The Geothermal Resource Development Act is now in force

The Geothermal Resource Development Act, along with the Geothermal Resource Development Regulation and Geothermal Resource Tenure Regulation,  is now in force

In December of 2021, we published a brief examining Liability Issues in Geothermal Resource Development which provides an overview of the regulatory framework for development of deep geothermal resources (this regulatory framework is also outlined in a blog post from late last year).  Just after we finalized this brief for publication, the government proclaimed the Geothermal Resources Development Act into force and filed two regulations which came into force on January 1, 2022.

Geothermal Resources Development Act (GRDA)

On December 8, 2021, the government proclaimed the GRDA into force (it had been passed almost a year prior).  The GRDA provides the framework for regulating deep geothermal resource development in Alberta. Essentially, the GRDA establishes a licensing and regulatory approach modelled on the Oil and Gas Conservation Act (OGCA) with most of the regulatory detail to be found in the Alberta Energy Regulator’s rules, directives and guiding documents. While the Alberta Energy Regulator has released a draft Geothermal Directive, it is not expected to be finalized until the spring of 2022 (see Bulletin 2021-46).

It should be noted that, with the proclamation of the GRDA, consequential amendments have been made to the Environmental Protection and Enhancement Act (EPEA), the Mines and Minerals Act, the OGCA, the Pipeline Act, and the Responsible Energy Development Act. One notable consequential amendment is EPEA’s definition of well being changed to include geothermal wells which means such wells will be subject to EPEA’s reclamation and remediation requirements.  Other consequential amendments include amending the Mines and Minerals Act to apply to geothermal resources (where context permits or requires), and to allow regulations under OGCA declaring that some or all of its provisions apply to geothermal wells.

Geothermal Resource Development Regulation

With only three sections, this is a very short regulation.  This Regulation clarifies that, under the GRDA, the term facility does not include a facility that is approved or licensed under another energy enactment (such as the OGCA), and that does not produce commercial heat or power and that any heat or power produced is used entirely at the facility site for the purposes of the site or development of the facility.

So, for example, an oil or gas facility that co-produces heat or power from geothermal resources, and uses all that heat or power to offset its own needs is not considered to be a geothermal facility.  This means that such a facility is not subject to requirements under the GRDA or made pursuant to it.

Geothermal Resource Tenure Regulation

This regulation is made pursuant to the Mines and Minerals Act and provides detail about leasing deep geothermal resources owned by the Crown.  A person may apply to the Minister pursuant to section 16 of the GRDA by using an application form that is satisfactory and providing the applicable application fee and the first year’s annual rent.

A geothermal lease grants the “non-exclusive right to explore for, develop and recover geothermal resources in the location of the lease”.  A geothermal lease only grants rights with respect to geothermal resources, there is no grant of a right to any mineral.  The maximum area of a lease location is 9 sections with the boundaries being at the Minister’s discretion.

The initial term of a geothermal lease is 5 years which may be extended for another 5 years (i.e. an intermediate term) so long as a geothermal assessment report demonstrating that the lease is potentially productive is submitted by the lessee prior to the expiry of the initial term.  The lessee may apply for continuation of the lease within the last year of the intermediate term, which if approved means the lease will continue indefinitely.  The Minister does retain discretion to extend the initial or intermediate terms of a lease beyond the standard 5 years.

Under this regulation, the Minister may request at any time that a lessee provide the results of a study, investigating, reconnaissance, or survey undertaken as part of the exploration, development or recovery of geothermal resources.  This information may be requested for the purposes of:

• establishing the geology of a given location of a lease,
• to ascertain or evaluate the characterization, nature, quality, or extent of geothermal resources in a location under a lease, or
• to aid the Minister in determining whether a lease is potentially productive, productive, or no longer productive.

Unfortunately, this regulation does nothing to clarify some of the questions about ownership of geothermal resources that arise from section 10.2 of the Mines and Minerals Act (which was a consequential amendment by the GRDA):

10.2 The owner of the mineral title in any land in Alberta has the right to explore for, develop, recover and manage the geothermal resources associated with those minerals and with any subsurface reservoirs under the land.

At first glance, this provision grants ownership of geothermal resources to the mineral title owner (as opposed to the surface title owner).  Simple right?  Not really, there are a few questions unresolved by section 10.2 (for an excellent analysis see Nigel Bankes, A Legal Regime for the Development of Geothermal Resources in Alberta).

Firstly, this provision is not declaratory and retroactive.  This opens up potential debate ownership as between the surface title owner and mineral title owner prior to the GRDA.  It would have been clearer if the provision deemed the mineral title owner to have and to always have had rights to the geothermal resource.  Secondly, in most situations in Alberta, the Crown will be the owner of the entire mineral estate (meaning the Crown will also own the geothermal resource).  However,  in some cases, there is private ownership of the mineral title which is often split into different mineral titles (i.e. different people own the coal, oil, gas, etc.).  This creates a complicated situation in which the person seeking to lease geothermal resources will have to obtain rights from each and every mineral title owner.

In our view, it would have been better to take an approach similar to that taken with respect to pore space (section 15.1 of the Mines and Minerals Act).  That is, declaring that the Crown is and always has been the owner of all geothermal resources in Alberta.  This would have clarified that all Alberta’s geothermal resources are owned by the Crown, resolving questions about ownership, simplifying the process for industry to obtain tenure, and maintaining the potential to collect royalties for the development of all deep geothermal resources.