Methane Reduction Requirements: What You Should Know

Federal Regulations

On April 26th, 2018, the Government of Canada (GoC) released the final Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) (the Federal Regulations). These Regulations introduce operating and maintenance standards for the upstream oil and gas industry. They ensure that fugitive or venting emissions of methane are reduced when there is a higher potential to emit.

The Federal Regulations cover natural gas production and processing, conventional oil production, transmission, and most oil sands emissions.

Putting Regulations Into Perspective: The Bottom Line

According to the GoC, the Regulations will decrease carbon dioxide equivalent (CO2e) emissions by approximately 232 million tonnes between 2018 and 2035. Using the Social Cost of Methane and the Social Cost of Carbon to estimate the economic value of avoided climate change damages at the global level, these reductions are valued at $11.6 billion.

The GoC estimates these reductions will come at a cost the upstream oil and gas industry of approximately $3.9B, with a front end loaded economic impact of 2.4B between 2018 to 2025.

However, it’s expected these compliance costs will be offset, in part, by the recovery of 351 petajoules of natural gas. This offset in the use of natural gas is estimated to be worth a market value of $1 billion.

Based on the GoC’s regulatory impact analysis,the regulations are expected to result in net benefits of $8.9 billion.

Alberta: Directive 060 and Directive 017

Two days before the release of the Federal Regulations, the Alberta Energy Regulator (AER) published draft Directive 060 (D60) and draft Directive 017 (D17). These two regulations propose to introduce new stringent methane emission requirements on Alberta’s upstream oil and gas industry.

According to the AER, the requirements address the primary sources of methane emissions from the industry: fugitive emissions and venting, which includes emissions from compressors, pneumatic devices, and glycol dehydrators. The requirements also focus on improved measurement, monitoring, and reporting of methane emissions.

Sector activities covered under AER regulations include upstream oil and gas facilities; however, oil sands mining, NEB regulated, midstream, downstream and pipeline facilities are exempted.

For facilities in the Peace River area, the draft D60 requirements supplement those in Directive 084 (D84), with a few exceptions.

It is expected the Directives will be finalized by the fall of 2018.

What This Means For Oil & Gas Companies: The Alberta Difference

Both governments are reacting to Canada’s commitment to reduce methane emissions by imposing equipment specific emission limits, and increased record keeping and reporting requirements as early as January 1, 2019.

All Canadian oil and gas companies should prepare for the Federal requirements; however, Alberta-based organizations are faced with a unique challenge. The regulations and their application are not as clear.

Which compliance obligations apply?

The Canadian Environmental Protection Act (CEPA) allows for flexibility via equivalency and other collaborative agreements to be negotiated with individual provinces and territories, as long as CEPA minimum requirements are met by the Provincial regulations.

While the Government of Alberta (GoA) intends to negotiate equivalency with the Federal Government, no equivalency decision on Alberta and Federal methane regulations has been made to date.

Currently, there are significant gaps in expert opinions.

While GoA officials and representatives stand behind their plans stating Federal reduction targets will be accomplished, initial reactions from representatives of the GoC seem to indicate they are not as confident in the province’s legislation. Further, a recent analysis performed by a coalition of environmental groups has stated Alberta’s proposed methane emission regulations will achieve only half of the reductions the province is aiming for.

Clairifi recommends that Alberta based organizations understand and prepare for both regulatory approaches.

How?

Contact us for a demonstration of how the Clairifi platform is making it easy for users to understand how methane reduction requirements apply.

Methane Reduction: Key Targets

Generally speaking, both approaches target:

• Facility Venting Limits
• Pneumatic Devices
• Compressors
• Glycol Dehydrators, and
• Leak Detection and Repair (LDAR) / Fugitive Emissions Management (FEM).