Written by Thomas McInerney, Brad Gilmour and Parker McKibbon
On May 12, 2020, the Alberta Ministry of Environment and Parks jointly with the federal government announced a preliminary equivalency agreement regarding the reduction of methane emissions.
Currently in Alberta, methane emitters are subject to federal and provincial overlapping regulatory frameworks, which is problematic as it increases the burden and cost of compliance. To solve this problem, Alberta has amended Alberta Energy Regulator (AER) Directives regulating methane emissions to align with the federal regulatory framework and has entered into the agreement allowing Alberta to opt out of the federal regulatory framework. If adopted, the agreement would be finalized with an Order in Council allowing Alberta to solely regulate methane emissions.
Replacing the Overlapping Regulatory Framework
On January 1, 2020, the federal Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector)1 and the new provincial methane reduction rules came into effect in Alberta. The provincial methane reduction rules are contained in AER Directive 017: Measurement Requirements for Oil and Gas Operations and Directive 060: Upstream Petroleum Industry Flaring, Incinerating and Venting. This subjected methane emitters to two sets of complex and overlapping methane reduction and record-keeping rules. The agreement will allow methane emitters in Alberta to be subject to the provincial AER Directives regulating the reduction of methane emissions, rather than the federal regulation, reducing the overall regulatory burden and potential uncertainty associated with requirements to comply with two regimes regulating the same substance in similar circumstances for essentially the same purposes.
The agreement confirms that Alberta's regulatory framework will achieve the same methane emission reductions as the federal regulation by 2025, exceeding the reductions of the federal regulation by 2030.
The agreement will need to undergo a legislative review process and be approved by the federal cabinet. Pursuant to the legislative review process, Environment and Climate Change Canada will post the agreement for a 60-day comment period and will respond to those comments. While the agreement is undergoing the legislative review process, the federal regulation will continue to apply in Alberta.
Changes to AER Methane Emission Reduction Directives
In conjunction with the agreement, on May 12, 2020, the AER issued Bulletin 2020-12: Requirements Aimed at Reducing Methane Emissions Amended and made changes to Directive 017 and Directive 060, which are effective immediately.
The AER changed Directive 017 by lengthening the duration required to test gas production at heavy oil and crude bitumen batteries from 24 hours to 72 hours starting in 2023. This change does not apply to thermal in situ facilities.
The AER changed Directive 060 by:
- including reduced carbon levies in economic evaluations of gas conservation projects;
- revising measurement and reporting requirements to ensure consistency with the definitions for fuel, flare and vent gas; and
- amending vent gas limits for crude bitumen batteries, pneumatic devices, compressor seals, and glycol dehydrators beginning in 2022, the exemptions for the overall vent gas limit and the defined vent gas limit.
The purpose of the amendments are to align the AER Directives with the agreement. These changes are in addition to the significant methane reduction requirements introduced through Directive 060 in January 2020.
Timing of Changes
While the agreement will add more regulatory certainty in respect of methane emission reduction requirements, it will not come into force until the completion of the legislative review process and approval by the federal cabinet. In the interim, the federal regulation will continue to apply.
The oil and gas industry should expect more updates on the application of the agreement once Environment and Climate Change Canada has responded to public comments on the agreement following the initial 60-day comment period.
1. The federal regulation is made pursuant to the toxic substances provisions in the Canadian Environmental Protection Act, 1999 and includes the regulation of methane which was deemed to be a "toxic" substance by the federal cabinet in November 2005, on the basis that it is a greenhouse gas.