that reason and also the difficulty in limiting the impats of injected carbon dioxide to private lands if public lands are nearby.
The “U” in CCUS
While the focus of the Ministry’s proposal is on geological sequestration, we should not lose track of the fact that the “U” in CCUS is important as a way to ultimately generate revenues for CCUS and as a way to advance wealth creation in the province of Ontario through innovation, technological advance and building on the capabilities we already have in our universities, colleges and industries. This is touched on again further below.
Capture of CO2
CO2 capture at industrial facilities is expensive to install and also to operate. The federal income tax credit program needs to be enhanced to compete with the support available in the US through IRA. Ontario could usefully consider a program of investment into large emitting industries to provide additional enhancement on a site by site, proposal by proposal basis.
Transportation of CO2
The transportation of CO2 from the site where it is created to the location of the sequestration, whether geological or through other utilization, is a critical piece of the set of activities needed to implement CCUS.
Pipelines are the most frequently contemplated method and with the experience I gained in the early days of the Alberta Carbon Trunk Line, I am a strong supporter of developing this method of moving CO2 in Ontario. However, there are significant difficulties associated with converting existing pipelines to CO2 pipelines and those difficulties need to be taken into account. It appears that the pipeline right aways across Ontario for gas and oil movements may be largely restricted to facilitating the movement of hydrocarbons, not substances like CO2. Assuming that is correct, it will be necessary to either amend the terms of the pipeline right of ways (an onerous task absent legislation that would be controversial) or create new right of ways which would also create significant difficulties.
For those reasons, despite the propensity to consider plans to move CO2 by pipeline and the prominence of proponents of CO2 pipelines in CCUS discussions, attention should also be directed in the short run to the possibility of moving CO2 using trucks and railways in the short term and ships in the medium term. I am advised that some smaller quantities of CO2 are currently moved by truck in both the US and Canada, usually short distances for immediate use or for aggregation with other small batches for larger shipment by rail or by pipeline; if a fully developed pipeline network is delayed and also for the purpose of pilot projects, truck transportation may be essential. It is also worth noting that plans to use ships to move CO2 are moving rapidly to being put into practice in the EU and likely elsewhere; this technique would enable CO2 to move from Sault Ste. Marie for example where Algoma Steel is a major emitter although far from the likely reach of pipelines absent ships and for CO2 to move from Ontario through the Great Lakes to the Maritimes where it could be deposited in the offshore CO2 sequestration facilities currently being contemplated by Canada and two of the Maritime provinces; ships could also allow CO2 to move in and out of Ontario by involving US facilities on the Great Lakes and potentially elsewhere.
International and Interprovincial Movement of CO2
There has been some suggestion of the possibility of moving CO2 across national and provincial borders. With respect to national borders, the fact that there is a significant capability being developed in the United States for C02 sequestration makes such a movement worth considering. However, the additional fact that CO2 is a waste (until it is more commonly seen as a raw material) suggests the broad range of issues that can be encountered. Ontario has a history of controversy in moving waste to Michigan. There is also the entire issue of movements of waste under various international agreements. Given that the Great Lakes likely would need to be crossed to move CO2 internationally, plans in this regard should be approached cautiously. Even the movement of CO2 across provincial borders could pose difficulties as it is not entirely clear what jurisdictional specific arrangements would be required to facilitate such movements.
The injection of CO2 into a disposal site where the C02 could (or even inevitably would) move across a border raises significant concerns about the nature of permissions that would be needed to permit such injection. Perceived as a waste, CO2 is very difficult to deal with in the circumstances.
Alberta as a Model
CCUs is much further advanced in Alberta in that there has been an economy-wide consensus for some time that the economic well-being of Alberta would be well served by the development of projects, technologies and supportive policies relating to the implementation of CCUS in Alberta. Industry took the early lead in that process, making plans and then submissions to the Alberta and federal governments for needed financial and policy support, actions which moved the province forward relatively quickly. Ontario can learn from Alberta but need not (and indeed likely should not) copy what Alberta has done. One example of the partnership between industry and government is the development of the Alberta Carbon Trunk Line; a similar project, likely on a different financial basis given the fact that Ontario does not extract royalties in kind and thus does not share the incentive to resolve the GHG emissions issues associated with fossil fuel production, could make sense for Ontario. The creation and widespread utilization of a carbon credit system that encompassed CCS is also worth a close look by Ontario. The Alberta government’s actions to make “pore space” a provincial asset and to move to make that space available for CCS projects that meet appropriate criteria could be a useful source of ideas for Ontario although our land-holding system and history of development of land and oil and gas tenures suggests that a direct copy might not be the right approach. I note that the Government of Alberta’s “…announced its most recent development, Small-Scale and Remote (SSR) CCS projects by way of a Mineral Rights Information Bulletin on September 14, 2023” and that the model might better fit Ontario than the hub and spokes model frequently mentioned with respect to learning from Alberta.
Emission Performance Standards for Ontario (EPS) Incorporation of CCS
The incorporation of CCS into the EPS as of January 1, 2023 was a welcome, although incomplete, step forward. The step to exclude CO2 successfully captured and stored by large emitters in Ontario can bring financial relief to participating facilities and an incentive for the development and deployment of CCUS. However, the decision not to allow offsets into the Ontario EPS system precludes the use of such instruments by emitters; such use could provide more of a financial reward to such emitters for the same CCS-related activities and would also offer that opportunity to emitters with emission below or otherwise not caught by the Ontario system As CCS can be a financial lifeline, depriving such emitters of the ability to realize financial gains while supporting the scope of the CCS system seems unfortunate. It is noteworthy as well that the heavy lifting in creating such a system has been done already by Alberta, is underway in BC and could readily be adapted for Ontario use.
Direct Air Capture (DAC)
The existence of an operating CCUS system in the province of Ontario would provide the opportunity for the development of DAC projects. Many have indicated that it is difficult to see how the world achieves its 2050 target of net-zero GHG emissions without the extensive deployment of DAC. It seems clear that Ontario should participate in the development of DAC and the existence of a CCUS system offering the ability to sequester C02 where captured C02 could be funneled for sequestration would be very supportive of DAC deployment in Ontario. It should be noted that DAC credits will be highly priced and that they can be created for marketing outside of Ontario. Moreover as long as the captured carbon dioxide can be moved to a geologic or other sequestration site, credits can be created, opening the ability to locate DAC facilities outside of Southwestern Ontario but within truck, rail or ship range for moving the captured CO2 to the CCUS network.
Obligations on Proponents Too Onerous for Pilot Projects
Pilot projects can be implemented with a much reduced set of obligations on proponents as well as a streamlined process. This seems necessary to allow Ontario and those active in its borders to learn how to implement CCUS in Ontario.