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 Alberta: SOR/2020-233

Canada Gazette, Part II, Volume 154, Number 23

Registration
SOR/2020-233 October 26, 2020

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

P.C. 2020-826 October 23, 2020

Whereas, pursuant to subsection 332(1) footnote a of the Canadian Environmental Protection Act, 1999 footnote b, the Minister of the Environment published in the Canada Gazette, Part I, on June 6, 2020, a copy of the proposed 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 Alberta, substantially in the annexed form, and persons were given an opportunity to file comments with respect to the proposed Order or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Whereas, the Minister and the Government of Alberta have entered into a written agreement referred to in subsection 10(3) of that Act to the effect that there are in force by or under the laws of Alberta

Whereas, pursuant to subsections 10(4) and (5) of that Act, the Minister gave notice of the availability of that agreement in the Canada Gazette, Part I, on June 6, 2020, and persons were given an opportunity to file with the Minister comments or a notice of objection;

And whereas, pursuant to subsection 10(6) of that Act, the Minister published in the Canada Gazette, Part I, on September 26, 2020 a notice of availability of a report that summarizes how any comments or notices of objection were dealt with;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, pursuant to subsection 10(3) of the Canadian Environmental Protection Act, 1999 footnote b, makes 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 Alberta.

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 Alberta

Declaration

Non-application

1 Except with respect to a federal work or undertaking, the following 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 Alberta:

Cessation of Effect

Day agreement terminates

2 This Order ceases to have effect on the day on which the agreement between the Minister of the Environment and the Government of Alberta, entitled “Agreement on the Equivalency of Federal and Alberta Regulations Respecting the Release of Methane from the Oil and Gas Sector in Alberta, 2020”, terminates or is terminated under subsection 10(8) of the Canadian Environmental Protection Act, 1999.

Coming into Force

Registration

3 (1) This Order, except paragraph 1(b), comes into force on the day on which it is registered.

January 1, 2023

(2) Paragraph 1(b) comes into force on January 1, 2023.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

The Government of Alberta has introduced regulatory measures to manage methane emissions from the upstream oil and gas sector in a manner that is expected to achieve equivalent methane emission reductions to the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) [the Federal Regulations]. In addition, the provincial Environmental Protection and Enhancement Act contains provisions that are similar to sections 17 to 20 of the Canadian Environmental Protection Act, 1999 (CEPA). The Minister of the Environment has recommended that an order be made declaring that the provisions of the Federal Regulations do not apply in Alberta, on the basis of an agreement with the Government of Alberta that provincial regulatory measures to reduce methane emissions meet the requirements for an equivalency agreement as set out in CEPA. An order is required to avoid regulatory overlap and administrative burden, and allow the Government of Alberta to regulate methane emissions in the oil and gas sector in a manner that best suits its particular circumstances, while ensuring equivalent environmental outcomes to the Federal Regulations.

Background

In March 2016, Canada adopted a target to reduce methane emissions from the oil and gas sector by 40% to 45% below 2012 levels by 2025. footnote 1 This commitment was reaffirmed in the Pan-Canadian Framework on Clean Growth and Climate Change. To help achieve this target, the Government of Canada enacted the Federal Regulations in April 2018, which introduced control measures (facility and equipment standards) to reduce fugitive and venting emissions of methane and volatile organic compounds (VOCs) from the upstream oil and gas sector. These control measures include requirements respecting fugitive emissions, compressors, and well completions, which came into force in 2020, as well as routine venting and pneumatic controller and pump requirements, which will come into force in 2023. The well completion requirements do not apply in Alberta.

In December 2018, the Alberta Energy Regulator made amendments to Directive 060: Upstream Petroleum Industry Flaring, Incinerating, and Venting and Directive 017: Measurement Requirements for Oil and Gas Operations (the Alberta Directives), which put in place requirements for methane emission reductions. These requirements, as amended from time to time, are incorporated by reference in the Methane Emission Reduction Regulation (PDF) [together with the Alberta Directives referred to as the Alberta Regulation], which was registered in December 2018 and came into force on January 1, 2020. In May 2020, further amendments were made to Directive 060 and Directive 017 to increase the stringency and introduce earlier implementation dates for certain provisions. The Alberta Regulation contains regulatory requirements for the same sources of emissions as the Federal Regulations with additional requirements for glycol dehydrators, which are used to remove moisture from produced gas. The Alberta Regulation differs from the Federal Regulations in that control measures are more stringent for new facilities starting in 2022. The Alberta Regulation also contains more stringent requirements for existing pneumatic controllers. The Alberta Regulation requires a lower leak detection frequency at some facility types and less stringent routine venting and pneumatic pump requirements.

Equivalency agreements under the Canadian Environmental Protection Act, 1999

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 to declare 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 government of the province or territory must enter into an equivalency agreement with the Government of Canada. An equivalency agreement is a written agreement signed by the Minister of the Environment and representatives of the province, territory, or Aboriginal government where there are in-force provisions made under the laws applicable to the jurisdiction of the provincial government that are equivalent to the Federal Regulations, as well as provisions that are similar to sections 17 to 20 of CEPA establishing a right to require the investigation of alleged environmental offences. Under subsection 10(8) of CEPA, an equivalency agreement has a maximum term of five years from the date on which it comes into force. An equivalency agreement may also be terminated before this time subject to three months’ notice by either party.

Alberta equivalency agreement

The Government of Canada published an equivalency agreement in the Canadian Environmental Protection Act Registry (the CEPA Registry) entered into on the basis of equivalent methane emission reductions (in carbon dioxide equivalent [CO2e]), under provisions of the provincial laws in force in the jurisdiction of the Government of Alberta, for the oil and gas sector in Alberta and on the basis of similar provisions to sections 17 to 20 of CEPA for the right to require an investigation of alleged environmental offences. These provisions are set out respectively under the Alberta Regulation and the provincial Environmental Protection and Enforcement Act. The agreement was concluded upon signature of the parties and comes into force on the date of registration of the associated order declaring that the Federal Regulations do not apply in Alberta except with respect to federal works and undertakings. This agreement will terminate five years after it comes into force, unless terminated earlier by either party with at least three months’ notice. The agreement is to be reviewed annually, including a review of emissions estimates. A new agreement may be concluded after the expiry of this agreement. A draft equivalency agreement was published in the CEPA Registry and a notice of its availability was published in the Canada Gazette, Part I, on June 6, 2020, initiating a 60-day period for public comment. footnote 2

Equivalent environmental outcomes

For the purposes of determining equivalent outcomes between the Alberta Regulation and the Federal Regulations, the Department of the Environment (the Department) has estimated the methane reduction outcomes (in CO2e) from the Federal Regulations and the Alberta Regulation using the departmental reference case as published in Canada’s Greenhouse Gas and Air Pollutant Emissions Projections: 2018 (PDF) [the 2018 reference case].

Emission reductions were estimated in a manner similar to those described in the Regulatory Impact Analysis Statement for the Federal Regulations, published on May 27, 2017. The analysis was conducted by first developing detailed, bottom-up engineering emission estimates for the baseline and regulatory scenarios for each emission source. These engineering emission estimates were then scaled to align 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 Canadian Energy Regulator.

Using the Department’s 2018 reference case, the Alberta Regulation results in cumulative emission reductions of 18.60 megatonnes (Mt) of methane (in CO2e) for the period starting on January 1, 2020, and ending on December 31, 2024, compared to reductions of 18.71 Mt for the Federal Regulations, as summarized in Table 1 below. These estimates differ by 0.6% and are considered equivalent given the sensitivity range of modelled results. As illustrated in Table 2, the Alberta Regulation is expected to result in greater emission reductions over a 10-year time horizon.

Table 1. Five-year comparison of cumulative methane emission reductions (Mt CO2e) from January 1, 2020, to December 31, 2024
Numbers may not add up due to rounding.
Emission
source		 Alberta Regulation Federal Regulations Difference
Compressors 3.04 2.57 0.47
Fugitive emissions 3.90 4.94 −1.04
Glycol dehydrators 0.86 N/A 0.86
Pneumatic controllers 7.91 4.73 3.18
Pneumatic pumps 0.67 2.87 −2.20
Routine
venting		 2.21 3.59 −1.39
Total 18.60 18.71 −0.11
Table 2. Ten-year comparison of methane emission reductions (Mt CO2e) from January 1, 2020, to December 31, 2029
Numbers may not add up due to rounding.
Year Alberta Regulation Federal Regulations Difference
2020 1.08 1.02 0.06
2021 1.06 1.66 −0.60
2022 2.90 1.62 1.28
2023 6.68 7.19 −0.51
2024 6.87 7.22 −0.35
2025 7.12 7.30 −0.18
2026 7.44 7.43 0.00
2027 7.73 7.56 0.17
2028 8.08 7.68 0.40
2029 8.31 7.79 0.52
Total 57.28 56.48 0.80

Following publication of the proposed Order in the Canada Gazette, Part I, the Department conducted an updated analysis using the latest departmental reference case as published in Canada’s 4th Biennial Report to the United Nations Framework Convention on Climate Change (PDF) [the 2019 reference case]. Using the Department’s 2019 reference case, the Alberta Regulation results in cumulative emission reductions of 17.09 Mt, compared to reductions of 17.35 Mt for the Federal Regulations throughout the equivalency period. While the equivalency agreement was negotiated on the basis of modelling results derived from the Department’s 2018 reference case, results using the Department’s 2019 reference case support the conclusion of equivalent methane emission reductions.

Objective

The objective of 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 Alberta (the Order) is to reduce regulatory overlap and reporting burden, while allowing Alberta to achieve equivalent methane emission reductions in the oil and gas sector operating in the province in a manner that best suits its particular circumstances.

Description

The Order will stand down the application of the Federal Regulations to facilities in Alberta, with the exception of federal works or undertakings as defined in subsection 3(1) of CEPA. The Order will cease to have effect upon the termination of the equivalency agreement, which has a maximum term of five years from the day that the Order is registered, but may be terminated earlier by either party with at least three months’ notice.

Regulatory development

Consultation prior to publication of the proposed Order in the Canada Gazette, Part I

Officials from the Government of Alberta and the Government of Canada were actively engaged in bilateral discussions throughout the development of the Federal Regulations, the Alberta Regulations and Directives, and the proposed equivalency agreement. These discussions have focused on key policy and technical parameters used in support of the determination of equivalent outcomes and to ensure Alberta has in place environmental legislation containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences.

Industry stakeholders wrote to the Department indicating support for an equivalency agreement with Alberta in comments received during the 60-day comment period for the proposed 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. These comments encouraged the Department to move forward with negotiations on equivalency agreements with other provinces to avoid duplicative regulatory requirements.

Environmental non-governmental organizations (ENGOs) had publicly stated concerns regarding the methane emission reductions that would be achieved by the Alberta Regulation. These concerns were also expressed in a letter the Department received from an ENGO consortium in March 2019. In addition, the ENGO consortium published a fact sheet for policy-makers in September 2019 titled “Comparing Alberta and Federal Oil and Gas Methane Emissions Regulations” (PDF), where they describe, qualitatively, areas under the Alberta Regulation that in their view need improvement when compared with the Federal Regulations.

Specifically, these concerns included the Alberta Regulation not requiring specific action to reduce emissions from leaks at oil facilities, pneumatics, and storage tanks, as well as failing to update existing measurement and reporting requirements for solution gas venting. These criticisms were made prior to updates to the Alberta Regulation.

Comments received during the 60-day public comment period following publication of the proposed equivalency agreement and the proposed Order in the Canada Gazette, Part I

A notice of the availability of the proposed equivalency agreement and the proposed Order were published in the Canada Gazette, Part I, on June 6, 2020. They were also posted to the Department’s CEPA Registry website to raise awareness that they were available to the public for comment. The Department also informed a targeted group of key stakeholders of the applicable comment period. The Department received eight written submissions in total from various stakeholders, including the oil and gas industry and industry associations, and ENGOs.

Overall, the feedback received during the comment period was similar to that received prior to publication of the proposed Order. Industry stakeholders have confirmed support for the Order and the equivalency agreement. While submissions from ENGOs did not challenge the Department’s analysis that the Alberta Regulation would achieve equivalent methane emission reductions, they did raise concerns related to Canada’s 2025 methane commitment, enforcement provisions in the Alberta Regulation, and temporary relief measures put in place by the Government of Alberta in response to the COVID-19 pandemic.

Overview of feedback received and responses to specific stakeholder feedback

The Department’s responses to all comments related to the draft agreement have been published on the CEPA Registry. Stakeholder comments and responses are summarized below.

Support for equivalency agreements

Several industry stakeholders were supportive of the proposed equivalency agreement and the proposed Order and expressed support for provincially led regulations in the upstream oil and gas sector. Concerns were raised regarding the possibility of duplicative regulations in the absence of an equivalency agreement, as parallel regulatory regimes (federal and provincial) would increase the cost of compliance and create a more complex regulatory environment.

Impact of COVID-19 temporary regulatory relief measures on equivalency

In June 2020, the Government of Alberta passed a ministerial order temporarily suspending some reporting and monitoring requirements for oil and gas facilities. ENGOs expressed concerns that these temporary regulatory relief measures may result in lower methane emission reductions in 2020, potentially resulting in insufficient reductions over the 2020–2024 period compared to the Federal Regulations. They proposed adding a clause to the agreement to state that temporary measures to suspend regulatory requirements would trigger a federal review of emission outcomes to assess the need for increased stringency of provincial requirements.

The temporary measures put in place by the province of Alberta applied from June 9 to July 15. footnote 3 These temporary measures did not relieve operators of the requirement to meet their methane limits, they simply provided data-reporting relief. Therefore, they are not expected to affect the outcome of equivalent emissions reductions.

2025 federal methane reduction commitment

Recently published Departmental methodology documents relating to equivalency agreements for the provinces of British Columbia, Alberta and Saskatchewan have created concerns for ENGOs that the Government of Canada will no longer be meeting its national methane emissions target. The ENGOs believe that the Federal Regulations must be updated and new equivalency agreements must be negotiated if projected national methane emissions continue to exceed the target.

Canada remains committed to reducing methane emissions from the oil and gas sector by 40% to 45% below 2012 levels by 2025 as an important element of Canada’s climate plan. Several factors can alter the projected percentage reduction towards the 2025 target achieved by regulatory measures, including changes in production forecasts and updates to baseline emissions levels resulting from incorporation of the latest data. The Department updates its analysis of the projected impacts of the methane regulations annually to incorporate the latest data and align with the latest departmental greenhouse gas (GHG) emissions baseline. The Order is not expected to affect this commitment given that methane reductions equivalent to the Federal Regulations are estimated to be achieved under the Alberta Regulation. In addition, as Canada has adopted a national methane emission reduction target, emission reductions in Alberta represent only one contributor to that target. Moreover, the Order standing down the Federal Regulations in Alberta is supported by an equivalency agreement, which will be reviewed annually, including a review of emissions estimates.

The Department will continue to monitor emissions trends and provide updated information publicly through Departmental Results Reports tabled in Parliament each fall. The results achieved through implementation of the Federal Regulations are included in this report under the “Regulations to reduce GHGs and support climate action” section.

Sanctions and enforcement program

One ENGO expressed concerns that Alberta’s proposed regime is not equivalent with respect to penalties applicable under the Federal Regulations. They believe that the penalty scheme under the Alberta Regulation may not be sufficient to deter the recurrence of violations.

Sanctions and penalties under the provincial regime have been considered in the context of the equivalency agreement. The Department is confident that the implementation of the sanctions and penalty regime applicable to the Alberta regime, in particular the relevant provisions under the Alberta Regulation, are sufficient to ensure a comparable environmental outcome as the Federal Regulations.

Modern treaty obligations and Indigenous engagement and consultation

In Alberta, facilities subject to the Federal Regulations were identified on the reserve lands of 26 First Nations. The Order will stand down the application of the Federal Regulations in Alberta, including for those facilities on reserve lands. Equivalent environmental outcomes are expected to be achieved under the Alberta Regulation. Moreover, the Order is expected to result in incremental cost savings for facilities affected by the Federal Regulations, including facilities managed by Indigenous peoples. Upon publication of the draft equivalency agreement and the proposed Order, National Indigenous Organizations and the First Nations subject to the Federal Regulations were notified and invited to provide comment. No comments were received. No modern treaty obligations are expected to be impacted by the 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 Alberta. 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 Alberta Regulation will regulate methane emissions with an equivalent degree of stringency to the Federal Regulations in a manner designed with the specific characteristics of the Alberta oil and gas industry in mind. Furthermore, the Order will reduce regulatory overlap and reporting burden by suspending the requirements of the Federal Regulations in Alberta. Therefore, the 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 Alberta. These cost savings are estimated to be about $1,385,000 over the five-year period of the equivalency agreement. footnote 4

Due to less stringent requirements of the Alberta Regulation for routine venting, the Order will result in an increase in VOC emissions of 17 kilotonnes (kt). The Alberta Regulation is estimated to achieve 36 kt of VOC reductions, compared to 53 kt of emission reductions in Alberta under the Federal Regulations, over the equivalency period. This 17 kt increase represents less than 1% of total VOC emissions from the oil and gas sector in Alberta over the period of analysis. VOCs are air pollutants that contribute to the formation of ground-level ozone and particulate matter (PM2.5), which are the main constituents of smog. These pollutants are known to cause adverse health impacts, including increased risk of premature death and chronic and short-term respiratory and cardiac problems, as well as negative environmental effects on vegetation, buildings and visibility.

The effect of VOC emissions on atmospheric concentrations of PM2.5 and ground-level ozone is highly dependent on baseline ambient air quality in a given geographic location. Furthermore, the impact of VOC emissions on ozone- and PM2.5-related health effects depends on the size of the populations affected by the changes in air quality. The facilities affected by the Federal Regulations and Alberta Regulation are located in relatively remote areas, thus the potential Canadian population health and environmental impacts associated with the increase in VOC emissions from the Order are expected to be low.

Small business lens

While facilities that produce and/or receive less than 60 000 m3 of hydrocarbon gas per year are exempt from the Federal Regulations to help limit impacts on small businesses, small businesses own facilities that exceed this threshold. In 2018, the Department identified 354 small businesses in Alberta that would be affected by the Federal Regulations. As a result of reduced regulatory overlap and reporting burden achieved by suspending the requirements of the Federal Regulations in Alberta, the Order will result in cost savings for these small businesses.

One-for-one rule

The Order will reduce administrative costs imposed by the Federal Regulations on oil and gas facilities and result in an “out” under the one-for-one rule. Oil and gas facilities in Alberta will no longer need to comply with the administrative requirements associated with the Federal Regulations, resulting in average annualized cost savings of $1,305,206. The average administrative cost savings will be approximately $2,133 per business. footnote 5

Regulatory cooperation and alignment

Protection of the environment is a shared responsibility in Canada. The use of equivalency agreements, together with an order 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 Government of Alberta has final regulatory requirements applicable to the oil and gas sector to reduce methane emission reductions in the oil and gas sector in a manner equivalent to the Federal Regulations. The Department is satisfied that these measures, in combination with the applicable provisions in Alberta’s Environmental Protection and Enhancement Act, meet CEPA requirements for equivalency. Therefore, the order suspending the application of the Federal Regulations in Alberta has been recommended by the Minister of the Environment.

The Alberta Regulation is projected to achieve equivalent methane emission reductions to the Federal Regulations. Thus, Canada’s commitments to reduce methane emissions by 40% to 45% of 2012 levels by 2025 and Canada’s Paris Agreement commitment are not expected to be affected.

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 for Canada (PDF) goal of effective action on climate change.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this Order.

Implementation, compliance and enforcement, and service standards

The Order declares that the provisions of the Federal Regulations do not apply in Alberta effective on the day on which the Order comes into force, except for federal facilities expressly exempted. Upon the coming into force of the Order, the Federal Regulations no longer apply to oil and gas facilities in Alberta, with the exception of facilities that are 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
K1A 0H3
Email: ec.methane-methane.ec@canada.ca

Matthew Watkinson
Director
Regulatory Analysis and Valuation Division
Economic Analysis Directorate
Strategic Policy Branch
Environment and Climate Change Canada
200 Sacré-Cœur Boulevard
Gatineau, Quebec
K1A 0H3
Email: ec.darv-ravd.ec@canada.ca