New regulator in town – more than a name change

On October 27, Bill 37, the Energy Statutes Amendment Act, 2022 had its first reading in the British Columbia legislature. If enacted in its current form, Bill 37 would result in major changes to the British Columbia Oil and Gas Activities Act (OGAA) and Petroleum and Natural Gas Act (PNGA), including:

• Renaming and restructuring the BC Oil and Gas Commission as the “British Columbia Energy Regulator” (Regulator), akin to the names of the analogous Alberta and federal regulators, and expanding its jurisdiction to include hydrogen production;
• Expanding and clarifying the regulatory regime applicable to carbon capture and storage (CCS); and
• Expanding liability for orphan sites to a broader pool of responsible persons, and providing the Regulator with new powers and tools to ensure orphaned sites are addressed.

Each of these proposed changes is described in greater detail below.

The new British Columbia Energy Regulator would also be responsible for regulating hydrogen production

Bill 37 proposes to rename the OGAA as the “Energy Resource Activities Act” and, correspondingly, to rename the BC Oil and Gas Commission as the “British Columbia Energy Regulator.” Along with this change in name for the commission, the board of directors would increase in size from three to a range of five to seven, one of whom would be required to be Indigenous. The statutory purpose of the Regulator under the Act would also be updated to explicitly reference support for reconciliation with Indigenous peoples and the transition to low-carbon energy.

Shifting from a focus on petroleum and natural gas, Bill 37 would add a new definition of “energy resource” to the OGAA, which would include hydrogen and hydrogen-related transportation mediums, as well as a corresponding new definition of “energy storage activity.” In the BC government’s recent news release relating to Bill 37, it asserts that Bill 37, as proposed, “provides certainty to the hydrogen companies and potential investors and signals that B.C. is ready to support the industry’s development.”

An expanded regulatory regime for carbon capture and storage would provide the government with new rights

The new definition of “energy storage activity” that Bill 37 would introduce into the OGAA specifically includes the “exploration for or development or use of a storage reservoir… for the purposes of storing or disposing of carbon dioxide…” This clarifies the application of the OGAA and PNGA regulatory regimes to CCS. 

In particular, including CCS activities as an “energy storage activity” under the OGAA would result in the application of the surface rights regulatory framework under the PNGA applying to the development of a storage reservoir for CCS (i.e., company will need a right of entry to go onto private land and the land owner will receive compensation for loss or damage to the surface of its land, and rent for the use of the land).

In addition, Bill 37 would:

• Establish (subject to regulation) that the PNGA provisions relating to storage reservoirs do not apply to certain lands in which Indigenous groups hold an interest (including treaty lands of a treaty first nation, Nisga’a lands, and lands over which Canadian courts have found that the Tsilhqot’in Nation has Aboriginal title); and
• Provide the government with the right to explore for, access, develop and use storage reservoirs for the purpose of storing or disposing of:
  • carbon dioxide, 
  • natural gas, 
  • water produced in relation to the production of petroleum or natural gas or other substances associated with petroleum or natural gas, or 
  • other substances to be prescribed by regulation, 

without compensation being payable. This is a major change that could impact investor certainty in CCS in British Columbia (given the risk that the provincial government could functionally expropriate private rights by developing and using a storage reservoir subject to an existing interest – without compensation). 

Liability for orphan sites would be expanded, and the Regulator would have new powers and tools

Bill 37 proposes to expand liability for orphan sites beyond the permit holder to include additional “responsible persons,” including a person who has a legal or beneficial interest in the rights, production or profits related to the permit, or the location for the permit. The Regulator will also have the jurisdiction to extend responsibility for the costs associated with orphan sites to the director or officer of a corporate permit holder or responsible person. This is a notable change, as it provides for broader potential liability than directors and officers have under, for instance, the British Columbia Environmental Management Act. 

Along with this expanded ambit of liability, Bill 37 would permit the Regulator to establish a register of responsible persons, and require the Regulator to establish a list of orphan sites.

The Regulator could also make orders against and impose liability on a director or officer of a corporate permit holder or responsible person. In addition, Bill 37 would empower the Regulator to:

• Transfer a permit in relation to an orphan site to a responsible person for an orphan site (or a director or officer of a corporate permit holder or responsible person), even without the transferee’s consent;
• Order a responsible person for an orphan site (or a director or officer of a corporate permit holder or responsible person) to carry out work in relation to a permit, or reimburse the government for work completed in relation to the permit; and
• Dispose of property abandoned at an orphan site, and pay any money received in relation to the disposition into the Orphan Site Reclamation Fund.