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: SOR/2020-60

Canada Gazette, Part II, Volume 154, Number 8

Registration

SOR/2020-60 March 25, 2020

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

P.C. 2020-166 March 24, 2020

Whereas, pursuant to subsection 332(1) footnote a of the Canadian Environmental Protection Act (1999) footnote b, the Minister of the Environment published in the Canada Gazette, Part I, on June 15, 2019, a copy 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 British Columbia, substantially in the annexed form, and persons were given an opportunity to file comments with respect to the proposed Order or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

And whereas, the Minister of the Environment and the Government of British Columbia have entered into a written agreement referred to in subsection 10(3) of that Act to the effect that there are in force by or under the laws of British Columbia

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, pursuant to subsection 10(3) of the Canadian Environmental Protection Act (1999) footnote b, makes 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 British Columbia.

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

Declaration

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 British Columbia:

Expiry

2 The provisions of this Order cease to have effect on the day on which the agreement between the Minister of the Environment and the government of British Columbia, entitled “Agreement on the Equivalency of Federal and British Columbia Regulations Respecting the Release of Methane from the Oil and Gas Sector in British Columbia, 2020”, terminates or is terminated under subsection 10(8) of the Canadian Environmental Protection Act, 1999.

Coming into Force

3 (1) This Order, except Paragraph 1(b), comes into force on the day on which it is registered.

(2) Paragraph 1(b) comes into force on January 1, 2023.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

The British Columbia (B.C.) Oil and Gas Commission has introduced amendments to the Drilling and Production Regulation (the B.C. Regulation) to regulate methane emissions from the oil and gas sector in a manner equivalent to the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) [the Federal Regulations]. footnote 1 In addition, the Oil and Gas Activities Act (OGAA) has been amended to include provisions similar to those in sections 17 to 20 of the Canadian Environmental Protection Act, 1999 (CEPA). The Minister of the Environment has recommended to the Governor in Council the making of an order that would declare that the provisions of the Federal Regulations do not apply in British Columbia, following an agreement concluded with the government of B.C. on the basis that the B.C. Regulation and enabling legislation meet the requirements for an equivalency agreement as set out under CEPA. An order in council is required to reduce regulatory overlap and administrative burden, and allow the government of British Columbia to regulate methane emissions in the oil and gas sector in a manner that best suits its particular circumstances, while ensuring equivalent environmental outcomes to the Federal Regulations.

Background

In April 2018, the Government of Canada enacted the Federal Regulations. The Federal Regulations introduced control measures (facility and equipment requirements) 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 fugitive emissions, compressors, and well completions, which come into force in 2020, and routine venting, pneumatic controllers and pneumatic pumps, which come into force in 2023. The federal well completion requirements do not apply in British Columbia as the province already had its own well completion requirements in place prior to 2018.

On December 17, 2018, the B.C. Oil and Gas Commission approved amendments to the existing B.C. Regulation, which contain requirements for methane emissions reductions. footnote 2 The B.C. Regulation requires control measures to reduce fugitive and venting methane emissions from the upstream oil and gas sector. This 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 B.C. Regulation differs from the Federal Regulations in that control measures are more stringent for new facilities beginning in 2021 and most requirements for existing facilities come into force in 2022. While the B.C. Regulation allows a lower leak detection frequency at some facility types and contains less stringent routine venting requirements, venting and leak detection requirements apply to a greater number of facilities.

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 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.

British Columbia equivalency agreement

The Government of Canada published an equivalency agreement entered into on the basis of equivalent provisions of the Federal Regulations and the B.C. laws and comparable methane emission reductions (in carbon dioxide equivalent [CO2e]) for the oil and gas sector in British Columbia and on the basis of similar provisions to sections 17 to 20 of CEPA for the investigation of alleged offences, set out respectively under the B.C. Regulation and the B.C. OGAA. The agreement was concluded upon signature of the parties and comes into force on the date of registration of the associated order standing down the application of the Federal Regulations in British Columbia. The agreement will end five years after the date of its coming into force unless terminated early by either party subject to a three-month notice. The agreement is to be reviewed annually including a review of emissions estimates. The draft equivalency agreement was published in the CEPA Registry and a notice of its availability was published in the Canada Gazette, Part I, on March 30, 2019.

Equivalent environmental outcomes

For the purposes of determining equivalent outcomes between the B.C. Regulation 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 B.C. Regulation using the departmental reference case as published in Canada’s GHG and Air Pollutant Projections: 2018. footnote 3

Emission reductions were estimated in a manner similar to that described in the Regulatory Impact Analysis Statement for the Federal Regulations. footnote 4 The analysis was conducted by first developing detailed, bottom-up emissions estimates for the baseline and regulatory scenarios for each emission source. These emission estimates were then scaled to align with the departmental reference case. The departmental reference case for the oil and gas sector is 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 B.C. Regulation results in cumulative emission reductions of 2.85 megatonnes (Mt) of methane (in CO2e) from January 1, 2020, to December 31, 2024, which exceeds the Federal Regulations, as summarized in Table 1 below. The B.C. Regulation achieves greater emission reductions than the Federal Regulations due to the increased stringency for new facilities and early implementation dates for some requirements. As noted below, the B.C. Regulation is also expected to result in greater emission reductions beyond 2024.

Table 1: Comparison of cumulative methane emission reductions (in Mt CO2e)

Emissions Source

B.C. Regulatory Reductions

Federal Regulatory Reductions

January 1, 2020, to December 31, 2024, Methane Reductions (Mt CO2e)

Fugitive emissions

1.44

1.43

Pneumatic devices

1.12

0.90

Compressors

0.21

0.41

Routine venting

0.01

0.02

Glycol dehydrators

0.04

N/A

Surface casing vent flow

0.04

table note *

Total (Jan. 1, 2020, to December 31, 2024)

2.85

2.76

Total (Jan. 1, 2025, to December 31, 2029)

5.75

5.25

Table 1 note(s)

Table note *

Surface casing vent flow is captured in the routine venting requirements of the Federal Regulations.

Return to table note * referrer

Sensitivity analysis

Given the greater stringency for new facilities under the B.C. Regulation, the Department conducted a sensitivity analysis to estimate the impact of a low oil and gas price scenario on the emissions outcomes. footnote 5 Lower prices will lead to fewer new facilities and therefore fewer facilities subject to the more stringent requirements for new facilities under the B.C. Regulation. Under this scenario, the B.C. Regulation would achieve cumulative methane emission reductions of 2.47 Mt in CO2e, compared to 2.50 Mt CO2e under the Federal Regulations over the period of analysis.

Objective

The objective of the Order is to reduce regulatory overlap and the reporting burden, while allowing British Columbia to achieve equivalent methane emission reductions in the oil and gas sector in a manner that best suits its particular circumstances.

Description

The 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 (the Order) will stand down the application of the Federal Regulations in British Columbia, with the exception of federal works or undertakings as defined in subsection 3(1) of CEPA. The Order will cease to have effect upon the termination of the equivalency agreement with a maximum term of five years.

Regulatory development

Consultations prior to publication of the proposed Order in the Canada Gazette, Part I

Prior to the publication of the proposed Order, officials from the Government of British Columbia and the Government of Canada were actively engaged in bilateral discussions throughout the development of the Federal Regulations, the B.C. Regulation, and the proposed equivalency agreement. These discussions focused on key policy and technical parameters used in support of the determination of equivalent outcomes and to ensure British Columbia has in place environmental laws containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences, as well as information-sharing arrangements agreed to with B.C. representatives allowing the conduct of annual reviews of the agreement.

Environmental non-governmental organizations (ENGOs) publicly expressed concerns regarding the data used by both the Department and the B.C. Oil and Gas Commission to estimate methane emissions. ENGOs emphasized that a field study conducted by the B.C. Oil and Gas Commission could yield updated emission reduction estimates. The Department met with ENGOs to explain the quantification methodology used to determine equivalent environmental outcomes between the Federal Regulations and the B.C. Regulation.

Comments received during the 60-day public comment period following publication of the proposed equivalency agreement in the Canada Gazette, Part I

A notice of the availability of the proposed equivalency agreement was published in the Canada Gazette, Part I, on March 30, 2019. The proposed equivalency agreement was posted on the Department’s CEPA Environmental Registry website to make it broadly available to the public. The Department also informed engaged stakeholders of the applicable comment period. The Department received eight written submissions from various stakeholders, including oil and gas industry and industry associations and ENGOs.

Overview of feedback received

Industry stakeholders were supportive of the proposed equivalency agreement and proposed Order and expressed support for provincially led regulations in the upstream oil and gas sector. Concerns were raised regarding the possibility of duplicative regulations in the absence of an equivalency agreement.

ENGOs reiterated concerns expressed regarding the data and methodology used to estimate methane emission reductions. In addition, it was stated that the Department is overestimating emission reductions that would be achieved by the leak detection and repair (LDAR) provisions in the B.C. Regulation. ENGOs commented that the provincial methane regulations should be strengthened to ensure enhanced capture of methane emissions. It was also noted that the rates of inspection should match or exceed those of the Federal Regulations. Additionally, one submission expressed that the draft equivalency agreement should be made conditional on the B.C. Regulation being revised to reflect clearer language on LDAR requirements application to ensure wells co-located on the site of a battery are included in all inspections.

ENGOs recommended that the Department update its modelling approach and assumptions to use the best available data and methodologies to inform the Department’s estimation of methane emission reductions. One submission stated that the B.C. Methane Regulations should be evaluated using new data from the recently published 2018 B.C. Methane Emissions Field (MEF) study to determine the equivalency of emissions outcomes. This stakeholder also commented that the B.C. Regulation should be evaluated using best available, real data while continuing to improve on model methodology. This submission also expressed the need for better collection of baseline data on methane emissions and continued monitoring according to best practices. It was also requested that an obligation to automatically rescind or renegotiate the agreement be made if it cannot be demonstrated that the B.C. Regulation is achieving equivalent reductions during each annual review and that this discussion include other stakeholders.

Additionally, one ENGO filed a notice of objection during the proposed equivalency agreement comment period. The notice of objection stated that the provincial legislation providing the right to request investigations of environmental offences does not provide for a report in case of discontinued investigations, and that the provincial sanction and penalty regime is divergent in terms of stringency of penalties with those applicable under CEPA. The Department’s response to this notice of objection and all other comments related to the draft agreement has been published on the CEPA registry. These responses are summarized below.

Comments received during the 60-day public comment period following publication of the proposed Order in the Canada Gazette, Part I

The proposed Order was published in the Canada Gazette, Part I, on June 15, 2019, and posted to the Department’s CEPA Environmental Registry website to make it broadly available to the public. The Department also informed engaged stakeholders of the comment period. The Department received five written submissions from stakeholders, including oil and gas industry and industry associations, and ENGOs.

Overview of feedback received

Comments received during the comment period for the proposed Order mirrored those received regarding the proposed equivalency agreement.

ENGOs reiterated concerns regarding the modelling, stringency of provincial penalties, and annual review, and additionally expressed concerns that the Department may be underestimating LDAR reductions achieved by the Federal Regulations. An additional submission from ENGOs during the proposed Order comment period commented that the Department may be overestimating the number of wells that would not be required to perform LDAR under the Federal Regulations, due to the exemption for wellheads with limited infrastructure. The submission pointed to analysis of the data from the B.C. MEF Study that suggested 87% of wells would have sufficient equipment on site to not qualify for the single well exemption.

An industry stakeholder reiterated support for the proposed Order and proposed equivalency agreement. One industry stakeholder commented that the B.C. Regulation would not apply to gas transmission pipelines, and requested clarity with respect to the application of the proposed Order.

The Department’s response to feedback received on the draft Order has been published on the CEPA registry. These responses are summarized in the section below.

Responses to specific stakeholder feedback received

Data quality, modelling, and incorporation of new information

The Department has reviewed and integrated data from the final B.C. MEF study into the current analysis, in addition to updating facility and well counts to align with data reported to the B.C. Oil and Gas Commission. These updates confirmed that the B.C. Regulation is projected to achieve higher methane emission reductions than the federal methane regulations in the province of B.C. The Department is continually improving methane emission estimation techniques and frequently considers available and robust information to inform on data quality.

Leak detection and repair

The Department modelled the regulatory provisions in a consistent manner when comparing leak detection and repair requirements between the provincial and federal approach. This modelling determined that the requirements under the B.C. Regulation are expected to lead to emissions reductions that exceed those under the Federal Regulations in the province over the period of analysis from January 1, 2020, to December 31, 2024.

The Province of B.C. committed to include expectations for LDAR practices with respect to co-located wells in guidance documentation material. The province of B.C. has published guidance on this aspect in its Fugitive Emissions Management Guideline published on July 18, 2019. The B.C. Oil and Gas Commission has also committed to undertake a regulatory review in 2022.

With respect to the estimation of wells exempted under the Federal Regulations, the Department reviewed the analysis presented in the B.C. MEF Study but does not view the wells surveyed in the study to be representative of the wells currently estimated to be exempted. The wells selected for surveying in the study was restricted to those within 3 km of a battery. Given that over 90% of the wells currently estimated to be exempt are not attached to a battery, the Department did not adopt the results of the study for these wells.

Equivalency of provisions related to enforcement and residents’ right to investigation

Sanctions and penalties under a provincial regime are elements for consideration in determining whether to conclude an agreement with a government under section 10 of the CEPA. The Department remains confident that the implementation of the British Columbia regime, in particular the relevant provisions under the OGAA and the Drilling and Production Regulation (DPR), are sufficient to ensure a comparable environmental outcome as the federal methane regulations.

The amending provisions set out in sections 61.1 to 61.4 of the province of B.C.’s OGAA provide a comprehensive mechanism for the exercise of a right to require investigations of offences that is similar to that provided in sections 17 to 20 of the CEPA. Further, where the Minister discontinues an investigation, the obligations to prepare a report with reasons, and describe information obtained, are not required under sections 17 to 20 of CEPA.

Application to transmission pipelines

A pipeline wholly situated within a province is subject to the B.C. Regulation, unless it is a federal work or undertaking, which includes pipelines that extend beyond the limits of the province. To ensure regulation of methane is regulated for all facilities in the province, the Order will exempt from its application federal works and undertakings, which will thus be required to comply with the Federal Regulations.

A summary of all comments and responses is available in the CEPA registry.

Modern treaty obligations and Indigenous engagement and consultation

In 2017, there were three Indigenous groups identified to whom there is a potential application of the Federal Regulations. The objective of the Order is to declare the Federal Regulations not applicable in British Columbia, on the basis that the scope and effect of the B.C. Regulation are equivalent to the Federal Regulations. No modern treaty obligations associated with the Order have been identified. National Indigenous organizations were notified and invited to provide comments on the proposed equivalency agreement and proposed Order; however, no comments were received.

Instrument choice

An order in council is the only regulatory instrument under CEPA for the Governor in Council to declare that the Federal Regulations do not apply in British Columbia. Application of this instrument for this purpose is in line with the Government of Canada’s international commitments to reduce greenhouse gas (GHG) emissions.

Non-regulatory options, such as a voluntary option or a code of practice, are not suitable tools for achieving the objective.

Regulatory analysis

Benefits and costs

Given that industry will be regulated with a similar degree of stringency under both regulations, the Order is not expected to lead to incremental costs to industry.

While equivalent environmental outcomes are determined based on methane emission reductions, less stringent requirements in the B.C. Regulation for routine venting are estimated to result in an increase in VOC emissions of 240 tonnes in the January 1, 2020, to December 31, 2024, time period. This increase represents 5% of the total VOC reductions that are expected in British Columbia under the Federal Regulations. Given the challenges in modelling small changes in VOC emissions, particularly in remote areas, the expected cost due to human health and environmental impacts of this increase in emissions has not been estimated. However, any associated cost is expected to be negligible.

Oil and gas facilities in British Columbia are expected to realize incremental cost savings as a result of the standing down of administrative requirements related to the Federal Regulations. The federal government is expected to realize incremental cost savings of about $80,000 over a five-year period footnote 6 related to enforcement, compliance promotion, and administration of the Federal Regulations in British Columbia.

Small business lens

The Order is not expected to result in incremental costs to industry, and thus is not expected to result in cost impacts to small businesses.

One-for-one rule

The Order will 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 British Columbia will no longer need to comply with the administrative requirements associated with the Federal Regulations, resulting in average annualized cost savings of $70,647. The average administrative cost savings per business will be approximately $785 per business. footnote 7

Regulatory cooperation and alignment

Protection of the environment is a shared responsibility in Canada. The use of equivalency agreements, together with an order in council standing down the application of a federal regulation in a jurisdiction, is set out in section 10 of CEPA as a tool for avoiding regulatory duplication.

There are no international agreements, obligations or standards that will be affected by the implementation of the Order, as the B.C. Regulation is projected to exceed the methane emission reductions (in CO2e) of the Federal Regulations. This approach is consistent with international commitments overall to limit Canada’s GHG emissions.

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. footnote 8 The SEA concluded that proposals under the framework will reduce GHG emissions and are in line with the 2016–2019 Federal Sustainable Development Strategy goal of effective action on climate change. footnote 9 The Order will result in a small increase in VOC emissions; however, the environmental impact of this increase is expected to be negligible.

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 Order will declare that the provisions of the Federal Regulations do not apply in British Columbia effective on the day on which the Order comes into force, except for the facilities expressly exempted. At the coming into force of the Order, the provincial regulations described above and directly regulating methane emissions will apply exclusively to oil and gas facilities in British Columbia, with the exception of facilities that are federal works or undertakings, including pipelines extending beyond the limits of a province.

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