Battlefield Earth: When CCUS Comes Head-To-Head With Competing Interests, Such As Helium

None

Check out some of our recent Energy Evolution content:

Former Gas Players Switch To Carbon Capture And Storage

First Co-Produced Geothermal Power Project To Highlight Alberta Innovation

Starting Out Small: CWC Expanding Into Helium, Other Alternative Drilling Opportunities

Saskatchewan Releases Helium Action Plan; Province Aims To Produce 10% Of Global Supply

Helium Companies Still In Early Stages; Resource Provides Lots Of Potential In Western Canada

Complementary Resource: Helium Has Technical Advantage In Its Similarity To Producing O&G


Some areas reserved for carbon capture, utilization and storage (CCUS) in Alberta might contain viable resources, such as helium, which should be considered along with the need for appropriate geology to inject carbon dioxide, says David Johnson, chief executive officer, Imperial Helium Corp.

“This is a major issue,” he told the Bulletin. “There are lands we wanted to acquire earlier this year that we’ve been unable to acquire, absolutely, because the land is blocked.”

Fortunately, according to Johnson, CO2 sequestration does not necessarily require the same downhole spaces as where helium is being produced, or where geothermal, lithium or other resources might be profitable. “And so, there’s space in here for everyone to play. I think that’s really important for Alberta, because that gives an opportunity for the most growth for the province in terms of the industry and in terms of Albertans.”

Johnson said he is concerned that when government decided to move forward with carbon sequestration, it took a rather “large swath” of the province for CCUS and determined there would be ministerial discretion for any mineral rights applied below it. “I recognize that carbon sequestration can require large pieces of land, but the geology that is required can be narrowed down to particular zones, and zones can be set aside.”

For its part, the province is working to ensure all industrial facilities can sequester captured CO2 and capitalize on the economic and environmental opportunity CCUS technology provides, while also managing subsurface resources in the best interests of long-term sustainability, said Jennifer Henshaw, senior press secretary for the Minister of Energy.

“The competitive process for pore space is not intended to impede the development of other resources, such as helium,” she told the DOB. “Hubs that capture carbon dioxide from a cluster of industrial emission sources will also allow for efficient pore space management while working with other resource development activities. This will ensure that CCUS will [be] done in a responsible and strategic manner.”

Henshaw added: “It will also be an effective way to avoid issues with numerous, and potentially overlapping, sequestration proposals.”

In its request for proposals, Henshaw noted, the province asks proponents to demonstrate their understanding of potential conflicts, and those successful proponents must work to identify and effectively address potential subsurface interactions and conflicts. For a hub to move forward, she said, the operator needs to also obtain stringent regulatory approvals from the regulator to ensure the activity is safe and environmentally responsible.

“The approval process also includes a participant involvement program which will [be] managed by the regulator where stakeholders will have the opportunity to express any concerns.”

Regarding his ongoing CCUS concerns, Johnson said, Alberta is in a period of transition. While there are voices that “don’t feel they have been heard at the table,” he added, the current phase of action is one of education more than anything else. “We’re trying to get as much information on the table so that things can be seen in the light of day.

“There are regulatory components to this. There are fundamental property rights issues to this, and all of this about trespass. There are future management issues around this. There are royalty issues around this. It’s not just one thing.”

The legal route

When it comes to pursuing any sort of legal action in response to the CCUS issue, Johnson told the DOB, it is simply always best to find alternative methods towards resolution.

“I think there’s lots of opportunity there for the government to recognize all the players there are at the table,” he said, adding the government can steward the resources and set up good regulations as it has for years. “The reason the oil and gas industry in Alberta is not like it is in the rest of the world is because we have had codes, morals and ethics for over 100 years here in the oilpatch in Canada. We have good regulations. We worked hard at regulations.”

CITO Energy Law LLP is counsel to numerous companies, including helium, as well as petroleum and natural gas operators, who are concerned for the transparency of the provincial process around, for example, Alberta Energy’s disposition of pore-space tenure rights for carbon capture and storage (CCS) purposes where those grants could conflict with existing rights holders, according to the law firm’s cofounder Tony Cioni.

While the province has indicated it will not strictly follow established regulations for dispositions under the Mines and Minerals Act, he told the DOB in an email response, it will instead adopt an ad-hoc disposition model pursuant to its discretionary authority — pursuant to the act.

“A consequence of this could be that existing rights may not be addressed until after Alberta Energy grants legally enforceable property rights to CCS proponents. At that point (if it occurs), CCS projects may snowball and the AER’s discretion to weigh competing interests in the approval of CCS schemes may be diminished.”

If the province does not sort out the uncertainty regarding consultation and competing interests, Cioni said, then impacted third parties might resort to the courts, suffer share-value losses, or lose project funding. Further, he noted, determining what uses of common pore-space should be permitted, and in what priority, is important for companies.

For example, suggested Cioni, if a freehold leaseholder wants to use that property for a particular purpose, then the leaseholder likely would not appreciate Alberta Energy issuing tenure rights to an adjacent landowner to use a common reservoir for another purpose that diminishes or possibly negates what the leaseholder aimed to accomplish. He added that the province needs to sort out these types of uncertainties.

“Would this be tantamount to expropriation? Would this encourage a spate of lawsuits by freehold lessees against freehold lessors, and in turn freehold lessors against the Crown?”

Although not necessarily the view of CITO, Cioni said, the law firm is aware of concerns around Alberta Energy granting a few large companies an effective monopoly concession for a limited number of CCS projects without public process. “A select few upstreamers or midstreamers may then have the opportunity to extract excessive economic tolls as common carriers from third parties seeking to access CO2 hubs.”

He added: “Similarly, as holders of deep rights for CCS, those upstreamers or midstreamers may then have prior access to those same deep rights to pursue other opportunities (e.g. competing uses of deep rights) such as helium, lithium brine, acid water injection, wastewater injection, et cetera.”

Johnson recommends…

Alberta’s government should “do the geological work, and figure out what zones are good for sequestration, and what zones they can set aside, and then leave the rest of it alone,” suggested Johnson. With multiple players within the helium, lithium, petroleum and geothermal realms potentially able to capture resources, he noted, growth opportunities in terms of the service sector jobs and royalties, as examples, would be significant.

“There’s an opportunity here for Alberta to come to the table and recognize the value of the helium industry, and recognize the value of the lithium industry, and recognize the value of the geothermal industry, and provide space for them with the framework as a whole.”

He added: “If there is a concern I have that sits in the back of my mind, it’s that [the province] is planning to give away large tracts around these hubs. And if they give away these mineral rights for all zones completely, then I’d have to wonder, since they’re not going to sequester in all zones equally.”

If a “whole column” is designated for CO2 injection, and some of the zones therein are suitable for helium, then injecting into zones takes away from the value of the resource for the whole province, according to Johnson. “When considering those zones, the government should take a look and see if there’s other value for those zones for either lithium or helium, or for people who do geothermal and need to get to certain depths to do that.”

Further issues within this land mass would include the various freehold landowners, said Johnson. As government looks to sequester CO2 adjacent to freehold lands, he noted, there is the potential for trespass — another issue in terms of sequestering and injecting large volumes into the ground is it creates challenges from a drilling perspective.

“As it is now, we work with the people who are injecting around us, asking them to stop for a few days while we drill through the zone and get access to the lower zones. As much as it’s a challenge, I wouldn’t want it to happen that townships are blocked off from drilling through a sequestration zone, and make access to the lower zones inaccessible.”

Finally, Johnson is concerned there might be a “land grab” associated with big companies injecting CO2 having an opportunity to attain large tracts of lands of mineral rights in the future, using them for the sequestration part, and then discovering deeper production opportunities later. “In the meantime, everyone else has been kept away from the party because the lands have been granted to those individual party holder purchasers.”

He added: “I’d like an opportunity, at least, before the government gives away large tracts of land, that there be some consultation and discussion about all the sorts of issues, those five or six issues, around the helium space, and how they pertain to lithium and the geothermal space as well.”

Word from the regulator

When the Alberta Energy Regulator (AER) reviews CCUS applications for CO2 injection and storage into geological formations, the criteria considered includes containment, storage capacity, pressures, injectivity, resource conservation and equity within the area of influence, according to Kate Bowering, public affairs advisory, strategic planning and advice. The regulator reviews applications to ensure requirements and government policy are met.

For example, she said, operators of enhanced oil recovery (EOR) projects wanting to incorporate CCUS into the existing production processes must apply for the regulator to amend existing approvals under Directive 065 resources applications for oil and gas reservoirs. “As part of the Directive 065 application for a scheme approval, we conduct a detailed geology and engineering review of the impacted area, assess injection wells, and offset wells.”

She added: “Scheme operators must also demonstrate to the AER that resources are recovered in a manner that optimizes recovery of hydrocarbons while ensuring the injected fluids are contained.”

To date, noted Bowering, the AER has approved one Directive 065 application for Alberta’s Carbon Trunk Line, which captures industrial emissions and delivers the CO2 to oil and gas reservoirs for use in EOR and for permanent storage. If an impacted party believes it may be directly and adversely impacted by a proposed project, then that party can submit a statement of concern with the regulator.

“We review and consider all statements of concern when making decisions on applications,” she told the DOB in an email response. “Our application process for CO2 injection at EOR sites is available on our website.”

Alberta’s new industries

Sectors such as helium have grown out of the so-called ‘retrofit’ of Alberta’s petroleum industry, suggested Johnson, which is important to small hydrocarbon producers, the service sector, as well as the province overall, considering that everyone who must access the subsurface must do so through the drill bit.

“The drill bit turns into drilling rigs, it turns into pipeline companies, it turns into testing companies, it turns into people who deal with pressure vessels, it turns into mud companies, and all those companies turn into jobs — jobs this province has provided to its citizens for decades now.”

He added: “We’re skilled and talented at the subsurface opportunities out there, and this is a big opportunity. And so, if the government really is on board with all these things, then I’d hope they’d take a moment to think about those and the [resource] industries before they block off large sectors of the land from those companies having access to the mineral rights in those areas, and make allowance for them to be able to access mineral rights in those areas.”

In terms of the above-mentioned lands Imperial Helium had hoped to develop, according to Johnson, the province had said it could be made available at the minister’s discretion, but a determination could not be made until a geologic study came out across the area, the timing for which was not conducive to the related land sale.

“And so, I was in the place where I was buying the land with my hands sort of over my eyes, hoping the minister would give me discretion, which I clearly couldn’t do. I can’t do that.”

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.