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While Ontario does not currently have a regulatory framework to authorize carbon sequestration projects, the provincial government is developing that framework through a phased approach. This article provides an overview of the current phase, which will establish a regulatory framework to allow special projects to test and demonstrate new activities, such as carbon storage, on private land.
Among Canadian provinces, Ontario is the second highest emitter of greenhouse gases, accounting for 22% of the country’s emissions in 2021, much of which is emitted from stationary industrial sources. As the price of carbon in Ontario increases in concert with the federal backstop carbon price, these industrial sources are increasingly evaluating whether carbon capture and sequestration can be used to reduce their emissions. However, unlike Alberta and certain other provinces, Ontario does not have a regulatory regime for carbon sequestration. In fact, until March 2023, the Oil, Gas and Salt Resources Act (the OGSRA) effectively prohibited the underground injection of carbon dioxide for carbon sequestration and other activities.
Recently, the Ontario government began rolling back these restrictions. In late 2022, Ontario amended its Emissions Performance Standard (EPS) regulations to allow, in effect, carbon sequestration to be used to reduce a covered facility’s reportable emissions. And on March 22, 2023, the province amended the OGSRA to remove the prohibitions on carbon sequestration.
However, limitations remain. The Mining Act still prohibits the permanent storage or disposal of any substance, including carbon dioxide, on Crown land. Without removing this prohibition, sequestration activities would only be able to proceed on private land, which will significantly limit sequestration opportunities in Ontario given that some of the most promising geological formations are located under Crown land, especially under Lake Erie.
There are other roadblocks. Even with the OGSRA prohibition lifted, Ontario has not clarified the ownership of Ontario’s pore space, a major impediment to the development of commercial-scale sequestration facilities. It has also not established a permitting regime for sequestration facilities. Further regulatory incentives are also needed to justify the capital and operating expenses of new projects. The federal CCUS Investment Tax Credit, for example, does not yet apply in Ontario (as it only applies in provinces with an approved regulatory framework, such as Alberta). And industry continues to push for carbon price certainty, including through carbon contracts for difference with the federal government. These hurdles will need to be overcome to facilitate commercial-scale projects.
While the federal and provincial governments work to overcome the barriers for commercial-scale facilities, Ontario has taken steps to authorize a more limited class of test and demonstration projects. On June 8, 2023, the OGSRA was amended to authorize future regulations that would allow the Minister of Natural Resources and Forestry (the Minister) to designate certain special carbon storage projects. These amendments will only come into force on a date that is determined by implementing regulations.
On September 1, 2023, the Ministry of Natural Resources and Forestry (MNRF) published a proposal for these implementing regulations. The proposal describes, among other things, the process proponents would need to follow to obtain authorization for special projects, including test or demonstration carbon storage projects. Key features of the proposal are discussed below1.
According to MNRF’s proposal, the implementing regulations would take effect on January 1, 2024, following the closure of the current public consultation period. With many carbon sequestration projects already moving forward in western Canada, Ontario is starting to develop a regulatory framework in support of these projects as well—and we encourage project proponents to keep an eye on this developing space.
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