With the COP 21 Paris Climate Change Conference as the backdrop, Canadian Prime Minister Justin Trudeau and U.S. President Barack Obama have agreed to focus on the reduction of methane emissions from the oil and gas sector.
According to a report in the Globe and Mail, “The federal government will impose regulations to cut methane emissions in the oil and gas industry by as much as 45 per cent as part of a bilateral climate deal announced Thursday during Prime Minister Justin Trudeau’s official visit to Washington.” Using 2012 as the base year, the target year for achieving the goal of a 40-45 per cent reduction is 2025.
The United States already proposed a rule on September 18, 2015, to reduce methane (and volatile organic compounds) for the oil and gas industry. According to information on the US Environmental Protection Agency’s website, “The agency will begin with a formal process to require companies operating existing oil and gas sources to provide information to assist in the development of comprehensive regulations to reduce methane emissions.”
Since 2005, Canada has been a part of the Global Methane Initiative, which is a voluntary program aimed at methane recovery. Environment and Climate Change Canada will propose new regulations in early 2017 to meet Mr. Trudeau’s goal.
What will this mean for the oil and gas industry? Likely more controls, monitoring, and reporting. This focus on methane will not likely be limited to the oil and gas sector, but landfills, mining, and agriculture can likely expect similar pressure to reduce methane emissions.
Part of the challenge as it relates to methane emissions from oil and gas is lack of consensus as it relates to these emissions. To this point, studies have varied, and, in some cases, significantly. See “Methane Leaks from North American Natural Gas Systems” in Science and “Measurements of methane emissions at natural gas production sites in the United States,” Proceedings of the National Academy of Sciences of the United States of America.
Further, there is not a universal agreement that additional regulation is necessary to achieve the reductions. As pointed out in an article by the international law firm, Jones Day, “Despite U.S. oil and natural gas production being, until recently, at their highest level in nearly 30 years, EPA data shows that methane emissions in the United States have decreased 15 percent since 1990.”
And, for the somewhat beleaguered energy sector that has seen persistently low energy prices and a continued glut of oil and gas in the market, this will be yet another challenge.
The UK Guardian recently reported, “The global oil glut is larger than previously thought and the risk of prices falling further has increased, the International Energy Agency has said.”
Dinara Millington, Vice President of Research at the Canadian Energy Research Institute, said, “If you look at the historical data, the province of Alberta is already at 95 to 96 per cent of conservation of the gas that would have been flared or vented…So if that 45 per cent target means that we have to capture the rest of that five per cent, I would say it’s a hefty goal, because there are sources of methane reduction that might not actually be feasible — physically or economically.”
Whether you think these steps to reduce methane are necessary and appropriate or unnecessary and over-reaching is not at question at this point. And, while we don’t know the nuances of these future regulations of methane (or any other greenhouse gas), like most regulation, it’s reasonable to expect that the devil will be in the details.
Like you, we’ll keep a watchful eye and ear to this and other environmental regulatory developments. In the meantime, if you have questions about an environmental regulatory issue, please contact my colleague, Christopher Paré, P. Geo (cpare@dragun.com) at 519-979-7300, ext 114.