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

Bill 228 Resource Management and Safety Act

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 will 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, 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, the 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 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 on June 8, 2023.

From September to October 2023, the ministry consulted on developing 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 new 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.

As part of the Bill 228 Resource Management and Safety Act, 2024, the government has introduced a proposed Geologic Carbon Storage Act, which, if passed, would enable the safe, responsible, and permanent storage of carbon dioxide within geologic formations in a manner that protects public safety and the environment and minimizes potential adverse impacts on other land and resource uses.

A summary of the proposed Geologic Carbon Storage Act has been provided below and should be read in conjunction with Schedule 2 of the proposed Bill 228 Resource Management and Safety Act, 2024 . A link to Bill 228 Resource Management and Safety Act, 2024 has been provided under Supporting Materials below.

Regulated Activities

The Act would define and regulate research and evaluation activities and carbon storage activities associated with the permanent storage of carbon dioxide in underground geologic formations. It would also prohibit undertaking these activities unless they are carried out in accordance with a permit and are within areas and storage repositories prescribed by the regulations.

The Act would not apply to activities associated with enhanced oil or gas recovery undertaken in accordance with the Oil, Gas and Salt Resources Act or other methods of storing carbon dioxide that do not involve the use of wells to inject and store carbon dioxide within geologic formations.

Ownership of and Rights to Pore Space

The proposed Act would clarify that pore space rights form part of the surface rights estate, except where they have been reserved or separately granted or conveyed to another person.

Proponents would be able to request a unitization order from the Ontario Land Tribunal (OLT) joining ownership interests within a proposed carbon storage site, similar to Ontario’s oil and gas framework. The OLT would need to consider certain factors when reviewing applications for unitization orders, including whether the person requesting the order has already obtained the consent from landowners owning the majority of the pore space right in a storage repository and has made a good-faith effort to obtain the consent of all landowners with pore space rights, and that all landowners who have not consented would be equitably compensated.

The Lieutenant Governor in Council (LGIC) would also have the authority to make regulations taking rights to pore space in storage repositories that straddle both public and private lands and vesting these rights in the Crown under certain conditions. If such a regulation is made, the Minister would be able to  provide proponents with rights to use the pore space for the purposes of carbon storage, provided the Minister is satisfied that the pore space would be used to store a minimum amount of carbon dioxide from a minimum number of industrial emitters as prescribed by the regulations. Proponents who have been provided with these pore space rights would be required to compensate the private landowners in accordance with regulations. These regulations to vest pore space rights would not provide the Crown, or any other party, with any right to access the surface of the lands.

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 or to use public pore space, including where public lands are already subject to a lease, licence, or other instrument.

Issuance of Permits

The Act would enable the Minister to issue research and evaluation permits and storage permits authorizing proponents to carry out activities related to carbon storage. Applicants would need to apply for permits and conduct consultation activities in accordance with the regulations. The Minister would be able to refer applications to the OLT if, after the prescribed consultation activities were completed, there were unresolved concerns relating to an application. In the case of a storage permit, the applicant must also provide the Minister with confirmation of municipal endorsement of the proposed project in accordance with the regulations.

The Minister would only be able to issue a permit if satisfied that:

• Proposed activities would 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 agricultural operations and systems, drinking water sources and surface or subsurface uses and activities have been assessed and suitable mitigation measures would be implemented.
• Adequate consultation with Indigenous communities has been carried out; and
• Any additional requirements or conditions for the issuance of the permit set out in regulation have been met.

Permit applications would require input from the Ontario Energy Board (OEB) when proposing to drill or use a well within an existing gas storage area, proposing to use a well to inject carbon dioxide within 1.6 kilometres of a gas storage area, or when the Minister is of the opinion that operations within a gas storage area may be affected.

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.

Obligations, Operation and Closure of Carbon Storage Sites

Persons would be required to carry out activities in a manner that protects public safety and the environment and take every precaution reasonable to ensure a person’s employees, agents, contractors, and subcontractors comply with the Act 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.

The proposed Act would allow permit holders to seek an order from the OLT granting them the right to enter onto and use the surface of private lands in connection with the proper working of a carbon storage site 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. Permit holders would need to compensate landowners for any injury or damage to the lands in accordance with rates determined by the OLT. These orders would not authorize proponents to drill wells.

Permit holders would need to obtain approval prior to closing a carbon storage site and comply with requirements for closure outlined within the Act and regulations including decommissioning all wells, storage repositories and ancillary works, remediating and restoring the carbon storage site, and continuing to monitor and maintain closed sites for a prescribed period.

Responsibility for managing carbon storage sites could transfer to the Crown if the operator of a carbon storage project is deemed to be incapable of acting (i.e., a dissolved or insolvent corporation, or a deceased individual). Storage permit holders would also be able to request a closure certificate which, if issued, would transfer liability and responsibility for the 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.

Carbon Storage Stewardship Fund

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

The Minister would provide applicants and permit holders with written notice when the Minister proposes to make certain decisions under the Act concerning licences, permits (e.g., proposing to refuse a licence or permit) and suspension orders. Persons receiving a notice related to licences could request the OLT review the proposal. Following their review, the OLT would provide recommendations to the Minister, but the Minister would retain the authority to carry out the proposal even if doing so is inconsistent with the OLT’s recommendations. Persons receiving a notice related to a permit or order would be able to appeal the proposal to the OLT. Following the appeal, the OLT would issue an order to the Minister and the Minister would be required to comply with the order.

Compliance and Enforcement

The Minister would be able to appoint inspectors and enforcement officers, with the powers of inspectors and enforcement officers outlined within the Act. Inspectors would be able to issue orders for non-compliance, require measures be taken to prevent a hazard to the public or environment, and require that a well or ancillary work not be used or be decommissioned. 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.

The Act would enable the Minister to take or cause to be taken any action to prevent, decrease or eliminate a hazard if an authorization holder is deemed incapable of acting and the Minister believes that the action would prevent or eliminate the hazard.

The Act would outline the offences under the Act and 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, including fees for processing applications associated with obtaining any authorizations or approvals required under the Act. The Act would also enable regulations to be made requiring operators using Crown land in connection with carbon storage projects to pay rent and other charges for the occupation and use of public land.

Related Amendments

The proposed framework would regulate all scales of projects that use wells to conduct activities related to geologic carbon storage, including testing, pilot, and demonstration projects. Consequential amendments would be made to the Oil, Gas and Salt Resources Act to ensure that carbon storage special projects under that Act related to testing and demonstration could eventually be transferred under the proposed Geologic Carbon Storage Act and include broad regulation making authority governing such transitional matters.

Commencement

If approved, the proposed Act would come into force on a day to be proclaimed by the Lieutenant Governor.

Regulatory impact analysis

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.

As detailed above, and if legislation is passed and proclaimed into force with associated 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.