The Alberta Energy Regulator Releases New Guidance on Geothermal Regulatory Scheme

On August 15, 2022 the Alberta Energy Regulator (AER) published Directive 089: Geothermal Resource Development (Directive 89) which provides guidance on general geothermal development requirements including an overview of relevant rules and regulations throughout the geothermal resource lifecycle, and specific technical and licencing requirements for geothermal pipelines, wells, and facilities. Directive 89 also extends the AER’s existing Licensee Management Program to include geothermal developments and provides guidance on transferring an oil and gas well licence to a geothermal well licence.

Geothermal Energy in Alberta

Geothermal energy is a stable and predictable renewable energy resource that has a small land disturbance footprint and technological similarities to oil and gas developments. Alberta’s experience in both oil and gas extraction and regulation, along with naturally occurring geothermal resources, make geothermal an attractive source of alternative energy for the province. AER is currently accepting geothermal lease applications.

The Geothermal Resource Development Act (GRDA), released in December of 2021, created a regulatory framework for geothermal development, under which the AER was appointed as the primary regulator for commercially viable deep geothermal development. The Alberta Utilities Commission retains jurisdiction over connection to the electricity network in Alberta following geothermal resource development. In June 2022, the AER released the Geothermal Resource Development Rules that established licencing, operating, monitoring, and closure obligations for geothermal development according to standards set out in specific directives, including Directive 89.

Overview of Directive 89

Directive 89 summarizes and clarifies the requirements for geothermal energy development from initiation, to construction, operation, and closure. Licencing and approval requirements for geothermal wells, facilities, and pipelines are set out within this Directive. Approval from the AER is required for all geothermal development activities except site surveying. Geothermal development applicants must have the subsurface rights to develop the geothermal resource before applying for a well licence. Applicants hoping to convert an oil and gas well licence to a geothermal well licence must file an amendment application or a transfer application depending on whether or not the applicant is the current licensee of the oil and gas well.

Land Requirements

Geothermal development on private land will require a lease granting surface access, while development on public land requires an applicant to apply for, or hold, a public land disposition before applying for a geothermal licence. If the public lands in question are already the subject of a disposition (such as a timber disposition), the geothermal applicant must obtain consent from the occupant. Standalone geothermal wells require a geothermal resource tenure lease or documented authorization from the freehold mineral owners. Additional guidance on geothermal tenure leases can be found in the Geothermal Resource Tenure Regulation.

Holistic Licensee Assessment and Licensee Management Program

Under the Holistic Licensee Assessment described in Directive 89, the AER’s assessment of the licensee throughout the geothermal lifecycle will inform the regulatory decisions for the activities and will determine if the licensee poses an unreasonable risk. A geothermal licence application will trigger the Holistic Licensee Assessment, and the outcome of the assessment will inform whether the licence is approved, approved with conditions, or denied. Factors considered under a Holistic Licensee Assessment include financial health, estimated liability (including remediation and reclamation liability), remaining geothermal resource lifespan that may fund liabilities, site and infrastructure management, rate of closure activities, compliance with regulatory requirements, and other factors the AER considers appropriate.

The results of the Holistic Licensee Assessment will be used in the Licensee Management Program to identify licensees that are, or are likely to become, at risk of not meeting their regulatory and liability obligations. The AER may conduct compliance assurance activities under the Licensee Management Program, including changing licence eligibility, placing restrictions on licences and/or approvals, requiring security deposits, or issuing orders. Licence transfer applications will trigger a Holistic Licensee Assessment of both the transferor and the transferee to determine if security deposits are required, and if so, in what amount, to offset any potential increase in risk.

Closure Obligations

Geothermal wells, facilities, and pipelines must be reclaimed before closure pursuant to requirements of the Environmental Protection and Enhancement Act (EPEA). Geothermal well closure must comply with AER Directive 20: Well Abandonment. Geothermal facility closure must include a closure plan that includes the details of abandonment activities, site monitoring and maintenance activities, details of environmental site assessment, remediation, and reclamation activities, and the proposed completion dates for closure activities. Additional closure requirements for geothermal wells, facilities, and pipelines may be found in the relevant EPEA Approval.

If you are considering producing geothermal energy in Alberta or have any questions, please contact the authors or a member of our Environment & Regulatory Group.

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  • Shailaz  Dhalla
    Partner

    Shailaz practices regulatory and administrative law with a focus on energy, environmental, public utility and indigenous law matters. She has knowledge and experience navigating regulatory processes for various industries and ...

  • Molly  Bannister
    Articled Student

    Molly Bannister is an articled student in the Calgary office of Lawson Lundell.

    Prior to joining the firm, Molly was an environmental scientist monitoring reclamation on industrial sites in northern Alberta. While at law school ...

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