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Jumping through hoops

The Ontario geothermal industry is still grappling with regulation 98/12


January 8, 2015
By Julie Fitz-Gerald

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It’s been over two years since Ontario regulation 98/12 came into effect, changing the province’s geothermal industry forever. The hastily prepared regulation was in response to an Oakville contractor striking a significant amount of pressurized natural gas while drilling a borehole for a vertical geothermal heating system back in April 2012.

It’s been over two years since Ontario regulation 98/12 came into effect, changing the province’s geothermal industry forever. The hastily prepared regulation was in response to an Oakville contractor striking a significant amount of pressurized natural gas while drilling a borehole for a vertical geothermal heating system back in April 2012.

The industry came to a standstill as the government quickly drew up new rules for geothermal drilling. Within the new regulation was the requirement for a 45-day minimum posting in order to obtain an environmental compliance approval (ECA), further immobilizing the industry. Today, two and a half years since the regulation came into effect, Ontario’s geothermal drillers are still struggling to adjust to the new rules.

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Stanley Reitsma, CEO and co-owner of GeoSource Energy Inc. and board member of the Ontario Geothermal Association (OGA), says some companies are finding it tough to stay within the guidelines and their frustration is evident. “We were at the OGA conference last week and clearly there is still some anger and aggravation within the industry about the regulation. It’s clear that various contractors are having a lot of trouble with it. I do know there have been some fines levied and some suspensions pending relating to the reg, so there’s no doubt it’s causing some problems within the competition. Our experience has been a little different than that. We’ve been able to comply and we’ve learned to work within the regulation and the expectations, but it’s not easy. It’s a bit of a challenge,” Reitsma explains.

According to Denis Tanguay, president and CEO of the Canadian GeoExchange Coalition, the landscape of Ontario’s geothermal industry has been drastically altered. “My estimate is that before the regulation there were about 50 drillers doing geothermal work in Ontario. I looked at the registry this week and I saw 19 companies, officially. I say ‘officially’ because the regulation is only as good as the government has the capacity and willingness to enforce the regulation, and in this case there are some very prominent drillers well known to the MOE (Ministry of the Environment) who have been drilling for at least a year without a permit. So what’s the point of shutting down an industry if a large driller, well known to a lot of people, is drilling without an ECA?”

Ontario regulation 98/12 requires all geothermal drillers to obtain an ECA, which involves hiring a licensed engineer or geoscientist to prepare a work plan, among other things. Fortunately, the Ontario MOE has made a provision for a multi-site ECA, allowing the holder to submit one application for projects in various locations. However, the cost of hiring a geoscientist or engineer to draw up a work plan can be steep; too steep for many small geothermal companies. “Some small companies don’t want to invest that money for five to 10 jobs a year, so some have decided not to do geo. We’re trying to promote the geo industry and this doesn’t send a good signal. The companies that are left are much bigger and sometimes they don’t want to do small residential jobs. The ones that used to do small residential jobs are the ones that we see not doing work anymore because it’s probably too expensive for them. They’re probably focusing on water well drilling or geotechnical now,” explains Tanguay.

While many companies dabbled in both geothermal and water well drilling before the new rules were put in place, the regulation has effectively forced them to choose which industry they want to work in. According to Tanguay, it has been the one silver lining of the regulation. “It’s made a business case for geothermal drilling as an industry for itself, rather than being a secondary activity for water well drillers, for example. What we heard for many years was that geo drilling should be done by water well drillers, but now they are geothermal drillers. It’s clarified the situation of who’s allowed to drill a borehole. When you look at the situation, for the most part they are not water well drillers, so I think it sends a positive message to the geo industry and this may have an impact as well for outside of Ontario.”

Reitsma agrees the new rules have highlighted the differences between the geothermal and water well industries. “If you’re not a geothermal driller full time, maybe you shouldn’t be in it. So, [fewer companies] may not be a bad thing. The two are different; they’re different enough that you can’t be an expert at both things. Those who have gone through the ECA have made the investment [in geothermal],” Reitsma notes.

However, reg 98/12 has left the geothermal industry feeling unfairly targeted by the government and many still question why other industries that drill, such as water well or construction, are not held to the same standards.

“Why would the geo industry get this regulation when other drilling types in the province are exempt from this type of compliance? For example, there are about 50,000 water well drills in Ontario and when you look at regulation 903 for water well drilling, the only obligation for drillers is to inform the authorities after the fact and only if they hit gas pockets. For geo, they have to apply before the act of drilling just in case they hit gas, but it’s the same equipment, sometimes doing boreholes at the same depth. So why reg 98, if water well drilling does not have to respect the same rules? It’s contributing to imbalances in the industry. It sends the wrong message,” Tanguay explains.

Reitsma agrees, but he believes other drilling industries will have to follow similar rules in the years to come. “It’s frustrating that we feel we’re being targeted and it’s not a fair regulation in that regard, but what we’re seeing and what we’re quite sure will happen is that the water well industry, for example, and construction drilling may also have to be under similar regulations in the future. That’s what we understand from the MOE,” says Reitsma.

Regardless of what the future holds, Ontario’s geothermal industry must work within the parameters of reg 98/12. According to Reitsma, GeoSource Energy was the first company to obtain its ECA in August 2012. This year alone, MOE inspectors have visited three to four different GeoSource Energy job sites to ensure protocols are being met. “They’re taking it very seriously from my point of view. We very carefully follow it to the ‘T’ as much as we can. It’s hard to be 100 per cent, but we follow the rules as much as we can. To be honest, if you’re doing everything you’re supposed to be doing in your work plan, the following of it is not terrible. I think the regulation itself and most of the safety precautions are good things. They can be met and they are reasonably workable.”

However, Reitsma concedes that if some geothermal drillers are not notifying the province of upcoming projects, it’s possible to fly under the MOE’s radar, albeit operating illegally outside of reg 98/12. According to Tanguay, some companies are skirting the regulation by claiming to be drilling for water well. “We know there are companies drilling without authorization and I’m pretty sure the government knows that as well. It was almost deemed at some point that the government was afraid of shutting down the operation of one driller because he was well known and politically it was not a good thing to do,” says Tanguay. “What I do hope is that the serious companies will have an environment into which they can keep working in a professional manner and that companies that are bending the rules will go out of business for good. But I don’t see that happening right now; quite the contrary. I still think we have an unhealthy industry at this point and I don’t see things improving.”

Reitsma believes that any geothermal companies operating outside of the regulation will have a steep price to pay if they are discovered by the MOE. “If they get caught doing that, the repercussions are serious enough,” he says.

For better enforcement of the regulation, Tanguay offers Quebec’s new water intake regulation that covers geothermal drilling as an example. In this case, he says, drillers must notify the municipality, bringing accountability one step closer to the drilling company. “It’s softer, but it increases the requirement to file reports and municipalities are at the obligation to enforce the regulation, so the enforcer is closer to the driller. We don’t see that in Ontario. When it’s the provincial government enforcing, they’re not as close.”

Another big issue identified by Reitsma is the MOE’s response to small shows of gas, which he says has often been over the top. “At what stage do we report and when don’t we? There are certain cases where gas is common; it’s not that risky unless we can’t control it. The MOE may come in and halt work, force you to abandon immediately, or even suggest that you didn’t make notification quick enough and therefore you’re in violation…. Then suddenly drillers are being threatened with fines, brought into court and may even have their ECA revoked or suspended. We’re scared to call because of their reaction. It feels a little draconian sometimes.”

As in any healthy relationship, two-way communication is key and that’s exactly what’s needed to smooth relations between the province’s MOE and its geothermal drillers. For Reitsma, working with the MOE to find common ground is crucial.

“We have a good relationship with them. I don’t think that all drillers do and I don’t think we have a consensus among the drilling industry of whether [reg 98/12] is a good or bad thing. Those who are getting suspensions and fines aren’t happy, but for us, we have the choice and we’re going to meet the regulation. Some are fighting it and some are living with it. It’s here to stay and we’re working with them to meet the requirements. I can’t imagine it will be rescinded. Never say never, but I do think it will be amended to cover other drilling industries.”


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