Canada Gazette, Part I, Volume 154, Number 23: 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 Alberta
June 6, 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 Alberta 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 Environmental Protection and Enhancement Act contains provisions that are 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 Alberta, with the exception of federal works and undertakings, on the basis that 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 Alberta 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 include requirements respecting fugitive emissions, compressors, and well completions, which came into force in 2020, and routine venting and pneumatic controller and pump requirements, which will come into force in 2023. The well completion requirements do not apply in Alberta.
In December 2018, the Alberta Energy Regulator made amendments to Directive 060: Upstream Petroleum Industry Flaring, Incinerating, and Venting and Directive 017: Measurement Requirements for Oil and Gas Operations (the Alberta Directives), which put in place requirements for methane emission reductions. These requirements, as amended from time to time, are incorporated by reference in the Methane Emission Reduction Regulation [PDF] (together with the Alberta Directives referred to as the Alberta Regulation), which was registered in December 2018 and came into force on January 1, 2020. In May 2020, further amendments were made to Directive 060 and Directive 017 to increase the stringency and introduce earlier implementation dates for certain provisions. The Alberta Regulation contains regulatory requirements for the same sources of emissions as the Federal Regulations with additional requirements for glycol dehydrators, which are used to remove moisture from produced gas. The Alberta Regulation differs from the Federal Regulations in that control measures are more stringent for new facilities starting in 2022. The Alberta Regulation also contains more stringent requirements for existing pneumatic controllers. The Alberta Regulation requires a lower leak detection frequency at some facility types and less stringent routine venting and pneumatic pump requirements.
Equivalency agreements under the Canadian Environmental Protection Act, 1999
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 sections 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 three months’ notice by either party.
Alberta equivalency agreement
The Government of Canada and the Government of Alberta have published a proposed equivalency agreement 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 Alberta for the oil and gas sector in Alberta and on the basis of similar provisions to sections 17 to 20 of CEPA for the right to require an investigation of alleged environmental offences. These provisions are set out respectively under the Alberta Regulation and the Environmental Protection and Enforcement 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 Alberta except with respect to federal works and undertakings. This agreement would terminate five years after it comes into force, unless terminated early by either party with at least three months’ notice. The agreement contains information-sharing provisions and would be reviewed on an annual basis. A new agreement may be concluded after the 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 Alberta Regulation and the Federal Regulations, the Department of the Environment (the Department) has estimated the methane reduction outcomes (in CO2e) from the Federal Regulations and the Alberta Regulation 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 emission estimates for the baseline and regulatory scenarios for each emission 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 Canadian Energy Regulator.
Based on these estimates, the Alberta Regulation results in cumulative emission reductions of 18.60 megatonnes (Mt) of methane (in CO2e) for the period of January 1, 2020, to December 31, 2024, compared to 18.71 Mt under the Federal Regulations, as summarized in Table 1 below. These estimates differ by 0.6% and are considered equivalent given the sensitivity range of modelled results. As illustrated in Table 2, the Alberta Regulation is expected to result in greater emission reductions over a 10-year time horizon.
| Emission |
Alberta Regulation |
Federal Regulations |
Difference |
|---|---|---|---|
Compressors |
3.04 |
2.57 |
0.47 |
Fugitive emissions |
3.90 |
4.94 |
−1.04 |
Glycol dehydrators |
0.86 |
N/A |
0.86 |
Pneumatic controllers |
7.91 |
4.73 |
3.18 |
Pneumatic pumps |
0.67 |
2.87 |
−2.20 |
Routine |
2.21 |
3.59 |
−1.39 |
Total |
18.60 |
18.71 |
−0.11 |
Note: Numbers may not add up due to rounding.
| Year |
Alberta Regulation |
Federal Regulations |
Difference |
|---|---|---|---|
2020 |
1.08 |
1.02 |
0.06 |
2021 |
1.06 |
1.66 |
−0.60 |
2022 |
2.90 |
1.62 |
1.28 |
2023 |
6.68 |
7.19 |
−0.51 |
2024 |
6.87 |
7.22 |
−0.35 |
2025 |
7.12 |
7.30 |
−0.18 |
2026 |
7.44 |
7.43 |
0.00 |
2027 |
7.73 |
7.56 |
0.17 |
2028 |
8.08 |
7.68 |
0.40 |
2029 |
8.31 |
7.79 |
0.52 |
Total |
57.28 |
56.48 |
0.80 |
Note: Numbers may not add up due to rounding.
Objective
The objective of 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 Alberta (the proposed Order) is to reduce regulatory overlap and reporting burden, while allowing Alberta 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 would stand down the application of the Federal Regulations to facilities in Alberta, 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 with a maximum term of five years.
Regulatory development
Consultation
Officials from the Government of Alberta and the Government of Canada have been actively engaged in bilateral discussions throughout the development of the Federal Regulations, Alberta Regulation, and proposed equivalency agreement. These discussions have focused on key policy and technical parameters used in support of the determination of equivalent methane emission reductions and to ensure Alberta has in place 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 Alberta in comments received during the 60-day consultation 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 negotiations on equivalency agreements with other provinces to avoid duplicative regulatory requirements.
Environmental non-governmental organizations (ENGOs) have publicly stated concerns regarding the methane emission reductions that would be achieved by the Alberta Regulation. These concerns were also expressed in a letter the Department received from an ENGO consortium in March 2019. In addition, the ENGO consortium published a factsheet for policy-makers in September 2019 titled “Comparing Alberta and Federal Oil and Gas Methane Emissions Regulations” that qualitatively describes areas under the Alberta Regulation that they believe need improvement when compared with the Federal Regulations. Specifically, these criticisms include the Alberta Regulation not requiring specific action to reduce emissions from leaks at oil facilities, pneumatics, and storage tanks, as well as failing to update existing measurement and reporting requirements for solution gas venting. These criticisms were made prior to updates to the Alberta Regulation.
Modelling work conducted by the Department shows that the Alberta Regulation will result in methane reductions that are equivalent to those of the Federal Regulations over the 2020–2024 period. These estimates of methane emission reductions were derived 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 Alberta, facilities subject to the Federal Regulations were identified on reserve lands of 26 First Nations. The proposed Order would stand down the application of the Federal Regulations in Alberta, including for those facilities on reserve lands. Similar environmental outcomes would be achieved under the Alberta Regulation. Moreover, the proposed Order is expected to result in incremental cost savings for facilities affected by the Federal Regulations, including facilities managed by Indigenous peoples. Upon publication of the proposed equivalency agreement and the proposed Order, national Indigenous organizations and 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 Alberta. 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 Alberta Regulation would regulate methane emissions with an equivalent degree of stringency to the Federal Regulations in a manner designed with the specific characteristics of the Alberta 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 Alberta. 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 Alberta. These cost savings are estimated to be about $1,385,000 over the five-year period of the equivalency agreement. footnote 1
Due to less stringent requirements of the Alberta Regulation for routine venting, the proposed Order would result in an increase in VOC emissions of 17 kilotonnes (kt). The Alberta Regulation is estimated to achieve 36 kt of VOC reductions, compared to 53 kt of emission reductions in Alberta under the Federal Regulations, over the equivalency period. This 17 kt increase represents less than 1% of total VOC emissions from the oil and gas sector in Alberta over the period of analysis. VOCs are air pollutants that contribute to the formation of ground-level ozone and particulate matter (PM2.5), which are the main constituents of smog. These pollutants are known to cause adverse health impacts, including increased risk of premature death, and chronic and short-term respiratory and cardiac problems, as well as negative environmental effects on vegetation, buildings and visibility.
The effect of VOC emissions on atmospheric concentrations of PM2.5 and ground-level ozone is highly dependent on baseline ambient air quality in a given geographic location. Furthermore, the impact of VOC emissions on ozone- and PM2.5-related health effects depends on the size of the populations affected by the changes in air quality. The facilities affected by the Federal Regulations and Alberta Regulation are located in relatively remote areas, thus the potential Canadian population health and environmental impacts associated with the increase in VOC emissions from the proposed Order are expected to be low.
Small business lens
While the Federal Regulations exempt facilities that 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 354 small businesses in Alberta that would be affected by the Federal Regulations. As a result of reduced regulatory overlap and reporting burden achieved by suspending the requirements of the Federal Regulations in Alberta, 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 Alberta would no longer need to comply with the administrative requirements associated with the Federal Regulations, resulting in average annualized cost savings of $1,305,206. The average administrative cost savings will be approximately $2,133 per business. 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 Alberta has final regulatory requirements applicable to the oil and gas sector to reduce methane emission reductions in the oil and gas sector in a manner equivalent to the Federal Regulations. The Department is satisfied that these measures, in combination with the applicable provisions in Alberta’s Environmental Protection and Enhancement Act, meet CEPA requirements for equivalency. Therefore, the proposed Order suspending the application of the Federal Regulations in Alberta is being recommended by the Minister of Environment.
The Alberta Regulation is projected to achieve equivalent methane emission reductions to the Federal Regulations. Thus, Canada’s commitments to reduce methane emissions by 40%–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 greenhouse gas emissions and are in line with the 2016–2019 Federal Sustainable Development Strategy for Canada (PDF) goal of effective action on climate change.
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 Alberta effective on the day on which the proposed Order comes into force, except for federal 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 Alberta, with the exception of facilities that are federal works and 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 Alberta.
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 “Alberta”, and cite the Canada Gazette, Part I, and 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 29, 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 Alberta
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 Alberta:
- (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 Alberta, entitled “Agreement on the Equivalency of Federal and Alberta Regulations Respecting the Release of Methane from the Oil and Gas Sector in Alberta, 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.