CCS and CCUS technologies are being developed with plans to reduce CO2 emissions by millions of tons annually in Canada. With the rapid development and large-scale application of these technologies, the oil and gas industry intends low-carbon, efficient, and sustainable development while ensuring a secure supply of oil and gas. For CCS and CCUS tech to be successful, it is critical to ensure the storage of CO2 is secure and permanent.
Since the AER- regulates all aspects of energy resource development in Alberta, from decisions on project applications, to rule enforcement and measures to hold companies accountable at all stages of development, they constantly have regulatory changes under development to respond to new developments in the industry.
On October 19, 2022, updates to Directive 20 were announced in part to create regulatory certainty for CCUS development in Alberta- to provide a clear regulatory framework for industry and clarify internal procedures for AER staff.
In addition, on December 8, 2021, the Government of Alberta proclaimed the Geothermal Resource Development Act (GRDA). It established the AER as the primary regulator for deep geothermal energy developments in Alberta. This motivated the AER to develop a new framework for deep geothermal development to provide industry with clarity on processes and requirements that are unique to geothermal energy while incorporating applicable oil and gas regulatory instruments.
By June 30, 2022, the AER’s Geothermal Resource Development Rules were proclaimed which the new 2022 changes to Directive 20 also reference, making the changes pertinent to geothermal resource development as well.
As quoted from Section 1.3 of Directive 20 entitled “ What’s New in This Edition”, the updates to Directive 20 contain changes related to CO2 enhanced oil recovery (EOR), CO2 storage and CO2 sequestration schemes that have been made to section 5 and appendix 1.
References to the Geothermal Resource Development Rules have been added, as well as changes to Section 5 which concerns cased-hole abandonment requirements and changes to Appendix 1 Definitions for the Purposes of Directive 20.
Although it’s critical that Alberta is responding to the growing need for carbon and geothermal regulation, this brings implications for well abandonments. Mark Taylor of Taylor Energy Advisors, who has worked with the AER as Executive VP of Operations and VP of Closure & Liability and Climate Policy Assurance has perspective on changes to AER directives.
“Anytime the AER moves to update or change or create a new directive, whether it’s an update to an existing one or creation of a new one, the draft will always go out for public comment,” says Taylor. “So there is always an opportunity, usually measured in 2-3 month periods. Everybody has the opportunity to review the draft directive and then send comments back on every draft piece of regulation because that’s legislated.”
Taylor notes the relationship between policy and regulation is key. While energy policy in Alberta gets made in Edmonton by elected officials-energy regulation is made in Calgary by the AER. He notes that the government has set policy ensuring the environment is not damaged by old oil and gas wells that have been abandoned. That policy is then passed to the regulator and the regulator has to decipher it and turn it into tangible regulations that can be acted on. In the case of abandoned wells, the concern is leakage.
In simple terms – if wells leak then they pose a risk to the environment or to public safety. In policy changes made in the summer of 2021, the government of Alberta clarified that the AER would be the regulator for any CO2-related projects because they exist in the subsurface. The AER then considered the changes that were needed to existing regulation to make them clear and easy to follow for any future CO2 injection projects- whether they are EOR or CCS.
Up until that point you only had a few companies in the province with CO2 sequestration projects like Enhance Energy – using CO2 for CCUS and EOR in the Clive field or the Shell Quest project in the Edmonton area.
“So the AER and those operators essentially customized the requirements that were needed for those projects,” says Taylor. “This was functional because there were few projects. The AER could address them on a well-by-well basis and review what the technical requirements were. A year and a half ago, the province opened up options for carbon hubs. The AER forsaw the dramatic increase in projects for CO2 sequestration with the realization that project review could not continue on a well-by-well basis. There was a growing need for new regulations with clear directions to be fair to all potential projects- especially regarding procedures for dealing with a well that penetrates a CO2 scheme.”
That was the rationale for the changes to directives 20, 13 , 65, and 87. Directive 65 was updated regarding public notification. It has the most changes related to CO2 because the AER created all new notification requirements for CO2 projects.
However, in Directive 13, 87 and 20, there was increased clarity in classifying the type of well-penetrating CO2 project. With established projects, the operator will know to abandon a well in their CO2 project in compliance because they’ve worked the requirements out with the AER over the period of years that they’ve been running their EOR scheme.
The new specifications are such that if a company happens to have old wells, that penetrate a CO2 scheme and are slated to be abandoned, the AER confirms the company knows how to correctly abandon a well.
“In the new Directive 20 and the AER didn’t actually create new rules as to how to abandon a well,” says Taylor. “What they did is categorize that wells that penetrate a CO2 reservoir are essentially high risk category wells- similar to critical sour gas wells. So the company has to put time and attention into proving that they have successfully isolated the reservoir from the surface and from any other reservoir. The number one concern from a regulatory and policy perspective is to make sure that if we put CO2 into the ground as part of the CCS scheme, it stays sequestered exactly where it was put for eternity. The NGOs are going to be looking for the first sign that CO2 is leaking to the atmosphere. If they find leakage, then all hydrocarbon-related development in Alberta will be dirty again.”
The Directive 20 changes are not just for CO2 – now that different players are going to be drilling into the subsurface. Companies might be looking to extract brine for lithium extraction. They could be building a geothermal project.
Some of those companies may not have the same expertise or proficiency or history of experience as an oil and gas company would have at either drilling or abandoning wells. Leakage from wells that will penetrate the zones where companies are generating geothermal energy is a potential problem. With geothermal you circulate fluid to get heat out of the reservoir.
Each well in that reservoir is now a potential point where you could lose that circulation. So the heat that the company is trying to extract from the subsurface would escape. It would not be coming out the top of the designated well which is the desired outcome.
“Geothermal is emerging and there are many proposed projects,” says Taylor. “We can’t just let people infer – we need to tell them specifically that if there is geothermal in the area where you’re talking about abandoning a well, then we will classify your well in a certain category. It may have been classified differently six months ago before the update came out but now it’s going to be classified as indicated in the current version of Directive 20. Then companies have certainty. The standards for abandonment might be more rigorous. There are low, medium, and high-risk wells. If you’re penetrating a CO2 scheme or reservoir with the CO2 being injected, you’re in the high-risk category. This means you’re going to put the most rigorous effort into abandoning that well.”
Maureen McCall is an energy professional who writes on issues affecting the energy industry.