Federal regulations to reduce methane emissions in the oil and gas sector

Backgrounder

Methane is the main component of the natural gas used to heat homes and power factories. It is also a potent greenhouse gas responsible for approximately 25 percent of the human-caused global warming today. Methane packs more than 70 times the warming power of carbon dioxide over a 20-year period.

Methane is released directly into the atmosphere during oil and gas exploration and production. These releases can occur during normal operation of equipment and unintentional leaks, or they may be intentional releases. Releases happen because of a lack of infrastructure or for safety reasons. Methane releases are characterized as fugitives if they are unintentional or venting if they are deliberate.

To comply with Canada’s methane regulations, industry will regularly check and fix gas leaks and will adopt practices that prevent gas from being intentionally vented into the air during oil and gas production.

Greenhouse gas emission reductions

Canada’s oil and gas sector will now be subject to new regulations that are designed to ensure that the sector’s methane emissions are reduced by 40 to 45 percent by 2025, relative to 2012 emissions. That’s equivalent to taking five million cars off the road for a year.

Between 2018 and 2035, cumulative greenhouse gas emission reductions resulting from federal methane regulations are estimated at approximately 232 million tonnes of carbon dioxide equivalent.

Cutting methane emissions helps reduce the global economic costs associated with climate change. Taking action on methane emissions is one of the lowest-cost actions Canada can take to reduce greenhouse gases.

Economic impact

The Government recognizes the challenging market environment for the oil and gas sector. It is taking a number of steps in developing these regulations to minimize costs, introduce additional flexibilities, and encourage innovation.

Costs to industry from these regulations include expenditures in new equipment, leak detection and repairs, as well as administrative costs. However, conserved natural gas resulting from the regulations could generate up to $1 billion in revenue, which would help offset industry’s compliance costs. The amount of conserved natural gas these regulations help to generate is almost the same as the total amount used by all of the homes in the Province of Saskatchewan, in a given year.

These regulations will also open up new markets for clean technology in the oil and gas sector. There are already more than 170 Canadian companies providing clean-technology services. Companies will hire more workers as these regulations are phased in.

The regulations will begin to require specific industry compliance action in January 2020. They will be fully implemented by the end of 2023. By phasing in the implementation of the regulations, Canada is allowing industry lead time to manage required changes to incorporate methane-emission controls into the design of new oil and gas facilities, while giving companies time to upgrade existing facilities.

Consultations

The Government of Canada has carried out hundreds of hours of consultations with provinces, territories, industry, environmental non-government organizations, and Indigenous Peoples, in developing the methane regulations.

Following the Canada Gazette, Part I, comment period in 2017, the federal government made targeted changes to address specific technical compliance challenges brought forward by stakeholders. The general structure and focus of the regulations remain the same.

Equivalency agreements

The federal methane regulations provide a backstop to ensure that Canada’s objective of a 40 to 45 percent emission reduction from oil and gas will be achieved.

Provinces and territories can put in place methane regulations that make sense given their circumstances, provided they can clearly demonstrate emission reductions equivalent to the federal measures. Environment and Climate Change Canada is open to discussing the establishment of equivalency agreements, under the Canadian Environmental Protection Act, 1999, with interested provinces.

While considering a provincial regulatory approach, the Government of Canada will

  • validate data reported to provinces;
  • review and assess provincial procedures for emission quantification; and
  • review and assess provincial requirements for measurement, monitoring, and reporting consistent with specific provincial regulatory approaches.

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