The Alberta Government has recently introduced two pieces of legislation impacting the energy sector, in particular, large‐scale carbon capture and storage (CCS) projects and the development of coalbed methane.
On November 1, 2010, Bill 24, The Carbon Capture and Storage Statutes Amendment Act, 2010, was introduced in the Alberta Legislature. The Bill is intended to guide large‐scale CCS projects and to clarify the ownership of the pore space where carbon dioxide will be stored. Alberta is the first province in Canada to introduce legislation for this greenhouse gas reduction technology. The Bill proposes amendments or additions to the following statutes:
- Energy Resources Conservation Act;
- Mines and Minerals Act;
- Oil and Gas Conservation Act;
- Public Lands Act; and
- Surface Rights Act.
The Bill provides that the Alberta Crown will own the subsurface pore spaces where carbon dioxide will be stored, and will accept permanent liability for injected carbon dioxide after an operator provides data showing the stored carbon dioxide has been contained over a specified period of time. CCS operators will be responsible for any mitigation work during operation and will remain responsible until a closure certificate has been issued by the Crown. Once a closure certificate is issued to an operator, the Crown will become the owner of the captured carbon dioxide and assume all liability. The Crown will also establish and manage a post‐closure stewardship fund which will be financed by CCS operators for ongoing monitoring costs and required remediation. The proposed legislation will not change mineral ownership or mineral production and will have no impact on Enhanced Oil Recovery (EOR) projects which will continue to be governed by the current regulatory system.
According to Alberta Energy Minister, Ron Liepert, Bill 24 is intended to ensure that Alberta is on track to reduce greenhouse gas emissions, while increasing provincial royalties and taxes. By using some of the captured carbon dioxide for EOR, it is expected that Alberta’s conventional oil recovery will double, thereby generating tens of billions of dollars in additional provincial royalties and taxes. By having the Crown assume long‐term liability for captured carbon dioxide, the Government hopes to encourage more companies to move forward on large‐scale CCS projects in an effort to reduce provincial greenhouse gas emissions.
The Government has yet to decide how much time must pass before a closure certificate is issued and liability assumed by the Crown, or how much operators will have to pay into the postclosure stewardship fund. Such details will be included in regulations enacted following passage of the Bill.
On October 27, 2010, the Government introduced Bill 26, Mines and Minerals (Coalbed Methane) Amendment Act, 2010, and stated that it is an effort to remove historic barriers to resource development in the Province. The legislation proposes that coalbed methane is, and always has been, natural gas for both Crown and freehold purposes. Under the proposed amendments to the Mines and Minerals Act, coalbed methane would be owned by natural gas rights holders rather than the owners of the coal rights.
An important provision in the Bill is that existing agreements entered into by natural gas rights holders, or their lessees, that specifically provide coalbed methane rights to the coal rights holders or their lessees, will not be affected by the amendment. The Bill also states that natural gas rights holders and their lessees cannot sue coal rights holders or their lessees for compensation for coalbed methane that was extracted, produced or removed before the legislation was enacted.
According to the Province, the amendment is intended to provide certainty in coalbed methane split title situations where different parties own the rights to coal and natural gas under the same parcel of land. The legislation is intended to clear the way for coalbed methane development and facilitate the efficient and responsible development of Alberta’s mineral resources. Observers note that the Bill, if passed, would put to rest years of legal disputes between landowners and the owners of coal rights granted to the Canadian Pacific Railroad in the 1880s.
Coal seams with coalbed methane potential are found underneath much of Alberta. A study from the Alberta Geological Survey indicates that Alberta’s coalbed resource could contain upwards of 500 trillion cubic feet (Tcf) of coalbed methane. In comparison, Alberta’s current remaining natural gas reserves are only 36 Tcf.