Canada Gazette, Part I, Volume 154, Number 20: Order Declaring that the Provisions of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan
May 16, 2020
Statutory authority
Canadian Environmental Protection Act, 1999
Sponsoring department
Department of the Environment
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
Issues
The Government of Saskatchewan has introduced regulatory measures to manage methane emissions from the upstream oil and gas sector in a manner that would achieve equivalent methane emissions reductions to the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) [the Federal Regulations]. In addition, the Oil and Gas Conservation Act has been amended to include provisions similar to sections 17 to 20 of the Canadian Environmental Protection Act, 1999 (CEPA). The Minister of the Environment is recommending that an Order be made declaring that the provisions of the Federal Regulations do not apply in Saskatchewan, on the basis that the provincial regulatory measures to reduce methane emissions meet the requirements for an equivalency agreement as set out in CEPA. An Order is required to avoid regulatory overlap and administrative burden, and allow the Government of Saskatchewan to regulate methane emissions in the oil and gas sector in a manner that best suits its particular circumstances, while ensuring equivalent environmental outcomes.
Background
In April 2018, the Government of Canada enacted the Federal Regulations. The Federal Regulations introduced control measures (facility and equipment standards) to reduce fugitive and venting emissions of methane and volatile organic compounds (VOCs), from the upstream oil and gas sector. These control measures included requirements respecting fugitives, compressors, and well completions, which come into force in 2020; and routine venting, and pneumatic controllers and pumps, which come into force in 2023.
On January 1, 2019, the Government of Saskatchewan enacted the Oil and Gas Emissions Management Regulations (the Saskatchewan Regulations), which applies company-level greenhouse gas (GHG) emissions intensity limits to venting emissions from oil facilities. In addition to the Saskatchewan Regulations, on December 27, 2019, the Government of Saskatchewan enacted the Directive PNG036: Venting and Flaring Requirements (Directive PNG036) to provide venting and flaring limits on oil and gas facilities, as well as restrictions on temporary flaring during well completions. In April 2020, Directive PNG036 was amended to require leak detection and repair (LDAR) controls for gas facilities (gas batteries, gas plants, and gas gathering systems). In December 2019, the Government of Saskatchewan also amended Directive PNG017: Measurement Requirements for Oil and Gas Operations (Directive PNG017) to consolidate, clarify, and update regulatory requirements on oil and gas facilities with respect to how fuel gas, vent gas and flare gas volumes are measured for accounting and reporting purposes. In April 2020, Directive PNG017 was further amended to require enhanced quantification of associated gas at heavy oil facilities. Directive PNG036 and Directive PNG017 (Saskatchewan Directives) were adopted by ministerial orders.
Equivalency agreements under the Canadian Environmental Protection Act, 1999 (CEPA)
Protection of the environment is a shared jurisdiction between the Government of Canada and provincial governments. Section 10 of CEPA authorizes the Governor in Council, on the recommendation of the Minister of the Environment, to make an order to declare that the provisions of a regulation made under certain subsections of CEPA do not apply in a province or territory. For this to occur, the government of the province or territory must enter into an equivalency agreement with the Government of Canada. An equivalency agreement is a written agreement signed by the Minister of the Environment and representatives of the province, territory or aboriginal government where there are in force provisions made under the laws applicable to the jurisdiction of the provincial government that are equivalent to the Federal Regulations, as well as provisions that are similar to sections 17 to 20 of CEPA establishing a right to require the investigation of alleged environmental offences. Under subsection 10(8) of CEPA, an equivalency agreement has a maximum term of five years from the date on which it comes into force. An equivalency agreement may also be terminated before this time subject to a three-month notice by either party.
Saskatchewan equivalency agreement
The Government of Canada and the Government of Saskatchewan have published a draft equivalency agreement entered into on the basis of equivalent methane emission reductions (in carbon dioxide equivalent [CO2e]), under provisions of the provincial laws in force in jurisdiction of the Government of Saskatchewan, for the oil and gas sector in Saskatchewan and on the basis of similar provisions to sections 17 to 20 of CEPA for the right to require an investigation of alleged offences. These provisions are set out respectively under the Saskatchewan Regulations and Directives and the Oil and Gas Conservation Act. This agreement would come into force on the date of registration of the associated order declaring that the Federal Regulations do not apply in Saskatchewan except with respect to federal works or undertakings. This agreement would terminate on December 31, 2024, unless terminated early by either party with at least three-month notice. The agreement would be reviewed on an annual basis. A new agreement may be concluded after expiry of this agreement. This draft equivalency agreement will be published in the CEPA Registry with a notice of its availability published in the Canada Gazette, Part I.
Equivalent environmental outcomes
For the purposes of determining equivalent outcomes between the Saskatchewan Regulations and Directives and the Federal Regulations, Environment and Climate Change Canada (the Department) has estimated the methane reduction outcomes (in CO2e) from the Federal Regulations and the Saskatchewan Regulations and Directives using the departmental reference case as published in the report titled Canada’s Greenhouse Gas and Air Pollutant Emissions Projections 2018 (PDF).
Emission reductions were estimated in a manner similar to those described in the Regulatory Impact Analysis Statement for the Federal Regulations. The analysis was conducted by first developing detailed, bottom-up engineering emissions estimates for the baseline and regulatory scenarios for each emissions source. These engineering emission estimates were then scaled to align with the departmental reference case. The departmental reference case for the oil and gas sector was determined using historic emissions from the departmental National Inventory Report and the production forecast of oil and gas from the Canada Energy Regulator.
Based on these estimates, the Saskatchewan Regulations and Directives result in cumulative emission reductions of 11.61 megatonnes (Mt) of methane (in CO2e) for the period starting on January 1, 2020, and ending on December 31, 2024, compared to reductions of 11.48 Mt for the Federal Regulations, as summarized in Table 1 below. The Saskatchewan Regulations and Directives achieve equivalent emission reductions to the Federal Regulations. As illustrated in Table 2, the Saskatchewan Regulations and Directives are expected to result in lower emission reductions over a 10-year time horizon. At this time, the Department estimates that additional actions from oil and gas facilities will be necessary to achieve similar outcomes throughout the January 1, 2025, to December 31, 2029, period.
| Saskatchewan Regulations |
Federal Regulations |
Difference |
|
|---|---|---|---|
Compressors |
N/A |
0.28 |
−0.28 |
Fugitives |
0.32 |
1.96 |
−1.64 |
General venting |
10.63 |
8.02 |
2.61 |
Pneumatic devices |
N/A |
0.57 |
−0.57 |
Well completions |
0.65 |
0.65 |
0 |
Total |
11.61 |
11.48 |
0.12 |
Note: Numbers may not add up due to rounding.
| Year |
Saskatchewan Regulations |
Federal Regulations |
Difference |
|---|---|---|---|
2020 |
1.61 |
0.45 |
1.16 |
2021 |
2.12 |
0.54 |
1.58 |
2022 |
2.16 |
0.57 |
1.60 |
2023 |
2.73 |
4.91 |
−2.18 |
2024 |
2.98 |
5.00 |
−2.02 |
2025 |
3.36 |
5.10 |
−1.74 |
2026 |
3.44 |
5.19 |
−1.75 |
2027 |
3.53 |
5.29 |
−1.76 |
2028 |
3.60 |
5.37 |
−1.77 |
2029 |
3.67 |
5.44 |
−1.77 |
Total |
29.21 |
37.87 |
−8.66 |
Note: Numbers may not add up due to rounding.
Although equivalent outcomes have been determined between the Federal Regulations and the Saskatchewan Regulations and Directives on the basis of methane emissions reductions, the Saskatchewan Regulations and Directives are also estimated to achieve VOC emission reductions that exceed those of the Federal Regulations over the equivalency period. However, the Federal Regulations achieve higher VOC emission reductions throughout the January 1, 2025, to December 31, 2029, period.
Objective
The objective of the proposed Order is to reduce regulatory overlap and the reporting burden, while allowing Saskatchewan to achieve equivalent methane emission reductions in the oil and gas sector operating in the province in a manner that best suits its particular circumstances.
Description
The proposed Order Declaring that the Provisions of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan (the Proposed Order) would stand down the application of the Federal Regulations to facilities in Saskatchewan, with the exception of federal works or undertakings as defined in subsection 3(1) of CEPA. The proposed Order would cease to have effect upon the termination of the equivalency agreement on December 31, 2024.
Regulatory development
Consultation
Officials from the Government of Saskatchewan and the Government of Canada have been actively engaged in bilateral discussions throughout the development of the Federal Regulations, the Saskatchewan Regulations and Directives, and the proposed equivalency agreement. These discussions have focused on key policy and technical parameters used in support of the determination of equivalent outcomes and to ensure Saskatchewan has in place environmental legislation containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences.
Industry stakeholders wrote to the Department indicating support for an equivalency agreement with Saskatchewan relating to the Federal Regulations in comments received during the 60-day comment period for the proposed Order Declaring that the Provisions of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in British Columbia. These comments encouraged the Department to move forward with equivalency agreements with other provinces to avoid duplicative regulatory requirements.
Environmental non-governmental organizations (ENGOs) have publicly stated concerns regarding the outcome-based approach of the Saskatchewan Regulations. These concerns were also expressed in a letter the Department received from an ENGO consortium. In addition, the ENGO consortium published a fact sheet for policy-makers titled “Comparing Saskatchewan and Federal Oil and Gas Methane Emissions Regulations,” (PDF) where they describe, qualitatively, areas under the Saskatchewan regime that in their view need major improvement when compared to federal regulations.
Specifically, these concerns included the Government of Saskatchewan not requiring specific actions to reduce emissions from leaks at oil facilities, pneumatics and storage tanks as well as failing to update existing measurement and reporting requirements. These concerns predate the adoption of the Saskatchewan Directives, which notably require measures to reduce emissions at well completions, during routine venting and flaring applicable to facilities, measures to control fugitives applicable to gas facilities, and enhanced quantification of associated gas at heavy oil facilities.
Modelling work conducted by the Department shows that taken together, the Saskatchewan Regulations and Directives will result in methane emissions reductions that are equivalent to the Federal Regulations over the 2020–2024 period. These estimates of methane emission reductions were made using a consistent and robust modelling approach which has undergone significant consultation with stakeholders dating back to 2016.
Modern treaty obligations and Indigenous engagement and consultation
In Saskatchewan, facilities subject to the Federal Regulations were identified on reserve lands of 11 First Nations. The proposed Order would stand down the Federal Regulations in Saskatchewan, including for those facilities on reserve lands. Similar environmental outcomes would be achieved under the Saskatchewan Regulations and Directives. Moreover, the proposed Order is expected to result in incremental cost savings for facilities subject to the Federal Regulations, including facilities managed by Indigenous peoples. Upon publication of the proposed equivalency agreement and the proposed Order, National Indigenous Organizations and the First Nations subject to the Federal Regulations will be notified, where feasible, and invited to provide comment. No modern treaty obligations are expected to be impacted by the proposed Order.
Instrument choice
An order is the only regulatory instrument under CEPA for the Governor in Council to declare that the Federal Regulations do not apply in Saskatchewan. Non-regulatory options such as a voluntary option or code of practice are therefore not suitable tools for achieving the objective.
Regulatory analysis
Benefits and costs
The Saskatchewan Regulations and Directives would regulate methane emissions with a similar degree of stringency to the Federal Regulations in manner designed with the specific characteristics of the Saskatchewan oil and gas industry in mind. Furthermore, the proposed Order would reduce regulatory overlap and reporting burden by suspending the requirements of the Federal Regulations in Saskatchewan. As a result, the proposed Order is expected to result in incremental compliance and administrative cost savings to industry.
The federal government is expected to realize incremental cost savings from suspended administrative activities related to enforcement, compliance promotion, and administration of the Federal Regulations in Saskatchewan. These cost savings are estimated to about $410,500 over a five-year period. footnote 1
Small business lens
While the Federal Regulations exempt facilities which produce and/or receive less than 60 000 m3 of hydrocarbon gas per year to help limit impacts on small businesses, small businesses own facilities that exceed this threshold. In 2018, the Department identified 111 small businesses in Saskatchewan that would be affected by the Federal Regulations. As a result of reduced regulatory overlap and reporting burden by suspending the requirements of the Federal Regulations in Saskatchewan, the proposed Order would result in cost savings for these small businesses.
One-for-one rule
The proposed Order would reduce administrative costs imposed by the Federal Regulations on oil and gas facilities and result in an “out” under the one-for-one rule. Oil and gas facilities in Saskatchewan would no longer need to comply with the administrative requirements associated with the Federal Regulations, resulting in average annualized cost savings of $386,793. The average administrative cost savings per business will be approximately $2,015. footnote 2
Regulatory cooperation and alignment
Protection of the environment is a shared responsibility in Canada. The use of equivalency agreements, together with an Order suspending the application of a federal regulation in a jurisdiction, is included in section 10 of CEPA as a tool for avoiding regulatory duplication.
The Government of Saskatchewan has final regulatory requirements applicable to the oil and gas sector to reduce venting of gas, mandate LDAR at gas facilities (gas batteries, gas plants, and gas gathering systems), as well as restrictions on temporary flaring during well completions. The Department is satisfied that the Government of Saskatchewan’s Regulations and Directives adopted by orders have met CEPA requirements for the proposed equivalency period. Therefore, the proposed Order suspending the application of the Federal Regulations in Saskatchewan is being recommended by the Minister of Environment.
The proposed Order would cover the same period as the proposed equivalency agreement, ending on December 31, 2024, and equivalent emissions reductions are expected over the equivalency period. Canada’s international commitments to reduce methane emissions by 40 to 45% of 2012 levels by 2025, and Canada’s Paris Agreement commitment would not be affected.
Strategic environmental assessment
The Federal Regulations were developed under the Pan-Canadian Framework on Clean Growth and Climate Change. A strategic environmental assessment (SEA) was completed for this framework in 2016. The SEA concluded that proposals under the framework will reduce GHG emissions and are in line with the 2016–2019 Federal Sustainable Development Strategy for Canada (PDF) goal of effective action on climate change. The proposed Order would result in a decrease in VOC emissions.
Gender-based analysis plus
No gender-based analysis plus (GBA+) impacts have been identified for this proposal.
Implementation, compliance and enforcement, and service standards
The proposed Order would declare that the provisions of the Federal Regulations do not apply in Saskatchewan effective on the day which the proposed Order comes into force, except for facilities expressly exempted. At the coming into force of the proposed Order, the Federal Regulations would no longer apply to oil and gas facilities in Saskatchewan, with the exception of facilities that are federal works or undertakings, which includes interprovincial pipelines.
Contacts
Magda Little
Director
Oil, Gas and Alternative Energy Division
Energy and Transportation Directorate
Environmental Protection Branch
Environment and Climate Change Canada
351 Saint-Joseph Boulevard
Gatineau, Quebec
K1A 0H3
Email: ec.methane-methane.ec@canada.ca
Matthew Watkinson
Director
Regulatory Analysis and Valuation Division
Economic Analysis Directorate
Strategic Policy Branch
Environment and Climate Change Canada
200 Sacré-Cœur Boulevard
Gatineau, Quebec
K1A 0H3
Email: ec.darv-ravd.ec@canada.ca
PROPOSED REGULATORY TEXT
Notice is given, pursuant to subsection 332(1) footnote a of the Canadian Environmental Protection Act, 1999 footnote b, that the Governor in Council, pursuant to subsection 10(3) of that Act, proposes to make the annexed Order Declaring that the Provisions of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan.
Any person may, within 60 days after the publication of this notice, file with the Minister of the Environment comments with respect to the proposed Order or a notice of objection requesting that a board of review be established under section 333 of that Act and stating the reasons for the objection. All comments and notices must reference the proposed Order, including a reference to the term “Saskatchewan” and cite the Canada Gazette, Part I, the date of publication of this notice, and be addressed to Magda Little, Director, Oil, Gas and Alternative Energy, Department of the Environment, 351 Saint-Joseph Boulevard, Gatineau, Quebec K1A 0H3 (email: ec.methane-methane.ec@canada.ca).
A person who provides information to the Minister of the Environment may submit with the information a request for confidentiality under section 313 of that Act.
Ottawa, May 10, 2020
Julie Adair
Assistant Clerk of the Privy Council
Order Declaring that the Provisions of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan
Declaration
Non-application
1 Except with respect to a federal work or undertaking, the following provisions of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) do not apply in Saskatchewan:
- (a) sections 1 to 25, 28 to 36 and 42 to 56;
- (b) sections 26, 27 and 37 to 41.
Cessation
Day agreement terminates
2 This Order ceases to have effect on the day on which the agreement between the Minister of the Environment and the Government of Saskatchewan, entitled “Agreement on the Equivalency of Federal and Saskatchewan Regulations Respecting the Release of Methane from the Oil and Gas Sector in Saskatchewan, 2020”, terminates or is terminated under subsection 10(8) of the Canadian Environmental Protection Act, 1999.
Coming into Force
Registration
3 (1) This Order, except paragraph 1(b), comes into force on the day on which it is registered.
January 1, 2023
(2) Paragraph 1(b) comes into force on January 1, 2023.