As the emphasis on carbon capture and storage (CCS) continues to grow, the latest policy development is a guidance document published by the British Columbia (BC) Ministry of Energy, Mines and Low Carbon Innovation (Ministry). The Guidance for Obtaining and Utilizing Subsurface Tenure for Carbon Dioxide Storage (Guide), published in December 2022, follows legislative changes to BC's Petroleum and Natural Gas Act (PNGA) which took effect in November of last year, and provides direction on obtaining petroleum and natural gas (PNG) tenure needed for subsurface storage or disposal of carbon dioxide (CO2). BC's approach appears to differ from Alberta's approach in some important respects.

CO2 Storage or Disposal Tenure in BC

The Guide provides a helpful summary of recent changes to the PNGA related to CO2 storage tenure rights. It explains that, in BC, there are two forms of tenure which can be utilized for storage or disposal of CO2:

  1. PNG leases issued in accordance with Part 6 or section 71 of the PNGA, and
  2. Storage reservoir licenses issued in accordance with section 130 of the PNGA.

The Guide provides summary information on the use of these forms of tenure. PNG leases issued under Part 6 of the PNGA give the lessee the right to store or dispose of "natural gas" and other substances into a storage reservoir in the location of the lease. Because the PNGA has historically defined "natural gas" to include CO2, the use of PNG leases as a means of securing CO2 storage tenure is not new.

The Guide also highlights that parties seeking to develop CO2 storage projects may apply for a "storage reservoir licence" under section 130 of the PNGA. Under that section, holders of PNG permits, leases and drilling licences can apply to the Minister for a storage reservoir, which grants permission to access, develop or use a storage reservoir to store or dispose of CO2 and other substances. As an additional option, if a proponent does not hold PNG rights to a reservoir in a particular area, that proponent can obtain an "exploration licence" under section 126 of the Act. Exploration licences can be used to gather the necessary geological, geophysical, hydrogeological and other scientific information needed to demonstrate that the target formation is suitable for long-term CO2 containment. Once the exploration licence holder has acquired the necessary information, they can apply for a storage reservoir licence in the same manner as other tenure holders.

The Guide stresses that, regardless of the type of tenure used to store or dispose of CO2, a lease or licence holder must obtain a permit or order issued by the British Columbia Oil and Gas Commission (OGC) under section 75 of the Oil and Gas Activities Act. The Guide directs interested parties to the OGC's own guidance on applications for CO2 storage or disposal projects. The OGC's Carbon Dioxide Storage Application Guide, first published in 2021, provides limited information on what the OGC requires for these applications, except to say that CO2 storage projects would engage similar issues to acid gas disposal projects and that, as a result, applicants for CO2 storage projects could submit applications following the same guidance used for acid gas disposal projects.

Commentary

While the Guide and BC's recent legislative changes provide some helpful information about CCS projects, this latest release highlights some important differences when compared to the framework in place in Alberta, including some areas where proponents will likely be seeking more clarity.

As we explained in previous articles (here and here), Alberta's chosen approach is to encourage the development of a relatively small number of strategically-located carbon storage "hubs" that would accommodate CO2 captured in a geographic area. While Alberta's Mines and Minerals Act seems to contemplate that any number of parties can commence the process for obtaining the subsurface tenure needed to operate a CO2 storage hub, as a practical matter, the Alberta government’s policy approach appears to be to limit the issuance of those tenure rights. By contrast, BC appears to be taking a more decentralized approach, leaving all PNG rights holders with the subsurface tenure needed to develop CO2 storage reservoirs and leaving open the possibility for other non-PNG rights holders to acquire CO2 storage tenure. While all CO2 storage tenure holders would still need to apply for and obtain OGC approval for their storage projects, the OGC's stated intention to process those applications in a manner similar to acid gas disposal wells seems to confirm the more decentralized approach, with a greater number of CCS scheme operators.

One other major area of CCS policy uncertainty in BC is post-closure liability for subsurface CO2. As it stands, BC does not have any legislative framework in place that would transfer liability for stored CO2away from disposal well operators. By contrast, in Alberta, carbon sequestration lessees have the ability to apply for a closure certificate, the issuance of which permanently transfers all liability for the stored CO2from the lessee to the Crown, and provides the lessee with a statutory indemnity. Whereas Alberta intends to fund this liability transfer through a Post-Closure Stewardship Fund, BC has not established any similar mechanism.

While the recent developments in BC are welcome, we expect that industry participants interested in pursuing BC-based CCS projects may want to seek additional clarification on these and other policy issues before making significant comments to develop such projects.