Draft guidance for best-in-class GHG emissions performance by oil and gas projects

Official title: Draft guidance for the submission of information demonstrating best-in-class GHG emissions performance by oil and gas projects undergoing a federal impact assessment

Executive summary

On April 6, 2022, the Minister of Environment and Climate Change announced that new oil and gas projects that are subject to a federal impact assessment under the Impact Assessment Act (IAA) should have best-in-class greenhouse gas (GHG) emissions performance throughout their lifetime. While there can be many aspects to the determination of high-performing oil and gas projects, this guidance document focuses only on GHG emissions performance. For the purposes of this guide, best-in-class is the lowest level of GHG emissions intensity of oil and gas projects globally that are conducting the same activity as the proposed project: exploration, offshore production, onshore production, pipelines, oil refineries and heavy oil upgraders, natural gas processing, and liquefied natural gas (LNG) projects.

The International Energy Agency's Net-Zero Emissions by 2050 Scenario sees continued oil and gas use globally, but with demand declining significantly in the coming decades. In this context, demonstrating best-in-class emissions performance will help minimize Canadian GHG emissions while supporting the competitiveness of Canada's oil and gas industry, positioning it as a reliable energy producer in a low-carbon world.

This draft guidance outlines the information proponents of oil and gas projects undergoing a federal impact assessment should provide to demonstrate best-in-class GHG emissions performance. It also provides guidance to the Impact Assessment Agency of Canada, a review panel or an integrated review panel about assessing oil and gas projects against best-in-class considerations.

The approach is a refinement of the Strategic Assessment of Climate Change (SACC) and the Draft Technical Guide Related to the Strategic Assessment of Climate Change: Guidance on Quantification of Net GHG Emissions, Impact on Carbon Sinks, Mitigation Measures, Net-Zero Plan and Upstream GHG Assessment. It tailors the SACC's Best Available Technologies/Best Environmental Practices (BAT/BEP) Determination process to oil and gas projects, with a particular focus on advanced and emerging technologies and net-zero planning considerations.

The draft guidance outlines how, through the Impact Statement, a project proponent should:

The guidance does not specify which technologies or practices should be used. Nor does it prescribe emissions or emissions intensity thresholds or targets.

Environment and Climate Change Canada (ECCC) welcomes comments on this draft guidance until December 3, 2022. ECCC expects to publish a final version of the guidance in early 2023.

Glossary

Glossary

Note: The following definitions apply for the purposes of this guidance.

Acquired energy GHG emissions
GHG emissions associated with the generation of electricity, heat, steam or cooling purchased or acquired from a third party for the project. Hydrogen use as fuel is also considered as an acquired energy if generated off site by a third party. Refer to section 3.1.1 of the Strategic Assessment of Climate Change and section 2.1.2 of the Draft Technical Guide Related to the Strategic Assessment of Climate Change: Guidance on Quantification of Net GHG Emissions, Impact on Carbon Sinks, Mitigation Measures, Net-Zero Plan and Upstream GHG Assessment for more information.
Avoided domestic GHG emissions
GHG emissions that are reduced or eliminated in Canada as a result of the project.
Best-in-class
the level of GHG emissions performance that is met by leading oil and gas projects globally (including in Canada) within the same activity as the project undergoing a federal impact assessment; namely, exploration, offshore production, onshore production, pipelines, oil refineries including heavy oil upgraders, natural gas processing and liquefied natural gas (LNG) projects. While the GHG emissions performance applies to a project's net GHG emissions, the primary focus of best-in-class is on direct GHG emissions and acquired energy GHG emissions. Offset measures should be considered as a last option only for hard-to-eliminate GHG emissions sources. For clarity, projects may not be able to achieve best-in-class emissions performance at the project’s outset, but proponents can demonstrate the investment and timing to achieve best-in-class emissions performance.
Best Available Technologies / Best Environmental Practices (BAT/BEP)
the most effective technologies, techniques, or practices, including emerging technologies that can be technically and economically feasible for reducing GHG emissions during the lifetime of the project.
CO2 captured and stored (CCS)
CO2 emissions that are generated by the project and permanently stored in a storage project that meets the criteria in Section 2.1.4 of the Draft Technical Guide Related to the Strategic Assessment of Climate Change: Guidance on Quantification of Net GHG Emissions, Impact on Carbon Sinks, Mitigation Measures, Net-Zero Plan and Upstream GHG Assessment. When the CO2 captured is used for other purposes, the practice is referred to as carbon capture, utilization and storage (CCUS).
Designated project (as defined under section 2 of the IAA)
one or more physical activities that (a) are carried out in Canada or on federal lands; and (b) are designated by regulations made under paragraph 109(b) of the IAA or designated in an order made by the Minister under subsection 9(1) of the IAA. It includes any physical activity that is incidental to those physical activities, but it does not include a physical activity designated by regulations made under paragraph 112(1)(a.2) of the IAA.
Direct GHG emissions
GHG emissions generated by activities that are within the defined scope of the project. Refer to section 3.1.1 of the Strategic Assessment of Climate Change and section 2.1.1 of the Draft Technical Guide Related to the Strategic Assessment of Climate Change: Guidance on Quantification of Net GHG Emissions, Impact on Carbon Sinks, Mitigation Measures, Net-Zero Plan and Upstream GHG Assessment for more information.
Emissions intensity
the net GHG emissions per units produced as calculated in section 2.1.5 of the Draft Technical Guide Related to the Strategic Assessment of Climate Change: Guidance on Quantification of Net GHG Emissions, Impact on Carbon Sinks, Mitigation Measures, Net-Zero Plan and Upstream GHG Assessment.
Economically feasible
the costs associated with an action or technology are not so high that their use would render the project uneconomical. In reviewing a proponent's views regarding economic feasibility, the Impact Assessment Agency of Canada (the Agency) or review panel will consider on a case-by-case basis relevant economic criteria and the positive effects associated with the action or technology. Examples of economic criteria include: estimated costs (capital and operating); cost of capital; life cycle cost; revenue; profit; and production forecasts.
GHG emissions performance
a metric based on emissions intensity (for most projects).  For those projects where emissions intensity is not possible or relevant, the absolute GHG emissions (including direct GHG emissions and acquired energy GHG emissions) should be used.
Greenhouse gases (GHG)
gases that possess global warming potential, as identified in Schedule 3 of the Greenhouse Gas Pollution Pricing Act.
Lifecycle regulators
agencies that regulate a project from planning through to project abandonment. These agencies include the Canada Energy Regulator, the Canadian Nuclear Safety Commission, the Canada-Nova Scotia Offshore Petroleum Board, and the Canada-Newfoundland and Labrador Offshore Petroleum Board.
Mitigation measure
section 2 of the IAA defines a mitigation measure as a measure that eliminates, reduces, controls or offsets adverse effects and includes restitution for any damages caused by those effects through replacement, restoration, compensation or any other means. In the context of greenhouse gas emissions, for the purposes of this guidance, mitigation measures are technologies, techniques and practices that are implemented during the construction, operation, and decommissioning phases that reduce a project's net GHG emissions.
Net GHG emissions
the total GHG emissions attributable to the project undergoing federal Impact Assessment, including direct GHG emissions, acquired energy GHG emissions, avoided domestic GHG emissions and offset measures (offset credits, CO2 captured and stored, and corporate-level initiatives) (refer to section 2 of the Draft Technical Guide Related to the Strategic Assessment of Climate Change: Guidance on Quantification of Net GHG Emissions, Impact on Carbon Sinks, Mitigation Measures, Net-Zero Plan and Upstream GHG Assessment for additional details).
Offset credits
credits that are issued by an offset system or program corresponding to GHG emission reductions or removals generated from activities that are additional to what would have occurred in the absence of the offset project (i.e., generated from activities that are, among other criteria outlined in the Strategic Assessment of Climate Change, verifiable, quantifiable, and that go beyond legal requirements and a business-as-usual standard). Each offset credit generated by an offset project represents one tonne of carbon dioxide equivalent (CO2 eq) reduced or removed from the atmosphere. The use of offset credits must align with the criteria in section 3.1.1 of the Strategic Assessment of Climate Change and section 2.1.4.1 of the Draft Technical Guide Related to the Strategic Assessment of Climate Change: Guidance on Quantification of Net GHG Emissions, Impact on Carbon Sinks, Mitigation Measures, Net-Zero Plan and Upstream GHG Assessment.  
Project lifetime
the period encompassing all phases of the project, including construction, operation and decommissioning phases.
Technically feasible
the technology or practice can be implemented under the specific circumstances of the project and is either generally accepted, common, documented and tested or, if relatively new, has a high estimated probability of successful implementation. Examples of criteria to determine technical feasibility include: availability of energy sources; ability to implement in local context; mode of operation; performance metrics; requirement for supporting infrastructure; inherent risks (e.g., safety); use of proven technology; and distance to the main project site.
Acronyms

Acronyms

BAT/BEP
Best Available Technologies / Best Environmental Practices
CCS
CO2 captured and stored
CCUS
Carbon capture, utilization and storage
CEAA 2012
Canadian Environmental Assessment Act, 2012
CO2
Carbon dioxide
CO2 eq
Carbon dioxide equivalent
ECCC
Environment and Climate Change Canada
GHG
Greenhouse gas
IAA
Impact Assessment Act
IAAC
Impact Assessment Agency of Canada
LNG
Liquefied natural gas
Mt
Megatonne (1 million tonnes)
SACC
Strategic Assessment of Climate Change

Introduction and context

Introduction

This guidance document has been developed based on the direction provided by the Minister of Environment and Climate Change on April 6, 2022 that oil and gas projects subject to a federal Impact Assessment under the Impact Assessment Act (IAA) should have best-in-class emissions performance.

While the oil and gas sector has been successful in reducing the emissions intensity of its products, it continues to be Canada's fastest growing and top-emitting sector, accounting for approximately 179 Mt or 27% of the country's total greenhouse gas (GHG) emissions in 2020.Footnote 1  Addressing emissions from the oil and gas sector is critical to the achievement of Canada's climate goals and international commitments, and vital to the sustainability and competitiveness of Canada's energy industry in a low-carbon world. As we move toward a global net-zero economy, it will also be important for Canada to become a supplier of choice for other non-emitting oil and gas products, such as in petrochemicals, waxes, lubricants and clean hydrogen.

Best-in-class is the lowest level of GHG emissions intensity of oil and gas projects globally that are conducting the same activity as the proposed project; namely, exploration, offshore production, onshore production, pipelines, oil refineries including heavy oil upgraders, natural gas processing, and liquefied natural gas (LNG) projects. For example, a proposed oil sands mining project would be compared with the emissions intensity of other onshore oil production projects both in Canada and internationally. Likewise, an offshore oil project would be compared with the emissions intensity of other offshore oil projects.

If emissions performance at the project’s outset cannot be best-in-class, proponents should describe what steps will be taken and when they will lead to best-in-class emissions performance.

This guidance builds on the analysis required by the Strategic Assessment of Climate Change (SACC), published in 2020. The SACC describes the climate change-related information that project proponents need to provide during the federal Impact Assessment process. It also requires proponents of projects with a lifetime beyond 2050 to provide a credible plan to achieve net-zero emissions by 2050.

This guidance is part of a suite of Government of Canada measures to reduce oil and gas sector emissions and to support the goal of net-zero emissions by 2050. These include:

Objective and application

This guidance is intended to help proponents of designated oil and gas projects that are subject to a federal Impact Assessment under the IAA to demonstrate best-in-class GHG emissions performance. This guidance will also help the Impact Assessment Agency of Canada (IAAC or the Agency), a review panel or an integrated review panel in the assessment of designated oil and gas projects.

This guidance applies to oil and gas projects that are subject to a federal Impact Assessment under the IAA, as set out in the Physical Activities Regulations, including:

In addition, this guidance may be considered in the assessment of projects under the Canadian Environmental Assessment Act, 2012 (CEAA, 2012), and may also be adapted for projects on federal lands and outside Canada under the IAA, projects regulated by federal life cycle regulators, and regional assessments.

Overview

This guidance is a refinement of the SACC and the Draft Technical Guide Related to the Strategic Assessment of Climate Change: Guidance on Quantification of Net GHG Emissions, Impact on Carbon Sinks, Mitigation Measures, Net-Zero Plan and Upstream GHG AssessmentFootnote 3  (the Draft Technical Guide). It tailors the SACC's Best Available Technologies/Best Environmental Practices (BAT/BEP) Determination process and net-zero plan considerations, and adds specific information requirements for oil and gas projects.

Best-in-class is the lowest level of GHG emissions intensity performance of leading projects globally within the same activity as the project undergoing a federal impact assessment. Core principlesFootnote 4  in demonstrating best-in-class GHG emissions performance include:

The basic approach outlined in this guidance is that project proponents should:

The guidance does not specify which technologies or practices should be used, nor does it prescribe emissions or emissions intensity performance thresholds/targets.

Consistent with the SACC, the best-in-class guidance and the plan to achieve net-zero emissions apply to the net GHG emissions associated with the project (refer to section 2 of the Draft Technical Guide). As outlined in section 3.2.2 of the SACC, some project proponents may be required to complete an upstream GHG emissions assessment. Even if such an assessment is completed, the best-in-class guidance does not apply to these upstream GHG emissions.

Guidance

Introduction

The SACC and the Draft Technical Guide outline a number of information requirements for proponents of all projects undergoing a federal Impact Assessment, including to:

This best-in-class guidance provides additional considerations that complement the SACC and the Draft Technical Guide. It outlines the information proponents should provide to demonstrate how and when the project will achieve best-in-class emissions performance – or alternatively, to explain why it will not be possible to achieve best-in-class emissions performance. These information requirements include:

As a proponent-led process, the onus is on the proponent to provide the information outlined in this guidance.

Principles

Focus on emissions

Continuous improvement

Factoring in assumptions in demonstrating best-in-class

Proponents will inevitably need to make some assumptions based on the latest publicly available information when preparing the Impact Statement and in demonstrating best-in-class emissions performance. These assumptions could include, for example:

Proponents should provide clear descriptions of the assumptions they have made. This should include:

Proponents should review and update their net-zero plan over the project's lifetime through periodic updates that includes information about whether and how the project continues to achieve best-in-class emissions performance. This will allow the proponent to update the assumptions, integrate new knowledge, and account for technological developments.

Comparison with leading projects globally

Step 5 of the BAT/BEP Determination Process outlined in detail in the Draft Technical Guide involves comparing the proposed project with similar projects in Canada and internationally.Footnote 5 Best-in-class analysis entails an increased focus on this comparison, in which oil and gas project proponents must:

Ability to incorporate new technologies and/or practices at a later date

While a project may be considered best-in-class at the time of the impact assessment, as emission reduction technologies evolve, the project may cease to be best-in-class. Proponents should make clear through the BAT/BEP Determination process and the net-zero plan how they will strive to ensure that the project will remain best-in-class over its lifetime (continuous emissions improvement).

Proponents should provide information in the Impact Statement on how the project design will be sufficiently flexible to incorporate new technologies and practices over the project's lifetime, including during periods of project maintenance or facility upgrades. In cases where proponents cannot provide information on integration opportunities, an explanation as to why not should be provided.

Some examples of integration opportunities could include:

Proponents can refer to technical and economic feasibility considerations, and should identify and discuss the assumptions made in considering advanced and emerging technologies.

Consistency with the transition to a low-carbon economy

Building on section 5.1.3 of the SACC on the Impact of the project on federal emissions reduction efforts and on global GHG emissions, and on the information typically required through the Tailored Impact Statement Guidelines, proponents must provide the following information in their Impact Statement:

In the transition to a low-carbon economy, proponents should avoid supporting activities and assets that could be at risk of becoming stranded from declining demand for the project's products. However, there is likely to be a need for products that come from traditionally emissions-intensive sources, including non-combustion products such as asphalt. Proponents can describe how the project enables producing such products.

In providing the information required in this section, and consistent with the SACC, proponents should, where applicable, identify supportive government actions that would enable the project to achieve best-in-class emissions, achieve net-zero emissions by 2050, and ensure that it is consistent with the transition to a low-carbon economy. For instance, proponents could outline how they may need enabling government support to access a grid intertie to use Canada's low-carbon electricity grid, or government actions to support small modular reactor deployment.

Review by the Agency, a review panel or an integrated review panel

As outlined in Section 6 of the SACC, Climate Change in the Impact Assessment Phase, the Agency, a review panel or an integrated review panel, with the support of expert federal authorities, will review, comment on and complement, as needed, the GHG and climate change-related information provided by project proponents in their Impact Statements.

Section 63 of the IAA details the factors that inform federal decision-making in the Impact Assessment of projects. When a proponent outlines how its project will meet the best-in-class emissions performance – or if not, why not – decision-makers will consider this information among the factors referred to in section 63. This would include the determination of the extent to which the effects of the designated project hinder or contribute to the Government of Canada's ability to meet its environmental obligations and its commitments in respect of climate change. Section 7 of the SACC, Climate Change in Decision-Making and Conditions, outlines how climate change information is factored into decision-making and conditions.

Next steps

ECCC welcomes comments on this draft guidance until December 3, 2022. Comments are to be submitted by email to: escc-sacc@ec.gc.ca

Following publication of this draft guidance and a review of the comments received, the final guidance is expected to be published in early 2023.

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