Canada Gazette, Part I, Volume 158, Number 26: 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, 2025
June 29, 2024
Statutory authority
Canadian Environmental Protection Act, 1999
Sponsoring department
Department of the Environment
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
Issues
The current Equivalency Agreement between the Minister of the Environment and the Province of British Columbia, which forms the basis for the non-application of 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 the Province of British Columbia is set to expire on March 25, 2025.
A new equivalency agreement is now being negotiated. An updated Order-in-Council (the proposed Order) is required to avoid regulatory overlap and duplicative reporting burden.
Background
In April 2018, the Government of Canada published the Federal Regulations. The Federal Regulations introduced control measures (facility and equipment standards) to reduce fugitive and venting emissions of hydrocarbons, including methane, from the upstream oil and gas sector. The Federal Regulations came into force on January 1, 2020. On December 17, 2018, the British Columbia Oil and Gas Commission approved a final amendment to the existing Drilling and Production Regulations footnote 2 under the Energy Resource Activities Act footnote 3 (the BC Regulations), which contains requirements for methane emissions reductions.
In 2020, the Minister of the Environment entered into a five-year equivalency agreementfootnote 4 with British Columbia and made an associated equivalency Order to declare that the Federal Regulations do not apply to the province over the period of the equivalency agreement.footnote 5 This approach reduces regulatory overlap and administrative burden. British Columbia will continue to apply its own methane emission regulations and facilities will only face one set of requirements. This equivalency agreement recognized that British Columbia’s regulations would achieve equivalent outcomes in reducing methane emissions compared to the Federal Regulations. The current equivalency agreement is in force until March 25, 2025, unless terminated earlier by either party on three months’ notice.
Modelling analysis conducted for the existing Order showsfootnote 6 the current British Columbia Regulation results in equivalent GHG emission outcomes to the Federal Regulations up to 2030. Based on this, the Government has negotiated a five-year equivalency agreement for the 2025 to 2029 period with British Columbia in order to declare that the Federal Regulations do not apply to the province over the period of this equivalency agreement.
Equivalency agreements under the Canadian Environmental Protection Act, 1999 (CEPA)
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 declaring 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 province or territory must first enter into an equivalency agreement with the Minister of the Environment. An equivalency agreement is a written agreement entered into by the Minister of the Environment and the province or territory declaring that there are in force in the province or territory, laws containing provisions that are equivalent to the Federal Regulations, and laws containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences under laws of the province or territory. Under subsection 10(8) of CEPA, an equivalency agreement has a maximum term of five years after the date on which it comes into force. An equivalency agreement may be terminated before this time subject to a three-month notice by either party.
The Department of the Environment has indicated that it is willing to consider developing equivalency agreements for GHG emission regulations with interested provinces and territories, in order to reduce regulatory overlap and provide greater flexibility for regulated sectors. In the case of GHG regulations, provincial or territorial laws are considered to be equivalent if they result in equivalent GHG emission outcomes, calculated in terms of carbon dioxide equivalent (CO2e). In particular, GHG emissions under provincial or territorial regulations must be no greater than they would have been if the corresponding federal regulations had applied instead. As such, a province or territory is expected to attain the GHG outcome that would have occurred under the Federal Regulations in a way that best suits its particular circumstances.
British Columbia equivalency agreement (2025 to 2029)
The Government of Canada intends to publish a new draft equivalency agreement. This agreement is based on expected methane emissions (in CO2e), under provisions of the provincial laws in British Columbia, and on the fact that these provincial laws contain similar provisions to sections 17 to 20 of CEPA for the right to require an investigation of alleged offences. These provisions are set out under the British Columbia Regulations. This agreement would come into force on the date of registration of the proposed Order declaring that the Federal Regulations do not apply in British Columbia except with respect to federal works or undertakings. The agreement would be reviewed on an annual basis. The agreement institutes information-sharing requirements for British Columbia that include facility level emissions data, verification activities, and enforcement measures. This draft equivalency agreement will be published in the CEPA registry with a notice of its availability published in the Canada Gazette, Part I.
This agreement would terminate on December 31, 2029, unless terminated early by either party with at least three months’ notice. Specifically, the agreement acknowledges the Regulations Amending the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) [the proposed Amendments] that were published in the Canada Gazette, Part I, on December 16, 2023. If these regulations are finalized in the Canada Gazette, Part II, it will trigger an equivalency review process. Should the review show ongoing equivalent outcomes, this could form the basis of a renewed agreement and associated order. Should the review not show equivalent outcome, the Government of Canada will provide three months’ notice of termination, and the agreement will terminate on December 31, 2026. This date reflects a key coming-into-force date set out in the proposed Amendments, as published in December 2023.
Equivalent environmental outcomes
For the purposes of determining equivalent outcomes between the British Columbia Regulations and the Federal Regulations, the Department has estimated the methane reduction outcomes (in CO2e) from the Federal Regulations and the British Columbia Regulations using the departmental reference case as published in Canada’s Greenhouse Gas and Air Pollutant Projections: 2018.
Emission reductions were estimated in a manner similar to those described in the Regulatory Impact Analysis Statement for the Federal Regulations.footnote 5 The analysis was conducted by first developing detailed, bottom-up engineering emissions estimates for the baseline and regulatory scenarios for each emissions source, which are aligned with the departmental reference case. The departmental reference case for the oil and gas sector was determined using historic emissions from the departmental National Inventory Report and the production forecast of oil and gas from the Canada Energy Regulator.
Based on these estimates, the British Columbia Regulations result in cumulative emission reductions of 5.75 megatonnes (Mt) of methane (in CO2e) for the period starting on January 1, 2025, and ending on December 31, 2029, compared to 5.25 Mt of reductions under the Federal Regulations, as summarized in Table 1 below. The British Columbia Regulations are expected to achieve higher emission reductions from pneumatic devices and surface casing vent flows, while the Federal Regulations would be expected to achieve higher reductions from the other emissions sources, such that emissions reductions are achieved in a manner that best suits the province’s particular circumstances.
| Emissions source | British Columbia Regulations | Federal Regulations | Difference |
|---|---|---|---|
| Compressors | 0.43 | 0.63 | -0.20 |
| Fugitives | 1.71 | 1.66 | 0.05 |
| Routine venting | 0.02 | 0.05 | -0.03 |
| Pneumatic devices | 3.40 | 2.92 | 0.48 |
| Surface casing vent flows | 0.09 | table 1 note * | 0.09 |
| Total | 5.75 | 5.25 | 0.39 |
Table 1 note(s)
|
|||
As illustrated in Table 2, the BC Regulations are estimated to achieve higher emission reductions compared to the Federal Regulations over the five-year period.
| Year | British Columbia Regulations | Federal Regulations | Difference |
|---|---|---|---|
| 2025 | 0.93 | 0.93 | -0.01 |
| 2026 | 1.09 | 1.03 | 0.06 |
| 2027 | 1.19 | 1.08 | 0.11 |
| 2028 | 1.24 | 1.09 | 0.15 |
| 2029 | 1.30 | 1.11 | 0.19 |
| Total | 5.75 | 5.25 | 0.49 |
Objective
The objective of the proposed Order is to reduce regulatory overlap and reporting burden, having established that British Columbia’s laws are expected to achieve equivalent GHG emission reductions in the oil and gas sector in a manner that best suits its particular circumstances.
Description
The proposed Order, made pursuant to subsection 10(3) of CEPA, would suspend 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 proposed Order will cease to have effect upon the termination of the equivalency agreement on December 31, 2029, or if the equivalency agreement is terminated early by either party.
Regulatory development
Consultation
Officials from the Government of British Columbia and the Government of Canada are engaged in bilateral discussions on the renewal of the proposed equivalency agreement. These discussions are focused on key policy and technical parameters used in support of the determination of equivalent outcomes and to ensure British Columbia has in place laws containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences under environmental legislation of the province or territory, as well as information-sharing arrangements agreed to with British Columbia representatives allowing the conduct of annual reviews of the agreement.
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 proposed Order is to declare that the Federal Regulations are not applicable in British Columbia, on the basis that the British Columbia Regulations are equivalent to the Federal Regulations. Equivalent environmental outcomes are expected to be achieved under the British Columbia Regulations. No modern treaty obligations are expected to be impacted by the proposed Order.
Instrument choice
An order is the only regulatory instrument under CEPA for the Governor in Council to declare that the Federal Regulations do not apply in British Columbia. Non-regulatory options such as a voluntary option or code of practice are therefore not suitable tools for achieving the objective.
Regulatory analysis
Benefits and costs
The British Columbia Regulations will regulate methane emissions in a manner that results in equivalent outcomes to the Federal Regulations and in a manner designed with the specific characteristics of the British Columbia oil and gas industry in mind. Furthermore, the proposed Order will reduce regulatory overlap and reporting burden by suspending the requirements of the Federal Regulations in British Columbia. As a result, the proposed Order is expected to result in incremental compliance and administrative cost savings to industry.
The federal government is expected to realize incremental cost savings from suspended administrative activities related to enforcement, compliance promotion, and administration of the Federal Regulations in British Columbia. These cost savings are estimated to total about $94,213 over a five-year period (2023 Canadian dollars).footnote 8
Small business lens
Given that the proposed Order is not expected to result in incremental costs to industry, it is not expected to result in incremental cost impacts to small business.
One-for-one rule
The one-for-one rule would apply to the proposed Order, constituting an “out” as per the Policy on Limiting Regulatory Burden on Business. However, those cost reductions have already been accounted for in the Regulatory Impact Analysis Statement for the previous order, which covered the 2020–2029 analytical period. Accordingly, no additional impact was assessed for the proposed Order.
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 suspending the application of a federal regulation in a jurisdiction, is included in section 10 of CEPA as a tool for avoiding regulatory duplication.
The British Columbian Regulations require the oil and gas sector to reduce venting and fugitive methane emissions. If the Minister is satisfied that the requirements of section 10 of CEPA regarding equivalent provisions and the requirements of sections 17 to 20 regarding investigations have been met, the parties may sign the equivalency agreement. If the Governor in Council then approves the proposed Order, it will suspend the application of the Federal Regulations in British Columbia.
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. The SEA concluded that proposals under the framework will reduce GHG emissions and are in line with the 2016–2019 Federal Sustainable Development Strategy (FSDS) (PDF) goal of effective action on climate change. A preliminary scan concluded that a SEA is not required for the proposed Order, since they continue to align with the updated 2022–2026 FSDS to reduce emissions of methane from the oil and gas sector.
Gender-based analysis plus
No impacts based on gender or other identity factors have been identified for this proposal.
Implementation, compliance and enforcement, and service standards
Implementation
The proposed Order declares that the Federal Regulations do not apply in British Columbia effective on the day on which the Order comes into force, except for federal works and undertakings, which includes interprovincial pipelines.
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
J8Y 3Z5
Email: methane-methane@ec.gc.ca
Matthew Watkinson
Executive Director
Regulatory Analysis and Valuation Division
Economic Analysis Directorate
Strategic Policy Branch
Environment and Climate Change Canada
351 Saint-Joseph Boulevard
Gatineau, Quebec
J8Y 3Z5
Email: darv-ravd@ec.gc.ca
PROPOSED REGULATORY TEXT
Notice is given, under subsection 332(1)footnote a of the Canadian Environmental Protection Act, 1999 footnote b, that the Governor in Council proposes to make 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, 2025 under subsection 10(3) of that Act.
Any person may, within 60 days after the date of publication of this notice, file with the Minister of the Environment comments with respect to the proposed Order or a notice of objection requesting that a board of review be established under section 333footnote c of that Act and stating the reasons for the objection. Persons filing comments are strongly encouraged to use the online commenting feature that is available on the Canada Gazette website. Persons filing comments by any other means, and persons filing a notice of objection, should cite the Canada Gazette, Part I, and the date of publication of this notice, and send the comments or notice of objection to Magda Little, Director, Oil, Gas and Alternative Energy Division, Department of the Environment, 351 Saint-Joseph Boulevard, Gatineau, Quebec K1A 0H3 (email: methane-methane@ec.gc.ca).
A person who provides information to the Minister may also submit a request for confidentiality under section 313footnote d of that Act.
Ottawa, June 21, 2024
Wendy Nixon
Assistant Clerk of the Privy Council
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, 2025
Declaration
Non-application
1 Except with respect to a federal work or undertaking, 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.
Cessation of Effect
Termination of agreement
2 This Order ceases 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, 2025” terminates or is terminated under subsection 10(8) of the Canadian Environmental Protection Act, 1999.
Repeal
3 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 footnote 7 is repealed.
Coming into Force
4 This Order comes into force on the day on which it is registered.
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