New rules to reduce methane emissions from Canada's energy sector will cost the industry an estimated $3.3-billion over the next two decades, and will hit conventional oil and natural-gas producers the most dramatically.
But federal officials also say that the value of conserved gas from 2018 to 2035, as a result of the regulatory changes, could total $1.6-billion – alongside billions saved in avoiding costs related to climate-change damage. The draft rules for the oil and gas sector, released on Thursday, are part of Ottawa's climate-change plan that includes a goal of reducing methane emissions by 40 to 45 per cent from 2012 levels by 2025.
The government argues that working to reduce methane emissions from leaky equipment or reducing gas venting is the low-hanging fruit as Canada works to mitigate climate change. It costs less to reduce potent methane emissions compared with other greenhouse gases. And most methane emissions from the oil and gas industry are not subject to the provincial and federal carbon-tax regimes designed to prompt GHG reductions – which is why the government is instead moving to set hard and fast regulations in this area.
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"This is a huge opportunity to be more efficient," said Environment and Climate Change Minister Catherine McKenna as she announced the new rules at a Southern Alberta Institute of Technology (SAIT) lab Thursday.
Methane is the colourless, odourless main component of natural gas, used to heat homes and run industrial factories. The oil and gas industry produces about 44 per cent of Canada's methane emissions – with methane as a whole representing 15 per cent of Canada's GHG emissions. Ottawa is proposing rules regarding equipment leaks, venting, pneumatic devices, compressors and well completions.
Speaking after the announcement on Thursday, Shell Canada president Michael Crothers said the company supports controls on methane emissions, and has long had voluntary leak detection and repair programs in place at its Alberta and B.C. operations. But "maintaining cost competitiveness" remains an issue, he added.
While the Trump administration in the United States continues to move to loosen environmental rules – including those related to methane emissions – Canada is enacting a wide swath of measures to combat climate change. In the industry, there are concerns the differences between the two countries could render the Canadian oil and gas sector less competitive.
Last month, it became clear that the timeline for full implementation of the new methane regulations had been pushed back to 2023, instead of 2020 – mostly in response to industry concerns about competitiveness. But in the end, Ms. McKenna said Thursday, oil and gas producers will still have to enact the changes before the 2025 target.
The minister said the new rules will actually help Canada be more competitive, by encouraging innovation. She said a few U.S. states already have much stricter methane-emission controls.
But Terry Abel, executive vice-president of the Canadian Association of Petroleum Producers, said Canadian oil and gas firms are already achieving better outcomes than many U.S. counterparts. He added that the Canadian sector was on track through technology and other measures to achieve major methane reductions by 2025. Ottawa's detailed rules released Thursday are too prescriptive, he said.
"We're concerned, and we're interested in further discussion," Mr. Abel said. "The details that you see today, perhaps we don't agree they are all necessary to achieve that same reduction."
The Pembina Institute, an environmental think tank, said the rules are important for Canada to meet its international climate-change obligations, including the Paris agreement. It would like to see faster implementation timelines for the regulations.
The new rules will cover more than 95 per cent of oil and gas-industry methane emission sources, according to government officials. At the same time, the government has proposed new regulations to curb the release of volatile organic compounds from oil and gas sites, including petrochemical facilities, refineries and oil-sands upgraders.