The Alberta government has placed heavy emphasis on projects to geologically sequester carbon dioxide in its strategy to control greenhouse gas emissions in the province. Consistent with this strategy, on November 1, 2010, the government introduced Bill 24, the Carbon Capture and Storage Statutes Amendment Act, 2010, into the legislature.1
If enacted, Bill 24 will address two areas of legal uncertainty affecting potential Carbon Capture and Storage (CCS) projects: first, the regime for acquiring subsurface rights for CCS; and second, the allocation of long-term liability for sequestered carbon dioxide (CO2). Bill 24 proposes to amend existing legislation, most notably the Mines and Minerals Act and the Oil and Gas Conservation Act, to achieve these ends.
Ownership of Pore Space
Bill 24 provides for express ownership of subsurface pore space by the Crown. The Bill also clarifies that it is by specific leases from the Crown granting the right to inject captured CO2 that CCS proponents shall obtain rights to use such pore space for sequestration. Sequestration is defined to mean “permanent disposal” of CO2. Such leases for carbon sequestration are to be separate and distinct from Crown agreements contemplated under the Mines and Minerals Act for the “storage” (i.e., subsurface injection and storing) of fluid mineral substances such as oil and gas.
While Bill 24 does not define the “pore space” into which sequestration is contemplated, this term is described by a government backgrounder on the proposed legislation as “the tiny holes in porous rock that are unoccupied by a solid material. These tiny holes can be filled with oil, gas or salty water that is not suitable for human or animal use and can hold injected CO2.” 2
In clarifying Crown ownership, Bill 24 would add to the Mines and Minerals Act a section declaring that no grant of “any land in Alberta, or mines or minerals in any land in Alberta” has conveyed pore space, and that all subsurface pore space of “all land in Alberta” is the property of the Crown in right of Alberta. The proposed amendments would also provide that pore space is deemed to be an exception in each original grant from the Crown for the purposes of the Land Titles Act. Bill 24 further provides that enactment of the ownership amendments is expressly deemed for all purposes not to be an expropriation, including for the purposes of Alberta's Expropriation Act, and all claims to damages or for compensation of any kind against the Crown in connection with the ownership amendments are prohibited.
Notable for existing oil and gas operators is the government's claim that Bill 24 is not intended to affect enhanced oil recovery (EOR) projects that inject CO2 to improve recovery rates. The government has stated that the proposed amendments “do not affect (EOR)”3 and EOR is not expressly addressed in the Bill; however, whether the government intends that EOR projects integrating elements of permanent CO2 disposal will require separate leases to sequester CO2 may be a point for future clarification.
Significantly, the government clearly does not wish CO2 sequestration to sterilize hydrocarbon resources or affect other valuable subsurface uses such as gas storage. As such, the Energy Resources Conservation Board (ERCB), the provincial regulator of energy and subsurface injection projects, would be prohibited by Bill 24 from approving a CCS project using Crown pore space, unless the ERCB is satisfied that it will not interfere with the recovery or conservation of oil or gas, or an existing use of an underground formation for the storage of oil or gas.
Transfer of Long-term Liability for Sequestered CO2
Given that sequestered CO2 is intended to remain permanently underground to avoid adding to atmospheric greenhouse gases, the time horizon for liability for such sequestered gases is potentially perpetual. This endless liability horizon has been considered a significant disincentive to potential CCS developments, leading to calls for a regime to transfer long-term liability for sequestered CO2 from CCS project operators to the Crown. In its final report of March 2009, the government-appointed Carbon Capture and Storage Development Council recommended that “industry liability… be extinguished after a decision by the regulator that the project meets all expectations during decommissioning”, after which liability would transfer to the Crown, subject to some potential ongoing industry funding.4
Bill 24 appears to adopt this re-commendation. It contemplates that the Energy Minister may grant a closure certificate to a CCS lessee for a project that meets extensive conditions. In particular, the project must be decommissioned in compliance with all applicable regulatory requirements, including regulations around CCS well and facility monitoring and abandonment, and reclamation requirements under Alberta's environmental law of general application, the Environmental Protection and Enhancement Act. Further, it must be established that the captured CO2 is “behaving in a stable and predictable manner, with no significant risk of future leakage”, and a closure period, of a length yet to be defined, must pass between operations and issuance of the closure certificate.
If a closure certificate is issued, then an extensive transfer of liability from the CCS lessee to the Crown is provided for. Among other things, the Crown: (i) becomes the owner of the CO2; (ii) assumes all of the lessee's obligations under the Oil and Gas Conservation Act, for the purposes of ERCB compliance requirements, and the Environmental Protection and Enhancement Act; and (iii) indemnifies the lessee for third party tort actions in connection with the CCS project.
With respect to costs associated with the long-term liability assumed by the Crown under the foregoing provisions, Bill 24 provides for the creation of a Post-closure Stewardship Fund which may be used by the government for meeting such costs. Fees are to be levied on CCS project lessees as contributions to the fund, though regulations setting out such fees are yet to be made.
Bill 24 will, in short, substantially clarify the regime for long-term liability for CCS projects, but leaves uncertain potentially substantial considerations. These include:
- the details of conditions that must be met by CCS project lessees to receive closure certificates;
- the applicable closure period;
- whether the liability transfer to the Crown extends to obligations under legislation that is not expressly enumerated, including existing or future legislation specifically targeting greenhouse gas emissions and federal legislation generally; and
- the fees to be charged for the Post-closure Stewardship Fund.
In sum, if Bill 24 is enacted, potential CCS developers will enjoy greater certainty respecting the acquisition of pore space and at least a framework for the transfer of long-term liability to the Crown.
- Bill 24, the Carbon Capture and Storage Statutes Amendment Act, 2010, http://www.assembly.ab.ca/net/index.aspx?p=bills_status&selectbill=024.
- Alberta Energy, “Amendments Guide Use of Carbon Capture and Storage Technology”, November 1, 2010
- Alberta Carbon Capture and Storage Development Council, Accelerating Carbon Capture and Storage Implementation in Alberta: Final Report March 2009, www.energy.alberta.ca/Org/pdfs/CCS_Implementation.pdf.