Second report of the National Pollutant Release Inventory working group 2001 to 2002: chapter 3
3. Upstream Oil and Gas Exemption
3.1.1 Background
The recent addition of CACs to the NPRI stimulated the interest in more comprehensive coverage of emissions from the UOG industry. As a step in this direction, NPRI staff had suggested the option of removing the existing reporting exemption for emissions from activities related to the drilling and operating of oil and gas wells, beginning in the 2002 reporting year. It was decided, however, that more time was required to research and analyse various approaches to achieving an acceptable level of coverage from the UOG industry. In September of 2001, an UOG SG of the WG was formed, to assist EC in developing the background information necessary for the task of determining options, to identify and explore preferred options, and to provide a report back to the WG.
3.1.2 Context
The following points are important context for considering options:
- The UOG industry consists of numerous types of operations that are potential sources of NPRI-listed substances (e.g., well drilling and operation, gathering systems, batteries, processing plants). Taken together, these operations comprise well over one hundred thousand facilities. Many of these are small facilities are unmanned, or have few employees.
- Combustion-type processes are a major source of emissions of most CAC and some other NPRI substances, as well as some GHGs. Process and fugitive emissions are more significant for SO2 (e.g., emissions from sour gas processing plants), and for some non-CAC NPRI substances.
- A report commissioned by the UOG SG as a basis for better understanding the industry and its emissions confirmed that NPRI reporting from the UOG industry "only captures a small portion of total emissions of many of the NPRI-listed substances emitted by the UOG industry" (the Clearstone Report, p.ii).
- Notwithstanding the existing NPRI reporting exemption for a portion of the UOG industry (the drilling and operating of oil and gas wells), the most important factor affecting coverage in the UOG industry is the NPRI criterion which limits the requirement to report to facilities that have at least 20,000 employee-hours per year. (Currently, there are a limited number of NPRI reportable activities, in other sectors, to which the employee threshold does not apply.) Since many UOG facilities -- including oil and gas wells -- would not meet the employee criterion, removing the reporting exemption for oil and gas wells might, on its own, have little effect on reporting. In addition, data provided in the Clearstone report indicates that, relatively speaking, other types of facilities in the gathering segment are much more significant sources of emissions than are wells.
- One area where the 20,000 hour employee threshold does not apply is the reporting of CAC emissions from stationary external-combustion equipment burning certain types of fuel, with a capacity greater than 10 million BTU/hr. (In other words, if the substance thresholds are met, CAC emissions from this equipment must be reported, regardless of number of employees.) EC specifically allowed the UOG industry to retain the employee threshold for all reporting (including that related to stationary external-combustion equipment) for the 2002 reporting year, in order to allow for the current process of exploring more effective approaches to obtaining reasonable coverage from this industry. (It should be noted that the decision to allow the UOG industry to retain the employee thresholds for 2002 was not supported by the ENGO members of the WG). The concern is that if this requirement is applied to the industry, given the number of facilities involved, there could be substantial due diligence, reporting and data-handling burdens.
- There are provincial/territorial production accounting systems currently in place for the UOG industry across Canada. Research has revealed that there is reasonable consistency between jurisdictions in terms of how production-related data is reported, and how accessible it is. It is possible that some aspects of these production accounting systems could provide a basis for better coverage of emissions from the UOG industry. For example, the NPRI reporting system could parallel the production data reporting structure; and/or the production data could be used as a basis for estimating area-source emissions.
3.1.3 Additional Considerations
Work on this issue underwent a number of iterations. At the May 30th-31st meeting of the WG, the UOG SG presented three options to the WG. Each involved some type of aggregation for reporting purposes, though the rationale for aggregation, and the associated approach, differed for each option.
At the May meeting, WG members agreed that these three "options" would be better viewed as general scenarios or approaches, and that a final recommendation might actually blend elements of each. In addition, industry members of the WG asked the SG to consider the following element that could be integrated into any option:
Wells, given that they are small emitters on an individual and a collective basis, can be treated as an area source, with emissions calculated via the application of emissions factors to the production-related data already provided to the provincial utility boards.
It was suggested that with this element in place, the SG could focus on preferred approaches for NPRI reporting from facilities associated with the gathering versus the production segment of UOG. Some industry representatives on the WG indicated that this approach would be more consistent with the current division between what is directly reported to the NPRI, and what is estimated by EC on an area-source basis. This would go some way towards addressing the concern that aggregation of UOG facilities could set a precedent of aggregating to trigger reporting from small facilities that would normally be treated as area sources (and whose emissions would therefore be estimated by EC, as opposed to reported to the NPRI).
At the same time, the ENGO members of the WG held the position that removal of the current reporting exemption for oil and gas wells is an essential step. They also reiterated some basic principles that they feel are key to an acceptable approach to reporting from the UOG industry, which include:
- The requirement that facilities that meet the NPRI threshold be required to report individually (i.e., not as part of any aggregated reporting unit);
- The need for an appropriate degree of aggregation to capture releases from the large number of small facilities that are individually below threshold;
- The need for regional specificity (e.g., aggregating by type of facility on a provincial basis is not acceptable); and
- The need to capture significant portions of typical emissions to all media.
The WG as a whole also agreed that in determining how to achieve better coverage of UOG emissions, a guiding principle is that the UOG industry should report consistently in relation to other sectors reporting to the NPRI.
3.2 Options
Based on the direction received at the May meeting, and on additional research and discussion, the following options were developed by a technical committee of the UOG SG, with preliminary analysis of the options subsequently undertaken by EC. It is important to note that any of these options can be paired with removal of the existing activity exemption for "drilling and operating of wells to obtain oil and gas products".
Option 1: Subject all UOG industry facilities (other than drilling and operation of oil and gas wells) to the full set of NPRI reporting requirements, including the requirement to report CAC from stationary combustion equipment regardless of number of employees.
As previously noted, for the 2002 reporting year EC has allowed the 10-employee threshold to apply for the UOG industry in relation to CAC reporting from stationary external-combustion equipment. This allowance is unique to the UOG industry. Option 1 would require UOG industry facilities, excluding drilling and operating oil and gas wells, to assess and report based on the full set of NPRI requirements that are in place for other source sectors.
Based on the information provided in the Clearstone report and EC’s preliminary impact analysis, Table 3.1 provides an estimate of the number of UOG facilities that may be required to report for CAC to the NPRI under Option 1. It is important to note that the source populations for some "UOG Facility Types" in the Clearstone report were not available due to a lack of information, and the analysis is therefore incomplete at this time. For example, the source population for fuel combustion operations related to gas gathering systems were not provided in this analysis. The UOG Subgroup will continue to research and obtain more information in their efforts to complete the impact analysis.
N.B. This impact analysis remains incomplete, and facility type reportable emissions are related to combustion related processes only
Option 2: Option 1, plus removal of the employee threshold for reporting of CAC from all UOG sources (not just stationary combustion equipment).
Option 2 would require UOG industry facilities to assess and report based on the full set of NPRI requirements that are in place for other source sectors; but for CAC, to report when reporting thresholds are reached, regardless of number of employees. The rationale for removing the employee threshold for CAC reporting is that some smaller UOG facilities (such as sweet single-well batteries from convention crude oil production) may be large emitters of VOCs. (However, this situation may not be limited solely to the UOG industry.) Based on information provided from the Clearstone report and EC’s preliminary impact analysis, it is estimated that many more UOG industry facilities would be required to report under Option 2 than report at present. Based on information available to date, Table 3.2 provides an estimate of the number of UOG facilities that may be required to report for CAC. As noted above, the source population for some "UOG Facility Types" in the Clearstone report were not available due to a lack of information.
N.B. This impact analysis remains incomplete; and the facility type reportable pollutants are related to both combustion and non-combustion processes. For example, VOC emissions from batteries may be fugitive-related rather than combustion-related.
Option 3: Option 2 plus complete removal of employee threshold.
Option 2 would require UOG industry facilities to assess and report based on the full set of NPRI requirements that are in place for other source sectors; but to report releases for all substances when reporting thresholds are reached, regardless of the number of employees. In other words, it would go beyond Option 2 in that all UOG facilities (regardless of number of employees) that meet the standard 10-tonne MPO thresholds for NPRI-listed substances listed at this threshold would have to report releases and transfers (e.g. hydrogen sulphide in a gas or oil stream); and similarly for facilities meeting ATHs for those substances listed at an ATH -- including PAHs, dioxins, furans, and mercury.
Additional analysis with respect to the level of coverage that can be anticipated with each of the above options will be developed over the next two months and provided to the WG prior to its September meeting.
3.3.1 Status with Respect to a Recommended Option
Given that options are still being refined, and that additional analysis is pending, definitive views on the options have not yet emerged. Work will continue over the summer, in order to lay the ground for closure on this issue at the September meeting.
3.3.2 Reporting Structure
While the WG agreed that reporting from the UOG industry should be consistent with current NPRI requirements, there was consensus that some adaptation of the reporting structure, to take account of the unique conditions in the UOG industry, is reasonable. To that end, the WG recommends the following reporting elements, regardless of the option adopted:
Reporting by the owner or operator
Reporting responsibility should logically relate to the UOG production-reporting systems already in place at the provincial/territorial level.
Multi-facility reporting
Operators should be allowed to file multi-facility reports that detail individual facility emissions that meet NPRI reporting thresholds. This will allow for simplification of the reporting form.
3.4 Additional Issues and Ongoing Work Requirements Related to UOG
As noted, research will continue over the summer to clarify the coverage (proportions of emissions and of facilities, and number of reporters) that would be achieved with the different options. This research will be available for consideration by the WG at its September meeting.
EC will continue to research the implications of the "manufactured, processed and otherwise used" threshold for the UOG industry in cases where there may be reporting issues (e.g., undue reporting burden for the quantities released). Examples include: benzene in a gas stream that is transported to a dehydrator; and hydrogen sulphide in a sour gas stream.
The UOG technical committee (comprised of members of the UOG SG) will continue to meet to review, analyze and develop a reporting option for the UOG industry, in consultation with their respective members. Progress reports will be disseminated to the UOG SG. The SG will meet, if necessary, in early September to prepare a final report for consideration by the full WG at its September 23rd-24th meeting.
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