Moving Forward: Alberta Releases RFP Guidelines for Carbon Sequestration Hubs
On December 2, 2021, Alberta Energy released a Request for Full Project Proposals for Carbon Sequestration Hubs (RFPP). Following significant interest in carbon capture and storage, the RFPP is intended to facilitate the issuance of rights to Alberta’s pore space to proponents to enable the development and operation of carbon storage hubs. A carbon sequestration hub will be an area of pore space overseen by a private company that can effectively plan, enable and undertake carbon sequestration of captured carbon dioxide from various emission sources as a service to industrial clients.
Carbon sequestration, specifically, the permanent disposal of carbon dioxide in dedicated geologic formations, presents a strategic opportunity for both the Government of Alberta (Province) and industry to achieve economic and environmental objectives. It will undoubtedly play a key role for a variety of industries, including a clean hydrogen economy, petrochemical development, and enhancing environmental performance in the oil sands.
To help manage the growth in interest with respect to carbon capture and storage, Alberta is issuing sequestration rights through a competitive process and has opted to take a phased geographical approach.
The RFPP comes two months after Alberta Energy released a Request for Expressions of Interest (REOI) for Carbon Sequestration Hub Proposals. An overview of the REOI process can be found here.
Alberta received a large number of voluntary expressions of interest (EOI) in the fall which informed the RFPP. To meet the demand in a phased manner, this RFPP seeks proposals for Alberta’s industrial heartland region near Edmonton. This area includes Sherwood Park, Fort Saskatchewan, Gibbons, Redwater, Bruderheim and Lamont. Subsequent requests for proposals for additional regions across the Province are expected to open in Q2 2022.
Only subsurface formations deeper than 1,000 meters with no associated hydrocarbon recovery (i.e. injection into a saline aquifer) are eligible. However, Alberta Energy expressly states within the RFPP that it “will continue to engage with industry in exploring the potential for other forms of sequestration including the use of mature fields … . Current practices for enhanced oil recovery and injection of formation acid gas will remain in place”. The use of mature fields and other sequestration options could further broaden the technologies and projects available for future sequestration in Alberta.
The guidelines for submission for this RFPP can be found here.
Eligibility and Exclusions
As set out in detail within Section 1.4 and Appendix A of the RFPP, requirements for eligible projects and proponents include:
- eligible project must service and enable the sequestration of carbon dioxide from multiple facilities;
- proponents must work with the Province to establish terms and conditions of a “hub manager” role;
- proponents must provide access to pore space for the permanent disposal of carbon dioxide, deeper than 1,000 meters, with no associated hydrocarbon recovery (i.e. not enhanced recovery);
- the eligible project must capture carbon dioxide from facilities located within Alberta; and
- proponents must provide open access to parties subject to fair and reasonable cost recovery in providing: (i) carbon sequestration services; and (ii) access by a third party to sequestration pore space to undertake injection.
Notable exclusions from RFPP eligibility include:
- rights to pore space within rights owned by the Federal government on behalf of First Nations or in National Parks, the process will only grant rights to use pore space owned by the Crown in Right of Alberta; and
- projects that inject carbon dioxide as part of enhanced recovery will continue to operate under the current mineral rights tenure system (pursuant to the Part 4 of the Mines and Minerals Act (the MMA)).
Agreement under the MMA
Pursuant to the MMA, the Crown owns all pore space in Alberta, regardless of who owns the surface or mineral rights. To gain access or rights to pore space to sequester carbon, successful projects must agree to enter into an Agreement in accordance with Section 9 and Part 9 of the MMA and the Carbon Sequestration Tenure Regulation. The Minister’s power to enter into such an agreement is contained within section 15.1(e) of the MMA.
Part 9 of the MMA provides for two specific types of surface and subsurface agreements required to acquire pore space rights:
- Evaluation Permit: This agreement will allow the proponent to evaluate the geological or geophysical properties of a subsurface reservoir in a location to determine its suitability for use for the sequestration of captured carbon dioxide. An evaluation permit does not grant the proponent the right to recover any minerals found within the location of the permit. The term of an evaluation permit is 5 years and may be renewed.
- Carbon Sequestration Lease: This agreement grants the rights and sets out the terms under which a proponent can inject captured carbon dioxide into a subsurface reservoir for sequestration. As noted within Appendix A of the RFPP, the term of a carbon sequestration lease or “agreement” is 15 years with no automatic rights of renewal. However, it may be renewed for a successive 15-year term, subject to conditions prescribed by the Minister. Additional key provisions found within Part 9 of the MMA include:
- obligations to pay into the Post-closure Stewardship Fund (for all carbon dioxide injected including by third parties) (see section 122);
- measurement, monitoring and verification planning and reporting (see section 116(3)); and
- an initial and updated closure plan (see section 116(3)).
The RFPP makes it clear that the evaluation permit is intended only to offer the successful proponent the right to conduct diligence and does not guarantee that the proponent will be issued an Agreement for sequestration (i.e. a carbon sequestration lease pursuant to section 116 of the MMA). Instead, proponents must approach the Province for an Agreement to sequester carbon supported by evidence that the proposed location is suitable.
The Province is accepting confidential proposals between January 4, 2022 and February 1, 2022. Although a step forward, we anticipate industry remains anxious for additional certainty from both provincial and federal governments. McCarthy Tétrault will continue to monitor the developments related to carbon capture and storage, including the pending release of details regarding the Federal government’s proposed investment tax credit for capital invested in certain carbon, capture and storage projects.
To discuss any questions about the RFPP process or for assistance with RFPP submissions, please contact your trusted McCarthy Tétrault advisor or one of the authors.