Proposed changes to the OGSRA to regulate projects to test or demonstrate new or innovative activities, such as geologic carbon storage, and to safeguard people and the environment

Overview

Amendments are proposed to the Oil, Gas and Salt Resources Act (the Act) to authorize and regulate projects that are to test, assess, pilot or demonstrate an activity, method or technology that is new or innovative to Ontario. The changes would establish a process to designate these projects as special projects, which may make the Act apply to a project where it would otherwise not have. Carbon storage is one example of this type of project.

If approved, these changes would establish new authorities and tools to adapt authorization processes and requirements where flexibility is needed to address special projects, better addressing innovation and technological advancements to support Ontario’s changing energy needs, decarbonization efforts, and reduction of greenhouse gas emissions.

Initially, special projects involving carbon storage could only be considered on private land. While the Act applies on both Crown land and privately-owned land, further changes to other legislation would be required before access to Crown land could be granted for carbon storage projects.

The proposed changes also include measures to enhance the protection of public safety and the environment, including a variety of tools such as inspector’s orders, court orders, and factors for exercising discretion in decision-making, that would apply to all activities regulated under the Act.

If the proposed changes to the Act are approved, additional regulatory proposals would be developed for consultation, that would address implementation and detailed requirements addressing matters such as special project designations, applications, construction, operations, and decommissioning.

Background

Under the Act, the Ministry of Natural Resources and Forestry (the ministry) regulates the drilling and operation of wells and related structures or equipment (known as works) used for activities such as the exploration and production of oil and gas, salt solution-mining, the underground storage of hydrocarbons (e.g., natural gas), and compressed air energy storage projects.

These activities are regulated to ensure they are conducted in a safe, efficient, and orderly manner that safeguards the public and the environment. Currently, a licence is required to create, operate, or to do any work on or in a well, as defined under the Act. Some projects also require a permit to inject substances into a well. Where wells are subject to the Act, some of the associated works like pipelines and other equipment used in association with them, may also be subject to requirements under the Act.

The Act applies on Crown lands and privately-owned lands. Almost all the activities regulated under the Act occur in southwestern Ontario, as this is where the sedimentary bedrock geology is most likely to contain these resources. Other areas of the province, such as the Ottawa/St. Lawrence Valley and parts of the Far North, have similar rock formations but these activities are generally less likely to occur there due to shallow depths, thin rock layers, or remoteness that present logistical and economic challenges for access.

In recent years, businesses interested in testing, assessing, piloting, or demonstrating new activities have indicated a preference for established regulatory frameworks for the business clarity they provide. Recently, changes to the Act and regulations have been made to address new activities, such as compressed air energy storage projects. Most recently, changes have been made to the Act address interest in geologic carbon storage projects.

The ministry previously sought feedback on some of the concepts addressed in these proposed changes through a discussion paper on Geologic Carbon Storage in Ontario that was posted to the Environmental Registry of Ontario (ERO) in early 2022 (ERO# 019-4770). A subsequent proposal (ERO# 019-6296) was posted to remove the existing prohibition on carbon storage from the Act. The changes outlined in this proposal, together with future regulatory changes, would create a process to authorize and regulate some projects to start exploring the use of geologic carbon storage. However, further changes under other legislation would be required before it could be authorized on Crown land.

Special Projects

Designating proposed projects as special projects

The proposed changes would allow the Minister to designate a proposed project as a special project at the request of a project proponent. The Act would set out eligibility criteria for projects and proponents as well as the authority for the Minister to establish additional criteria and details through Minister’s regulations in the future. Eligibility criteria 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 or more new or existing wells to access underground geologic formations of Cambrian age or younger (note: the definition of well under the Act would be amended to include special project wells)
• the Minister believes that the project can be designed, constructed, operated and decommissioned in a manner that protects people and the environment

In requesting that a project be designated as a special project, a proponent, in some cases, would be voluntarily requesting to make all or part of their project subject to the Act, where it otherwise would not be. The proposed changes would allow the Minister to make a new activity subject to the Act through a special project designation. When making a decision to designate a project as a special project, the Minister would assess the potential for adverse impacts on the exercise of treaty or Aboriginal rights.

As part of the special project designation, the Minister would have authority to specify matters related to the project such as the term of the designation, or to exclude any structures or equipment associated with a well.

Special project wells, and other works that meet prescribed conditions, would remain subject to the Act, after the end of the term of a special project designation.

Designating a project as a special project would not authorize it – separate authorizations would be required under the Act before the project could proceed.

Authorizing special projects

Special projects would be authorized through licenses and injection permits under the Act and many their existing requirements would apply, such as those related to issuance and transfer, referral, hearing and appeal provisions, compliance and enforcement, fees, and reporting.

The proposed changes would create new authorities and tools to adapt authorization processes and requirements where flexibility is needed to address special projects. The Minister would have the ability to exempt the project from requirements under the Act, the regulations, or the provincial standards and substitute one or more alternate requirements, provided the Minister is of the opinion that the existing requirement is not suitable for the special project, and the exemption or substitution of any requirement would adequately protect public safety and the environment. Examples of the types of matters that may be adapted include requirements:

• to undertake, prepare and submit plans, studies, tests, evaluations, models, surveys, project descriptions, etc. as a part of an application
• to undertake notification and consultation with Indigenous communities, municipalities, and neighbours, where appropriate as part of an application
• respecting the design, construction, operation, maintenance, monitoring, abandonment and decommissioning of any wells and other works associated with the project, including reporting and financial assurance

Enhancing Protection of the Public and the Environment

Several changes are also being proposed to support stronger oversight towards preventing impacts to public safety and the environment and to ensure that proponents who are undertaking activities under the Act are doing so safely and responsibly, including:

• Establishing new authority for an inspector to issue an order to prevent or to minimize the risk of a hazard occurring. Where an inspector has reasonable grounds to believe that a well or other work is about to become a hazard to the public or to the environment, they may order the operator to take actions to test, monitor or assess the potential hazard, to eliminate or decrease the likelihood of it occurring, and to not use the well or other work. This order would be appealable as are the existing compliance orders.
• 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, or to do anything else to obtain compliance with the Act. Failure to comply with a court order would be established as an offence under the Act.
• Expanding an existing inspector’s power. Currently, when making an order for compliance, an inspector may direct that a well or other work not be used and to affix a tag to it that only they may remove. It is proposed that this would also be available to an inspector when issuing an order to plug a well or to prevent a hazard.
• Explicitly noting the authority to consider past non-compliance when making designation or authorization decisions under this Act. The consideration may include past convictions, or 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). The provisions apply to prescribed compressed air energy storage projects, projects that inject, store, or withdraw oil, gas, or other prescribed substances, or other prescribed activities.
• Allow a prosecutor to elect to have a provincial judge preside over a trial for an offence under the Act, which may be beneficial when addressing complex matters.

Regulatory impact analysis

The anticipated environmental, social, and economic consequences of this proposal are neutral to positive.

The process to designate, authorize and regulate special projects to test or demonstrate new activities would support innovation while safeguarding people and the environment. This is expected to lead to positive environmental and social outcomes and to economic benefits for proponents seeking to advance innovative projects.

The proposal would enable future regulations to create a clear framework for special projects to seek authorization which is expected to provide for the identification, assessment, and mitigation of potential impacts, and opportunities for local and Indigenous community engagement on proposals as needed.

Impacts to municipalities and other stakeholders are expected to be neutral to positive resulting from amendments that support the future establishment of clear and transparent processes to designate, authorize and to regulate special projects.

The proposed changes to enable testing and demonstration projects are not expected to result in any direct compliance costs to regulated entities as they will not come into effect until implementing regulations are in place. Future regulation proposals can be expected to result in direct compliance costs for business, which would be identified and addressed as those proposals are developed.

Proposed changes to enhance or create new tools to protect people and the environment are intended to address operations and operators that are – or are close to being – non-compliant with the requirements of the Act, and therefore no direct compliance costs will result from these proposals. The anticipated environmental and social consequences of these proposals are expected to be positive.