Albertans and Canadian are getting used to conflict between the Alberta and federal governments over the future of fossil fuels and emissions regulations. However, in the latest exchange from Premier Smith and her lieutenant, Environment minister Rebecca Schulz is a nasty personal attack on the integrity on the personal integrity of Environment minister Stephen Guilbeault.In a particularly nasty statement, Smith and Schulz seem to project their own ideas about post office careers, but not necessarily in the same line of work as Guilbeault.
Ottawa, ONTARIO, Canada on October 21, 2021.
© HOC-CDC
Credit: Mélanie Provencher, House of Commons Photo Services
The federal government has unilaterally established new methane emissions rules and targets to help win international headlines. Instead of building on Alberta’s award-winning approach, Ottawa wants to replace it with costly, dangerous and unconstitutional new federal regulations that won’t benefit anyone beyond Environment and Climate Change Minister Steven Guilbeault’s post-office career.
This statement marks a new low in Smiths campaign against the federal government and appears to be her attempt to force Trudeau to fire the federal minister.The attack comes days after the Alberta government issued a glowing report on its methane reduction achievements.
Federal Draft Regulations on Methane
Reporting on the quantum of escaping methane emissions from oil and fossil gas operations is notoriously unreliable.For example, in a 2022 paper by Jasmin Cooper, Luke Dubey and Adam Hawkes from Imperial College, University of London noted
there is high uncertainty in the emissions reported and therefore it is unclear how effective abatement strategies are and whether the sector is making progress towards reducing their emissions. Satellites are a technology which could improve the confidence in emissions reporting. In this work, by investigating the characteristics of how satellites detect and measure methane, we demonstrate that current technology is not capable of tracking emissions but could be suitable for large scale emissions verification
In the federal backgrounder on the draft regulations, Environment and Climate Change Canada provides a history of the developments of methane regulations since 2016. The oil and gas industry is the largest industrial emitters of methane in Canada— releasing about half of total methane emissions.
Given the measurement uncertainty, the Government of Canada is beefing up reporting, measuring and monitoring. Specifically, the Canadian government-
is enhancing the emissions-monitoring requirements through a risk-based approach to structure inspections for fugitive emissions—facilities with equipment that has greater potential for emissions must undertake more frequent inspections. All inspections must be conducted using instruments with a standard minimum detection limit, and repair timelines will depend on emissions rates. Further, the draft regulations introduce an audit system, requiring one annual third-party inspection to validate company program results. The first set of requirements under the proposed measures will come into force in January 2027.
What this means is that corporations who do not maintain their equipment and machinery is prime operating conditions will be obliged to step up their game- a not unreasonable risk-based approach. Part of the announcement stated the government of Canada would make a $30 million investment to establish a Methane Centre of Excellence “to improve our understanding and reporting of methane emissions.”
Contrary to what Ms. Smith and Ms. Schulz allege the federal government claims it has consulted with provinces and the industry over the past year and is building on “equivalency agreements” with the provinces, a “formal regulatory process that requires robust analysis to demonstrate that provincial regulations meet the requirements to replace federal regulations.”
Between the 2021 and 2023 National Inventory Reports, improvements to oil and gas emissions estimates resulted in upward revisions to previously published data.
The regulations are described as “broadly comparable” to the U.S. Environmental Protection Agency’s methane requirements are the proposed amendments.
A closer examination of the 100-page draft regulations includes a new section called fugitive emission detection and repair program. A key portion of the Act is based on provisions in the Federal Regulations of the United States (s. 8.11 (b)). As industry has reacted, the regulations are highly prescriptive and leave no room or little room for “negotiation.” Section 8.14 wants qualified inspectors with at least five years of experience but it’s ambiguous whether this individual can be a company employee! Exclusions from inspections are allowed for health and safety reasons.
Where fugitive emissions are found facilities must be repaired within 24 hours of detection, but up to 90 days if flow rates are less that 1 kilogram an hour and gradually reduced periods for higher emissions. Anything over 100 kilograms an hour must be remedied in 24 hours. This does not seem unreasonable for companies. One might question the wisdom of allowing detected methane to spew for 90 days though. Extensions are also available and 8.17 (2) limits the Minister’s discretion if there are reasonable grounds to conclude “that it is not technically feasible to complete the repair of the equipment component before the end of the applicable repair period or the extended repair period.”
Such provisions are negotiated between an industry that apparently wants as long as possible to cure the problem. There are elaborate report documentation requirements (8.19). For example, with respect to inspections, the inspector’s hours of training, dates of training, number of hours of training and a description of training.
Considerable detail on the emissions will be necessary to provide the federal government including:
(i) the unique identifier, if any, assigned to that emission by the operator,
(ii) a description of the equipment component that emitted the hydrocarbon gas and the location of that equipment component,
(iii) the date on which the fugitive emission was detected,
(iv) the date on which the fugitive emission ended,
(v) the flow rate, in kg/h, of the fugitive emission before repair of the equipment component, if determined,
and
(vi) if the fugitive emission cannot be repaired while the equipment component is operating, the day of the next planned shutdown of the facility.
This type of reporting, which becomes a major cost item, and therefore taken from profit, will drive CEOs and compliance officers nuts.
Flaring
Section 47 deals with flaring of hydrocarbon gas at an “ oil and gas facility,” other than flaring that is necessary to avoid serious risk to human health or safety arising from an emergency situation. That flaring must be supported by an engineering study that concludes that the “use of the hydrocarbon gas to produce useful heat or energy is not feasible in the circumstances.” In other words, permission to flare will be considerably tightened up.
Venting
Venting of hydrocarbon gas is prohibited except to avoid serious risk to human health or safety, is related to planned equipment maintenance or the “heating value” of the hydrocarbon gas or flow rate “are insufficient to sustain stable combustion of the gas by hydrocarbon gas destruction equipment.” Another exception is that the use of hydrocarbon gas destruction or conservation system “would prolong an interruption of the hydrocarbon gas supply to the public.” This appears to leave venting to the market place.
Part 2 establishes a “continuous monitoring system” spelling out the mandatory requirements for sensing equipment, provide readings within certain parameters depending on the type of facility and calibrated in accordance with manufacturers recommendations, not the company’s. Notice must be provided to the federal minister 60 days before the system is in place at the facility, presumably to allow for departmental officials to be available on site. Such systems and facilities will require annual inspections by an auditor.
The regulations will come into effect the day the regulations are registered. Certain sections will come into force on 1 January 2027 and others on 1 January 2030 in deference to industry concerns..
Regulatory Impact Analysis Statement (RIAS)
Attached to the draft regulations is the Regulatory Impact Analysis Statement (RIAS) which is a critical justification for the regulatory framework being imposed. In the Executive Summary it speaks of t introducing “a new performance-based compliance option designed to focus on emissions outcomes, rather than prescribing a specific pathway to compliance.” A reading of some of the provisions makes it difficult to conclude these rules are anything but prescriptive. The rules are designed to tighten the lid on what have been questionable industry practices in respect of flaring, maintenance of environment, worker health and safety, orphan well reclamation, and tailings ponds mismanagement. The federal environment department obviously does not trust the province’s energy industry.
Cost-Benefit Analysis
The central argument in the regulatory impact case is the cost-benefits study. The RAIS estimates the costs of $15.4-billion and benefits at $27.8-billion, benefits in “the estimated social benefit of avoided global damages from climate change.” The cost number is however much harder than the social benefits number.
A detailed cost analysis follows which costs such things as compressor seals and vents and the estimated compliance cost involving various instruments required. Since there is considerable “analytical uncertainty,” the RIAS posits several scenarios which vary from a net cost of $1.5-billion to net benefits of up to $15.8-billion. The “central” case gives a net benefit of $12.4-billion. This wide range would probably be vexing for energy government relations specialists who say the exercise is little more than throwing darts at a dart board.
Objective
The objective of the regulation is “to contribute to a reduction of methane emissions in the upstream oil and gas sector by at least 75% below 2012 levels by 2030.”
Consultations
As part of the RAIS, the department consulted with:
- provincial and territorial governments,
- Indigenous partners,
- representatives from industry and environmental non-governmental organizations (ENGOs),
- academics and experts,
- other government departments, international partners, and the public.
The Department has received 140 submissions in response to two publications, held over 80 meetings, and hosted three public webinars.
The industry’s comments were addressed first in the RAIS. The industry asked for more flexibility, meaning more time “to address the uneven distribution of costs, technical feasibility challenges across the oil and gas sector,” and potential conflicts with other federal and provincial legislation. The industry is also seeking “financial assistance for clean technology implementation and emissions monitoring and reporting,” a not uncommon ask for this industry.
With respect to provincial input, the federal government has recognized provincial regulations as equivalent to the Canadian Environmental Protection Act for periods of five years in these provinces, including Alberta. Some questions were asked about federal modelling which was responded to via a public technical meeting in June 2023. Of note, the draft regulations do not apply to natural gas distribution infrastructure, that is the retail gas distribution network.
Table 21 shows impacts by region. Alberta compliance costs represent more than half the country’s but the province receives almost half of the benefits through reduced emissions and gas conservation. Nevertheless, this table will be of particular interest to Alberta’s energy department. Another concern is the estimate of annual administrative costs borne by 484 small businesses impacted for an estimated annual cost of $33,592. Since half of those businesses will be in Alberta, for smaller concerns these costs will be material.
Implications
Returning to the politics of the issue, the Alberta government has declared “illegal for Ottawa to attempt to regulate our industries in this manner.” Ottawa is used as an epithet and the communique goes on to attack Ottawa’s failure to “even hit one of its past arbitrary and unscientific emissions targets largely because it has little to no credible expertise regulating the natural resource, agricultural and other industry sectors in this space.” Instead, Ottawa has not signed on to Alberta’s plan “keep reducing emissions with joint incentive programs in line with Alberta’s Emissions Reduction and Energy Development Plan.” The missive goes on to refer to the reference case decision on the Impact Assessment Act and urged Ottawa getting on board with “successful province-led approach.”
In spite of Alberta reducing methane emissions by 45 per cent “three years ahead of schedule,” Ottawa’s 75 per cent reduction plan by 2030 is “unrealistic.” The flaring rule is misrepresented as a “total ban on flaring at this time,” as flaring “is a critical health and safety practice during production, except the draft regulations do not ban “all flaring at this time” and also expressly acknowledge the centrality of worker safety.
Smith and Schulz are unhappy about the “tens of billions in infrastructure upgrades” to be borne by the industry for this extensive monitoring program but offers “virtually no financial support” while providing financial support of $37.7- billion for “just three battery plants in Ontario and Quebec.”
In this regard, there will be many Albertans who believe that Ontario and Quebec get way too much financial support. Given their collective population represents 61 per cent of Canada’s population while Alberta accounts for 11.7 per cent of the population, it should be no surprise that these provinces “get” multiples of what Alberta “wants.”. The carbon capture program as envisioned for the oilsands by Pathways- $16.5 billion- will be funded up to 50 per cent by the federal government and 12 per cent of the provincial government. On a federalism balance sheet Alberta with one-fifth of Ontario and Quebec’s population (or votes) “should” receive a fifth of the $37.7 billion which would be about $7.5-billion. Under the Pathways plan it is conceivable that if a maximum 50 tax credit would be $8.25 billion so these metrics point to a political deal at taxpayers’ expense.
Finally the attack on a single federal cabinet minister decisively signals that Smith wants Guilbeault gone. Meanwhile Mr. Trudeau has many problems of his own as his political future dims. Smith’s problem with Guilbeault is not high up on his to do list. A key question for Smith is Trudeau’s fate. A departure of the reviled Trudeau will remove one of Ms. Smith’s great foils.
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