Proposed 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

Context

Under the Oil, Gas and Salt Resources Act (the act or OGSRA), 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. 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.

Special projects

Through Bill 91, Less Red Tape, Stronger Economy Act, 2023, changes were recently made to the act to enable the ministry to regulate projects that are to test, assess, pilot or demonstrate an activity, method or technology that is new or innovative to Ontario (special projects). Carbon storage is one example of this type of project.

Bill 91 was passed in the Legislature and received royal assent on June 8, 2023, however, the changes relating to special projects will not come into effect through proclamation until regulations are in place to support their implementation.

Well security

The purpose of requiring financial security for wells is to ensure funds are available for plugging when wells are at the end of their useful life, including situations where the operator is unable or unwilling to do so. 

Currently under the OGSRA framework, compressed air energy storage projects using porous rock reservoirs are required to establish full-cost, project-based financial security prior to any site preparation. The individual well security rates and security caps for operators described below do not apply to these projects.

For other types of wells, operators are currently required, with some exemptions, to establish financial security prior to a well licence being issued. In addition, there is a limit or ‘cap’ on the maximum amount of security required for each operator. Security caps limit the total amount of security an operator must set aside upfront regardless of the number of wells for which they are responsible. These exemptions and security caps compound the risk arising from insufficient security amounts.

The proposed changes would eliminate the exemptions and the maximum security caps on a going-forward basis. Improving the likelihood that operators have funds available to cover the costs of well plugging reduces the environmental and safety risks associated with wells that have reached the end of their useful life. Efforts to reduce the number of future orphaned oil and gas wells support our actions to address risks related to legacy oil and gas wells.   

Proposal overview

This proposal includes two parts.

Part 1: Proposed implementing regulations for special projects, including:

• proposed Minister’s regulations for special projects that address:
  • special project designations
  • applications for licences and injection permits to authorize special projects
  • financial security requirements
  • transfers for, and amendments to, special project designations and their associated well licences and injection permits (including conditions)
  • other key requirements related to special projects
• proposed amendments to Ontario Regulation 245/97 to recognize special projects
• it is proposed that all changes in Part 1 would take effect on January 1, 2024

Part 2: Proposed regulation changes to remove well security exemptions and caps, going forward, for all wells under this act that are newly drilled, deepened or converted to another use, when a well licence is transferred, or companies amalgamate.

It is proposed that all changes in Part 2 would also take effect on January 1, 2024. If approved, the proposed changes to well security exemptions and caps would also apply to operators who make requests for transfers, new well licences, conversions, or consents to adjust security after the date of this posting.

Part 1: Special Project Regulations

Minister’s Regulation Proposal

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. 

Eligible projects

The first step in seeking an authorization under the act for a special project would be to request that the project be designated by the Minister as a special project. The designation of a special project does not authorize any activities associated with the project. Designation means that the project is eligible to pursue authorization under the act through licences and, where needed, injection permits. Only after a special project designation is granted may a proponent apply for well licences and injection permits.

In some cases, a special project designation may make an individual project (or parts of a project) subject to the act when it would otherwise not have been. For example, drilling a new well and using it to inject carbon dioxide for permanent storage (carbon storage) is currently not subject to the act. However, if a proponent planning to undertake those activities voluntarily requests a special project designation, and the Minister approves the designation, that individual carbon storage project would become subject to the framework under the act.

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.

In order to be designated as a special project, the act (section 11.2) sets out the criteria that must be satisfied. The following criteria are already established in the act:

1. The purpose of the project must be to test, assess, pilot or demonstrate a technology, method or activity that is new or innovative to Ontario.
2. There is a reasonable expectation, in the opinion of the Minister, that it will be possible to design, construct, operate and decommission the project in a manner that protects public safety and the environment.
3. The project must use, or intend to use, at least one existing well or proposed well to access underground geological formations of Cambrian or more recent age.

It is proposed that a new eligibility criterion be established through regulation for special projects that would prohibit projects for the purpose of permanently disposing of any substance with the exception of the following:

• projects for the purpose of assessing, testing, piloting or demonstrating carbon storage
• projects that involve the disposal of oil field fluid (which are already regulated under the act)

Note: “oil field fluid” is defined under the act as meaning: (a) anything that has been used as a well drilling fluid, and (b) formation water that is recovered from a well

Requesting a special project designation

Proponents would request the designation of their project in writing, providing information relating to the project, such as:

Description of the proponent

• operational history, experience and expertise with similar projects in Ontario and other jurisdictions
• compliance history under the act, if applicable.  For corporations, this would include the compliance history of its officers and directors

Description of the project

• location, activities, wells and other ‘works’ to be used, other federal, provincial and municipal approvals that would be needed for the project, etc.
• any local or Indigenous community engagement or consultation undertaken to date
• description of the proposed location, current land uses, and status of any landowner agreements/leases that would be necessary to carry out the project

Note: Under the act, a “work” means a well or any pipeline or other structure or equipment that is used in association with a well

Description of the technology, method or activity that the project seeks to advance

• its Technological Readiness Level (see Innovation Canada)
• recent research, studies, testing, development and projects regarding the technology, method or activity in Ontario and other jurisdictions in Canada as well as internationally
• identification of the key hazards and risks associated with the proposed project along with potential mitigation measures and approaches

Availability of recognized standards

• identification of recognized technical standards that are or may be applicable and which the proponent intends to follow with respect to the project

Note: Recognized standards as defined by Modernizing Ontario for People and Businesses Act, 2020.

Description of project benefits and the proponent’s plans, if any, for information sharing

• how the project may benefit Ontarians
• how and when details of the project and the findings stemming from the testing or demonstrations would be made available within the industry, to stakeholders, and the general public

Any exemptions and substitutions requested

• identification of any exemption(s) from the requirements of the act or regulations that the proponent is seeking for their project (including, where relevant, any proposed substitutions for those requirement(s) as well as the rationale for the proposed exemption(s))

Custom application plan

• With the exception of carbon storage projects, proponents requesting a special project designation would also be required to submit a custom application plan for any well licence and injection permits needed for the project, detailing, if the special project designation was approved:
  • the plans, studies, tests, evaluations, analyses, models, or surveys, that the proponent would develop and carry out
  • the documentation that the proponent would prepare and submit as a part of licence and permit applications for the project
  • the notification and engagement activities that the proponent proposes to carry out, in addition to any minimum requirements for applications set out in the regulation

Note: Any project to test, assess, pilot or demonstrate geologic carbon storage that falls outside of the scope of, CSA Z741 Geological storage of carbon dioxide or where the proponent is seeking an exemption from the requirement to follow that standard, would be required to provide a custom application plan.

Proponents’ assessment of how the project meets section 11.2 of the act

• The act requires that a request for a special project designation must include a description of how the project meets the requirements of section 11.2 of the act, described earlier, relating to the purpose of the project, the geological formations proposed to be used, the expectation that the project could be carried out in a manner that protects public safety and the environment and the limitations on projects involving permanent disposal.

Ministry’s decision on designation request

Once all of the required information has been submitted, the ministry would review the request to determine whether or not the project should be designated as a special project.  As a part of the special project designation, the minister may:

• establish a term (time limit) on the designation
• subject to subsection 11.4 of the act, exempt a special project (or a part of it) from a requirement of the act or regulations and may substitute a requirement in its place
• exempt any pipeline, other structure or equipment to be used in a project from the definition of work under this act
• approve a custom application plan as submitted, approve the plan with such modifications as the Minister considers necessary to be satisfied that the project could be carried out in a manner that protects public safety and the environment, or require the proponent to prepare another plan

After a project is designated as a special project, the holder of the special project designation would then be able to apply for any necessary licences and injection permits under the act. 

Applying for well licences and injection permits

All special projects will need to submit application(s) for authorization, and section 11.5 of the act says the project is not authorized unless the licence or permit expressly allows it. 

Only the person(s) named in a special project designation would be permitted to apply for, and hold, well licences and injection permits for the project.

Currently established application fees for well licences and injection permits would be required at the time of application. These non-refundable fees are:

• $100 for each well licence application
• $500 for an injection permit application

All applications for licences and permits related to special projects would be required to demonstrate, at a minimum:

• the purpose and scope of the project, as well as the proposed plans to carry the project out, are consistent with the information submitted in support of the special project designation request, any approved custom application plan
• the project has been designed for the site-specific geologic environment to which the proposed project relates
• the suitability of the proposed project with respect to the site-specific surface and subsurface conditions
• suitable plans are in place to ensure that remedial actions or measures will be taken to address any existing wells and other drilled or dug conduits, that may impact, or be impacted by, the project, whether those wells or conduits are known prior to the commencement of the project or identified in the future
• the project will be designed, constructed, operated and decommissioned in a manner that:
  • protects public safety and the natural environment
  • permanently isolates and protects all potable water formations from potential contamination
  • prevents the migration of fluids between permeable zones
  • protects existing and potential hydrocarbon-bearing formations from cross-contamination
  • promotes, where applicable, the conservation and efficient recovery of hydrocarbons, with minimal use of flaring
  • ensures that the plugging, abandonment and decommissioning of wells, underground caverns or other reservoirs used in the project, and other associated works, will leave them in a stable state that permanently protects the public and the environment

Application submissions for carbon storage special projects

Minimum submission requirements for licence and permit applications related to a special project to assess, test, pilot or demonstrate carbon storage would include:

• a detailed project description
• identification (description and delineation) of:
  • the Area of Review, representing the geographical boundary where, based on supporting technical information, the applicant predicts the proposed project could adversely affect people, the environment or other resource users
  • where applicable, a proposed Carbon Storage Surface Area Boundary, representing the geographical boundary that incorporates:
    • all works, including wells used for the purposes of the project
    • the area on the surface that corresponds to the furthest lateral extent of the storage complex
    • any additional area adjacent to the storage complex reasonably necessary to protect the storage complex from other drilling and subsurface activities
• confirmation from the applicant that:
  • all necessary rights have been acquired by the applicant in relation to all lands on or under which the special project will be located
  • all persons from whom rights or interests have been acquired for the project have been made aware of the proposed special project and the applications being made for the project
• a report that is prepared by an independent party with expertise in insurance matters related to environmental and other risks associated with the same or similar subsurface operations in Ontario and that recommends the types and amount of insurance coverage necessary for the proposed special project, including but not limited to liability and pollution coverage
• an assessment of existing and proposed neighbouring surface features, activities, users, and uses within the Area of Review identifying potential impacts of the proposed project on these neighbouring activities and vice-versa,
• an assessment of existing and proposed neighbouring subsurface activities, users and uses within the Area of Review identifying potential impacts of the proposed project on these neighbouring activities and vice-versa, 
• a risk assessment that addresses the full lifecycle of the project, including assessment of unmitigated or residual risks, and plans to mitigate risks
• plans and programs that address the full lifecycle of the project, including the design, construction, operation, maintenance, monitoring, abandonment and decommissioning and the safety of the wells, any underground reservoir proposed to be used, and other associated works proposed to be used during the lifecycle of the project
  • the plans relating to plugging, abandonment, decommissioning and site rehabilitation, as well as monitoring programs, would be required to include a detailed schedule for these activities and an estimate of the costs of carrying out these activities, including an itemized list of the costs of:
    • plugging, abandonment and decommissioning of all wells, reservoirs and other works that are a part of the special project
    • carrying out all necessary site rehabilitation work
    • any ongoing maintenance or monitoring work that is required after plugging, abandonment, decommissioning and site rehabilitation have been completed

• any documentation required by CSA Z741 Geological storage of carbon dioxide related to
  • site screening, selection and characterization
  • risk management
  • well infrastructure development
  • monitoring and verification
  • closure

Any special project for carbon storage that falls outside of the scope of CSA Z741 Geological storage of carbon dioxide or has been exempted by the Minister from the requirement to comply with that standard would be required to provide the application submissions, described below, for other special projects.

Application submissions for other special projects

For special projects unrelated to carbon storage, applicants would be required to submit any plans, studies, tests, evaluations, analyses, models, surveys, or other documentation that was included in the custom application plan approved by the minister as a part of special project designation.

While custom plans would be project-specific, it is anticipated they would also include some of the requirements that are proposed for carbon storage special projects, such as:

• a detailed project description
• identification of the Area of Review and a Special Project Surface Area Boundary (where applicable, e.g., for other storage activities)
• confirmation that all necessary rights have been obtained and that rights holders are aware of the project and applications
• insurance report prepared by an independent party
• assessments of existing and proposed neighbouring surface and subsurface features, activities, users, and uses within the Area of Review
• risk assessment that addresses the full lifecycle of the project, and plans to mitigate risks
• plans and programs that address the full lifecycle of the project, including plans detailing the plugging, abandonment and decommissioning activities and associated costs to inform the requirements for financial security related to the project.

Notification and engagement requirements

All applicants seeking licences or permits for a special project would be required, at a minimum, to notify the following parties of the application(s), providing a project description and offering to provide digital copies of any application submissions, including any expert review documentation, on request:

• landowners, local municipalities, and regional municipalities within the area of review
• any person from whom the applicant has acquired any rights relating to the use of land for the project
• any person who owns land on which a plugged or unplugged water well, geothermal well or a well as defined under the act with the area of review
• any person who owns, or is responsible for the operation of, a surface or subsurface operation that was identified by the applicant in an assessment of neighboring activities submitted in support of the application
• any person who owns, or is responsible for the operation of, a railway, high voltage transmission power line, transmission or distribution pipeline, or other occupied easement or utility right of way within the area of review
• operators of wells licenced under the act located within the area of review
• operators of any gas storage area designated under the Ontario Energy Board Act located within the area of review or within 1.6 km of any well proposed to be used for the project
• Indigenous communities and organizations, as identified by the ministry
• any other ministries of the provincial or federal government or agencies that are identified by the ministry

Note: Section 20.1 of Ontario Regulation 245/97 provides a process for applicants to redact certain types of information that is confidential in nature from technical documents to be shared  as part of an application process  It is proposed that the same process would apply to special project applications. 

Any party or person notified of the application would have an opportunity to provide comments to the applicant by mail or email within a minimum of 60 days of receiving the notice. Applicants would have the option of extending the comment period at the time of providing the notice.

Any special project with an approved custom application plan (e.g., other than carbon storage special projects that will be following the CSA standard) would also be required to carry out any additional notification and engagement activities identified in their approved plan.

All applicants would be required to provide documentation to the ministry summarizing their notification and engagement activities; the comments or responses received; any changes made to the application in response to the comments; and a description of any concerns from notified parties, with respect to the application, which have not been addressed and an explanation of the reason for not addressing the comments. 

Any comments provided to the applicant from persons not directly notified of the application, prior to the submission of the summary document, would also need to be included. 

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.

As with other applications carried out under this framework, special project applicants would be required to take all reasonable steps to ensure that any personal information collected under the proposed notification and engagement process is retained, transferred and disposed of in a secure manner so as to protect the information against theft or loss or unauthorized use or disclosure.  It is proposed that the current requirements as set out in section 2.11 of Ontario Regulation 245/97 would apply to applications for special projects.

Expert review

Any submissions provided in support of an application for a licence or permit or, or a request to amend a licence or permit after it is issued, would be subject to expert(s) review at the ministry’s request. 

Similar to the existing process for compressed air energy storage (CAES) projects in porous rock, once an application is submitted that meets the requirements of the regulation, the ministry would identify to the proponent which submissions, or parts thereof, will require review by an expert.  All costs associated with the expert review(s) would be paid by the proponent.

The expert reviewer must be qualified to perform the work, and the ministry and the proponent must agree on the expert selected. The expert who performs the review would be required to submit their report directly to the ministry.

The expert review would be required to be completed prior to the mandatory notification and engagement process required by the regulation.  If, during the application process, the applicant makes changes to a technical submission that has been reviewed by an expert, the ministry may require expert review of the revised technical submission.

Additionally, the conditions of a licence or permit could specify that certain technical information required to be submitted during the lifecycle of the project would be subject to the expert review process.

Minister’s request for additional information

Should a situation arise where the Minister is of the opinion that additional information is required to inform a decision regarding a special project designation or the issuance of one or more licences or permits for a special project, the Minister would have the authority to request additional information from the proponent.

When making the request for additional information from the proponent, the Minister would identify to the proponent whether or not further consideration of the application would be paused until the required information is submitted, and whether the information would be subject to the expert review process.

Unless the Minister determines that additional information requested is ‘information of a sensitive nature’ as described in section 2.6 of Ontario Regulation 245/97, if the request is made during an application process any parties notified of the application would be notified of the availability of the additional information requested by the Minister and would have the right to request a digital copy.

Financial security

It is proposed that financial security requirements for special projects follow the same model as recently established for CAES projects in porous rock.

The amount of the security would be equal to the amount forecasted by the proponent as a part of their closure plans, unless the Ministry of Natural Resources and Forestry determines a higher amount of security reflects a more accurate estimate of the costs of abandonment and decommissioning, based on

• any expert review of the applicant’s estimate required as a part of the application process, or
• any records or information the ministry has pertaining to the cost of abandoning or decommissioning similar facilities in Ontario or other jurisdictions

The form of security would be required to be provided or established in a trust or an irrevocable letter of credit.

In situations where, at the end of a special project, wells or other works would be intended to be converted to another use under this act (i.e., not permanently abandoned or decommissioned) the required financial security for these wells and works would continue to be following the same model to forecast costs and maintain financial security to cover the full cost of plugging, abandonment, decommissioning, site remediation and post-closure monitoring.

Other key provisions for special projects

Works, at end of project

• any work which forms part of a special project would continue to be a work for the purposes of this act and the regulations if the work has not been fully decommissioned and permanently removed from special project surface area

Exemptions from works for projects to assess, test, pilot or demonstrate carbon storage

• Works beyond the emergency shut down valve, or the first isolation valve if there is no emergency shutdown valve, would not form a part of a special project for carbon storage (except those used for well drilling, servicing, plugging, etc.)

Compliance with standards

• any special project to assess, test or demonstrate carbon storage project would be required to follow CSA Z741 Geological storage of carbon dioxide throughout the project lifecycle
• all special projects would be required to follow parts 3 through 13 of the Oil, Gas and Salt Resources of Ontario, Provincial Operating Standards (Provincial Standards)
• the requirements described in Part I of the Provincial Standards that address well location plans, well bore surveys, and the posting of well licences at the well site during operations involving a drilling or service rig
• In the event of a conflict between the requirements of the regulation, the Provincial Standards or CSA Z741 Geological storage of carbon dioxide, the requirement that provides a higher level of protection to public safety and/or the environment would take precedence

Drilling timeframes

• the authority to drill granted in a well licence for a special project would terminate on the date specified in the licence or, if no date is specified in the licence, one year after the licence is issued.

Reporting, examiners and registration of works

• where a qualified examiner is required to conduct or certify activities undertaken in association with the project, a Class VI examiner would be required. Class VI examiners must be Professional Engineers
• as a part of the annual examination of all surface works required by the Provincial Standards, operators of special projects would be required to have the Examiner assess compliance with the requirements of any other recognized standards, in relation to surface works, that the regulations and the conditions of any licence or permit issued for the project require compliance with
• In addition to any reporting requirements of Part 13 of the Provincial Standards or reporting requirements established through the conditions of licences and permits, the operator would be required to notify the ministry:
  • of planned well overhauls and inspections (by, or on behalf of, the operator) and the results of such inspections including copies of all surveys, logs, test data and the interpretations of this data
  • immediately when any emergencies occur, including spills, loss of well control, fire, explosion or other accident

• Operators of special projects would be required register the following information with the ministry in relation to the special project, and notify the ministry of any changes within 15 days of the change
  • the location, type, quantity, operating status, and technical specifications of each work
  • the name, address and telephone number of the licence holder, the licence holder’s agents, if any, and emergency contact persons
  • where the licensee is a corporation any change in the name or address of the corporation, or its directors or officers

Transfers of special project designations and associated licences and permits

The holder of a special project designation would be able to request the transfer of the designation and any associated licences and permits, subject to the following requirements:

• all licences and permits for a special project would be transferred with the special project designation (licences and permits could only be issued in the name of the designation holder)
• applicable transfer fees ($100 per well licence)
• submission of confirmation from the transferor that:
  • all relevant information pertaining to the project has been disclosed to the transferee including, but not limited to its design, operation, maintenance, decommissioning and closure, as well as any compliance matters whether or not these have been disclosed to, or discovered by, the ministry
  • all plans, programs, analyses, and other requirements or submissions that the current designation and authorization holder is required to follow under the act are up to date
• submission of information from the transferee, including:
  • a description of their operational history, experience and expertise with similar projects in Ontario and other jurisdictions
  • their compliance history under the act, if applicable.  For corporations, this would include the compliance history of its officers and directors
  • confirmation that:
    • they have acquired necessary rights related to the access and use of land required to carry out the project and that they have notified the rights holders of their plans to request the transfer of the special project designation and licences and permits
    • they have taken steps to be advised of, and are familiar with, all of the requirements and obligations associated with the special project under the act
    • they have conducted their own review of the project, and are satisfied that they are aware of any potential non-compliance under the act and their responsibilities with respect to any existing non-compliance should the authorizations be transferred
• should the minister agree to transfer the special project designation and associated licences and permits, the transferee would be required to establish the required financial security prior to the transfer

Amendments to special project designations and associated licences and permits

The holder of a special project designation would be able to request amendments to the special designation and associated licences and permits.

The designation holder would be required to make the request in writing, including the rationale for the request, and provide any information required by the ministry in support of their review of the requested change.

The ministry would be able to require expert review of the technical submission under the same terms and procedures that would apply to applications for licences and permits relating to a special project.

Where the ministry determines the proposed changes to a special project designation or a licence or permit is significant enough in nature that the parties originally notified of the application(s) for the project may have an interest, the ministry may require the designation holder notify any or all parties originally notified of the application and provide them with an opportunity to comment on the proposed change. 

As with applications, any party notified of a proposal would be provided with a list of information supplied to the ministry in support of the amendment request and would have the right to request a digital copy to inform their review and comments. Proponents would be required to provide summaries of notification, engagement and consultation activities, and protect personal information collected through these processes.

Other proposed amendments to Ontario Regulation 245/97 for special projects

• recognizing the use of special project wells in the fee provisions of section 5, with an annual fee per well of $250
• enabling CAES projects in porous rock that are currently prohibited to request a special project designation (subject to the eligibility criteria for special projects) and, if approved, to apply for authorizations under the act
• other amendments required to align with the proposed minister’s regulation described in this proposal

Part 2: Well security changes

Under the current regulation made pursuant to the OGSRA, there is a requirement for operators, with some exemptions, to establish financial security in the form of a trust prior to the well license being issued. Once a well is properly plugged and/or facility is decommissioned, the financial security can be released.

The amount of security required to be placed in trust is based on the depth of the well; security funds are currently set at:

1. $3000 for onshore wells less than 450m deep
2. $6000 for onshore wells between 450m - 800m deep
3. $10,000 for onshore wells more than 800m deep
4. $15,000 for all offshore wells

Well operators of hydrocarbon storage cavern wells where the operator owns both surface and mineral rights, historical wells and private wells are currently exempt from providing financial security.

There is also a limit or ‘cap’ on the maximum amount of security required for each operator, regardless of the number of wells they operate. For unplugged wells on land, the security cap is set at $70,000 and the security cap for unplugged wells located in water covered areas is $200,000.

Financial security for wells is established to help ensure funds are available for the plugging and cap decommissioning wells and associated works at the end of their useful life. When an operator is not able to pay the cost of properly plugging the well, the well remains on the landscape as an ‘orphan’ well with the potential to present a public safety or environmental hazard, or the responsibility for plugging may fall to the landowner. 

The proposed changes would be applied on a going forward basis as an initial step towards enhancing existing financial security requirements, so funds are available at the time of plugging. 

The proposed regulatory changes to the Exploration, Drilling and Production regulation (O. Reg 245/97) under the OGSRA would make the following changes:

1. Eliminate well security exemptions for operators of hydrocarbon storage cavern wells where the operator owns both surface and mineral rights, historical wells and private wells in the following circumstances:
   • when wells are newly drilled, deepened, converted to other uses
   • when a well licence is transferred to the operator

These changes would apply on a going forward basis and therefore would not apply to the wells currently held by operators unless they are seeking one of the described changes.

2. Remove the operator security caps for all wells regulated under the OGSRA framework under the following circumstances:
   • when wells are newly drilled, deepened, converted to other uses
   • when a well licence is transferred to the operator

As with the proposed changes to exemptions, these changes would only apply to when an operator is seeking one of the described changes.

To assist operators in setting aside security funds for wells where transfers are being requested for a large number of wells, if the amount of financial security to be set aside above an operator’s existing security cap is greater than 70k for onshore wells or greater than 200k for offshore wells, the regulation would allow the required security to be established through equal quarterly payments over a 2-year period.

3. When two or more companies amalgamate, security that is already held in trust by the amalgamating companies would no longer be released to the operator based on a maximum security cap. Going forward, the amalgamated company would be subject to an increased operator security cap equal to the amount held by each company prior to amalgamation.

As described in Item 2 above, maximum security caps for operators would no longer apply to any well that is newly drilled, deepened or converted to another use or when a well licence is transferred to the operator.

The proposed changes to well security described above would apply to all wells where an application to do one of the following is received by the ministry after the date this proposal is posted to the environmental and regulatory registries:

• to transfer a well licence
• for a new licence
• for a licence to deepen a well
• to convert a well
• for Minister’s consent to adjust security in the event of an amalgamation of companies

In the event that one of the above applications are made after the date of this posting and the authorization or consent is granted prior to these proposed changes being approved and coming into effect, the regulation would provide a 60-day period after the effective date of the regulation for the required amount of security to be established and for the provision of confirmation to the ministry.

Unless an operator is seeking approval for one of the changes described above, the proposed changes to well security would not affect existing operators with wells that are currently exempt from security or are subject to an operator security cap.

Regulatory impact analysis

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

The creation of an authorization process for projects to test, assess, pilot or demonstrate new activities, methods or technologies (special projects) would support innovation while safeguarding people and the environment. The proposed changes would also enable proponents of special projects to voluntarily have their projects regulated under this Act, where the project would otherwise not have been subject to it. This is expected to lead to positive environmental and social outcomes, as well as economic benefits for proponents seeking to advance innovative projects.

The establishment of a clear framework for special projects to seek authorization would provide for the identification, assessment, and mitigation of potential impacts, including potential impacts to Indigenous communities and Aboriginal and Treaty Rights.  It would also provide opportunities for local and Indigenous community engagement on proposals.  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 regulations for special projects will result in direct compliance costs for proponents that choose to pursue a special project designation, including administrative costs, related to the preparation and submission of application information, expert reviews, carrying out notification, engagement and consultation activities, reporting requirements, and administrative fees for applications and transfers under this act.  The ministry will be engaging industry representatives during the public consultation process to gather information on the range of costs associated with these activities to inform decision-makers. No direct compliance costs are anticipated for other regulated entities under the Modernizing Ontario for People and Businesses Act, 2020.

The proposed changes to the well security requirements would reduce environmental and safety liabilities associated with wells that have reached the end of their useful life by reducing the risk that current operators won’t be willing or able to cover the costs of decommissioning. Therefore, the anticipated environmental and social consequences of this proposal are expected to be positive. 

Some economic impacts to well operators are expected, particularly for those that were previously exempt from establishing financial security for decommissioning their wells and for those where large numbers of wells would be transferred. These operators have an existing legal obligation to plug and decommission wells under the OGSRA and therefore any increase in costs would be limited to costs associated with establishing and maintaining these funds in security trust accounts during operations. Input on these costs will be sought from industry representatives.