The Alberta government has promised to reduce methane emissions from the oil and gas sector by 45% by 2025. How to accomplish that goal has become somewhat contentious.
Industry is on board, but wants individual companies to be able to choose the best method to reduce emissions. Critics want more prescriptive regulations, which producers fear will raise compliance costs.
“Industry has been very active in this space for a number of years, has already proactively achieved reductions without very prescriptive regulations,” said Patrick McDonald, director, climate and innovation, Canadian Association of Petroleum Producers (CAPP), in an interview. “While we can appreciate there is the need to improve on data quality and such things, overall we’re looking to achieve the correct outcomes.”
Data is part of the problem, says Andrew Read, a senior policy analyst with the Pembina Institute. No one knows exactly how much methane is leaking from wells or pipes or facilities. “We really don't have a firm grasp of the measurement side of methane. There's been a lot of studies and more studies are being done right now in terms of how under-estimated these emissions really are. There's an expectation that they're actually much greater than we currently understand them to be,” he said in an interview.
Measuring fugitive methane emissions is difficult, according to Kent Fellows, an energy economist with the School of Public Policy at the University of Calgary. Other greenhouse gas emissions are relatively easy to calculate based upon how much fuel is burned. “It's much, much harder to figure out exactly what fugitive emissions look like. We know that there are a number of technologies—ranging from sniffer trucks with sensors reading the parts per million all the way up to satellite-based technology,” he said in an interview. “The expectation is that proper monitoring of these emissions to get a baseline is probably going to involve some combination of these technologies. We just don't know what that looks like yet from a cost-benefit perspective.”
If emissions can be accurately measured, they can be priced, says Read, and a carbon tax - similar to the Alberta oil sands carbon levy and emissions regulations currently being developed by the Alberta government - would be the most efficient way of getting to the 45% target. “You want to have some really fine precision in your measurements so that you can apply that carbon price fairly. if it comes back when we get better measurements after we've implemented a tax at these bad estimates of methane emissions, it comes back and maybe someone's overpaid, or someone's underpaid, what's the recourse if that occurs because of the measurement mistake?” he asks.
CAPP isn’t climbing on the carbon pricing bandwagon just yet, at least not with respect to fugitive methane emissions. McDonald argues that producers have been adopting new technologies for reducing emissions for some time and encouraging more innovation should be the goal of the new regulations. “If we are levying methane emissions as well, it might in some degree take away some of those resources that would then be able to be put into technology development and actually moving to the reduction. So currently, that is really our focus,” he said.
Read points out that Alberta has exempted the oil and gas sector from the province-wide $30 a tonne carbon tax until 2023. He thinks six years should be plenty of time to figure out how to accurately measure fugitive methane emissions. “Easily by 2023, when that carbon pricing may apply to the oil and gas sector, I think we could be well set up to potentially apply a carbon price to methane emissions. And I guess it's important to note we already have-- the British Columbia government is making commitments to applying that carbon price to methane emissions as well. So there's already sort of movement going that way and we just need to see the regulatory rules to sort of motivate that enhanced measurement.”
The Alberta Energy Regulator isn’t saying yet whether it favours prescriptive regulation, a carbon levy, or some other approach. “The AER creates and enforces requirements that ensure that Alberta’s energy resources (oil, gas, bitumen, and coal) are developed responsibly,” the provincial agency said in an email. “The AER’s methane reduction requirements are being drafted as we speak. Once the draft requirements are finalized, they will be posted for public feedback.”
In a July study, CAPP estimated the “cumulative costs associated with the changes in provincial and federal government policies and regulations” at $450 million to $760 million a year in the near-term. As Canadian producers grapple with the new “lower for longer” price environment for both oil and gas, containing those regulatory compliance costs as governments toughen climate change policies is a major objective for industry. Some industry players hope that 2019 will see the defeat of the left-leaning NDP and election of the more industry-friendly United Conservative Party, which has vowed to eliminate the provincial carbon tax, currently set at $20 per tonne and set to rise to $30 next year. The problem with that strategy is the federal government is committed to the same methane emission reduction targets as Alberta and has promised to impose its own regulations if a province refuses to do so. CAPP’s only viable option, it appears, is to work with the Alberta government and the provincial regulator, hoping the new regulations will the the least prescriptive—and onerous—possible.