Geothermal Resource Development in Alberta: The ELC’s comments on the Alberta Energy Regulator’s proposed directive

03 Sep Geothermal Resource Development in Alberta: The ELC’s comments on the Alberta Energy Regulator’s proposed directive

Geothermal Resource Development in Alberta:

The ELC’s comments on the Alberta Energy Regulator’s proposed directive

At the end of last year, the provincial government passed The Geothermal Resource Development Act (GRDA) which is still awaiting proclamation.  To see our thoughts on the GRDA when it was at the bill stage, see our blog post here.  The GRDA provides the legal framework for geothermal resource development in Alberta but a lot of the detailed requirements are to be provided in rules issued by the  Alberta Energy Regulator (AER).  To this end, the AER issued Draft Directive [XXX] Requirements for Geothermal Resource Development (Draft Directive) on August 4, 2021.   The AER is accepting public comments on the Draft Directive until September 3^rd and we recently submitted our comments (see AER Draft Directive_submissions_final).

The GRDA is modeled on the Oil and Gas Conservation Act (OGCA).  It is apparent from the Draft Directive that the AER’s rules for geothermal activities are also very similar to those for oil and gas activities. While this makes sense in that the OGCA regulatory framework is well established and familiar, it is problematic in that the OGCA model has resulted in a very significant legacy of orphan wells and environmental liabilities.   We are concerned that the GRDA and Draft Directive do not take the necessary steps to avoid resource development liabilities continuing to fall on the public purse.

Implement mechanisms to ensure the polluter pays principle is met

In order to ensure that polluter pays principle is met, it is essential to ensure that all licensees are responsible for future clean-up of their wells/facilities.  Two key mechanisms to achieve this goal are: (1) requiring payment of up-front security to address future liabilities regardless of licensee capability assessment and (2) imposing strict timelines for the completion of reclamation and remediation activities.

While the Draft Directive does indicate that security may be required for geothermal activities at the time of license application, amendment or transfer, it is apparent that security will not always be required for all activities.  As with oil and gas activities, the decision will be made based on a holistic assessment of the licensee.  The ELC is concerned that this approach is simply a somewhat enhanced version of the historic approach which has resulted in significant environmental liabilities being borne by the public purse rather than the responsible licensees.  In our view, a universal requirement for up-front security would be more effective and administratively simple than attempts to monitor licensee financial health through the holistic assessment approach.

In addition, as with oil and gas wells, there are no timelines set out in the Draft Directive for completing abandonment, remediation, and reclamation of a geothermal well.  In our view, the lack of timelines is problematic as it allows a well to languish on the landscape indefinitely.  An alternative to timelines may be mandatory insurance schemes (see Nigel Bankes, Green Regs and Ham: Some Thoughts on Contaminated Sites, the Redwater Decision and the Principle of Intergenerational Equity, October 5, 2017  and Benjamin Dachis and Blake Schaffer, All’s Well that Ends Well: Addressing End-of-Life Liabilities for Oil and Gas Wells (Calgary: 2017, C.D. Howe Institute).

Develop a process for pre-transfer inspection and assessment of well/facilities

Where a transfer is contemplated for conversion of an oil or gas well/facility to a geothermal well/facility, there should be a process for inspection and assessment prior to transfer.  Recognizing that there might be limited information pertaining to the actual condition of the well/facility, the object of the pre-transfer inspection and assessment is to provide a snapshot of the condition of the well/facility, the subsurface, and the surface.

We recommend an approach beyond the AER’s process for assessing the financial capacity of a company to hold a licence. Currently, the only process is the holistic licensee assessment for license transfer (if any) at which time a site-specific assessment and/or security deposit may be required.  This is not sufficient to assess the actual condition of the site before conversion.

The pre-transfer inspection and assessment process would be a physical, on-the-ground process looking at the actual condition of the well/facility that meets the Phase 2 standards set by the Alberta Environmental Site Assessment Standard.  We recommend that site-specific liability assessments be mandatory for all proposed transfers of oil and gas wells/facilities.

Any outstanding issues – including incomplete or failed remediation efforts regardless of the prior issuance of a remediation certificate –  would have to be addressed by the oil or gas operation prior to transfer.  If there are any risk management conditions arising from the reclamation or remediation processes, then these must be included as conditions in any licenses, approvals, or other authorizations issued to the transferee.

Require information and data sharing

Given the nascent stage of the industry to assist with technical and knowledge development, information and data should be made publicly accessible.  The Draft Directive does indicate that certain information will not be considered confidential: the surface and bottomhole locations, elevation, current depth, drilling status and casing and cementing data; monthly totals of each type of fluid injected into injection wells and produced from production wells; and information about hydraulic fracturing fluids used in geothermal operations.

Other information will be released after one year (unless extended in exceptional circumstances): fluid analysis data; routine pressure, temperature and flow test data; any log data, drillstem test data, worldliness formation test data, and completion details; core analysis data; hours on production and injection; and drill cuttings and core analysis data.  It would be helpful for Draft Directive to set out what would be considered “exceptional circumstances” allowing an extension and maximum times for extension.

In our view, the  Draft Directive should also be clear that annual reporting requirements outlined in section 7.3.3 – such as surface deformation information – will be publicly available. It is also important that all public information be made easily accessible to the public.

Address environmental matters associated with development of and access to geothermal resources

The Draft Directive does address some environmental matters associated with geothermal activity, often by referencing other directives developed for oil and gas operations.  For instance, setback requirements and measures to protect water bodies are those set out in Directive 056, air emission requirements are those set out in Directive 060, and water management requirements are those set out in Directives 050 and 058.  However, there are still some significant gaps in addressing environmental matters.

Environmental screening and assessment of all activities prior to approval is a key requirement of implementing the geothermal regulation framework. Screening would be done to identify any potential impacts on species at risk, water resources, habitat, and so forth. Ideally, screening would occur prior to issuance of tenure to any Crown resources (this is outside the AER’s jurisdiction).  In the face of significant environmental impacts, approvals should not be issued.

Another important environmental matter which is not addressed by the Draft Directive is consideration of impacts on thermophiles within geothermal reservoirs/waters (this is a regulatory feature in Iceland).

If proposals involve multiple extraction activities at one site (e.g. oil and gas/geothermal/solar/mineral), these projects should be addressed as a whole to properly assess and review cumulative impacts of the entire development (not on a disparate, project by project basis). This will require development of joint processes between the AER and other regulatory bodies.  Public participation will be essential to any such process.  We do encourage the approach of multiple extraction activities to minimize surface disturbance and footprints; however, scrutiny is still required to avoid significant environmental impacts and to address cumulative impacts.

AER should seek policy direction from the GOA

The jurisdiction of the Alberta Energy Regulator (AER) is limited to that granted via the Responsible Energy Development Act, the Geothermal Resources Development Act (GRDA) and other pieces of energy legislation.  As such, we recommend that the AER seek policy direction from the Government of Alberta (GOA) on certain matters to inform its development of the geothermal regulatory framework.  Firstly, the AER should seek direction from the GOA for resolution of potential subsurface conflicts between oil and gas, geothermal, water, and mineral (such as lithium) resources.  Some questions to be answered include: Is recovery or use of certain resources intended to have priority over others? How are matters of incidental recovery to be addressed?  On the last question, we recognize that measurement and reporting of incidental production of hydrocarbons are addressed by Directives 017 and 007; however, the AER and industry would benefit from additional guidance on resolving conflicts.

Secondly, the AER should seek direction from the GOA on the appropriate allocation of future liability in the case of reworking oil and gas well/facilities into geothermal wells/facilities, or in the case of multiple activities at one site (oil and gas/geothermal/solar/mineral).  To some extent, this will be determined by striking the balance between encouraging a nascent industry and conversion of unproductive wells/facilities (liabilities) into production wells/facilities (assets), and ensuring one industry is not responsible for the liabilities created by another.  Ultimately, the goal should be avoidance of placing additional burdens on the public purse.

More information on geothermal resource development in Alberta

If you are interested in learning more about geothermal resource development in Alberta, the ELC published Gaining Steam: A Regulatory and Policy Framework for Geothermal Resource Development in Alberta which can be downloaded from our website.

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