As climate change advances into the forefront of the minds of the public, governments are under pressure to implement stricter regulatory requirements on companies with high emissions intensities, requiring them to drastically reduce their emissions, or pay steep penalties for failing to do so. Oil and gas companies are under particular scrutiny- current estimates suggest about one-quarter of Canadian greenhouse gas emissions come from the sector.
Greenhouse gas emissions have been increasing across Canada. Oil and gas sector emissions have approximately doubled since 1990, with increases across natural gas production, conventional oil, and oil sands extraction, as shown in the figure below. Because of these upwards trends, the Canadian government, as part of its 2015 commitment to the Paris Agreement1, will be implementing much stricter-than-before regulations to limit emissions in the oil and gas sector, with the objective of reaching a 75% reduction in oil and gas methane emissions by 2030, below 2012 levels.
Figure 1. Canadian oil and gas industry greenhouse gas emissions from 1990 to 20202. Note that the values reflected here are in carbon dioxide equivalent, not units of methane. For simplicity of comparison, greenhouse gas emissions volumes are often converted into units of CO2e. Note the decrease in 2020 is attributed to a reduction in oil and gas demand and changes in trading that resulted from the COVID-19 pandemic.
Quick Summary of the Regulations:
To achieve the lofty methane emission reduction goals, the government proposed new regulations in November 2022, with stakeholder feedback open until December 12, 2022. One of the most significant proposed changes is that virtually all facilities that handle natural gas are included within the framework. Previously, only certain facilities and sources were included. This massive increase in the scope of included sites will require significant investment from producers to meet the targets.
Some of the biggest changes are surrounding gas conservation, destruction, and flaring. These changes aim to ensure that all gas can be conserved, used, or effectively destroyed. For a more in-depth discussion of waste gas management strategies, check out our blog post.
- Flaring is prohibited at oil sites. Flares are used to destroy associated gas (or waste gas) from oil sites that don’t have the appropriate gas takeaway infrastructure or capacity. The EPA estimates that a properly operated flare achieves a 96.5% combustion efficiency, while lower performance flares are closer to 65% efficient.3
- Enclosed combustion methods and equipment would be required to have an auto-ignition, eliminating the risk of unlit destruction equipment (resulting in direct methane emissions)
- Destruction equipment would be required to operate at a 99%+ control efficiency. Equipment such as enclosed combustors and incinerators are the only commercial options to achieve this level of destruction.
- Conservation equipment would be required to operate at a 98%+ efficiency.
- Fuel combustion would be required to meet a 95% control efficiency.
To see the full breakdown of proposed source-by-source amendments to the regulation, click here.
So why the focus on the destruction of natural gas in the regulations?
Emissions in the oil and gas sector typically come in two forms: carbon dioxide and methane. Methane is the primary component of natural gas, making up 70-98% of natural gas as it comes out of the ground (depending on the geology).4
Methane emissions occur when natural gas (mostly methane) enters the atmosphere. Methane has a higher greenhouse potential compared to carbon dioxide.
Methane can enter the atmosphere when it is let out of oil and gas systems on purpose (vented emissions), when it escapes by accident (fugitive emissions), or when destruction systems don’t work as they should. While uncommon in Canada, there also exist some places where the capacity of the oil and gas supporting infrastructure to take product away from site and to market (pipelines, tanks, etc.) is lower than how much product is actually produced. As such, many producers have to make a choice: get rid of natural gas they don’t have the capacity for or stop producing the well entirely.
CO2, on the other hand, results from the combustion of hydrocarbons (including methane). This means that when natural gas is burned, carbon dioxide is one of the end products. This is the balanced combustion equation for methane:
CO2 has a lower GHG potential than methane, so to make climate change-reducing action as quickly as possible, the focus is on reducing methane emissions via combustion or destruction into CO2.
How will this impact producers?
The prohibition of flaring at oil sites may significantly impact producers. In Canada, flaring volumes are already limited, and producers require regulatory approval for most flaring activities. Flaring is still permitted at gas sites, although these sites typically don’t rely on flaring as part of their daily operations.
The best option for producers who still need access to gas destruction equipment on their sites is to replace flares with higher-efficiency destruction equipment, such as enclosed combustors or incinerators.
Producers may also opt to construct additional infrastructure on their sites to eliminate the need for destruction by bringing the product to market or utilizing it on-site. These measures will be more costly to producers and may be entirely uneconomical, depending on the production of the site and commodity pricing.
For producers who can’t build extensive new infrastructure, changing out flares for enclosed combustors may represent the best and easiest opportunity to stay compliant, Figure 2.
Figure 2: Photos showing Emission Rx E-Series Enclosed Combustor on a Cold Heavy Oil Production (CHOPS) site combusting casing gas.
What is unknown:
Much remains unknown about these new proposed regulations. The feedback period ended recently, and no new announcements have since been made. It is unknown which of the proposed rules will make it through to the final version of the regulation. It is also currently unknown when these regulations will appear once they are finalized.
It remains to be seen whether these regulations will come into effect all at once or if there may be a phased approach. Finally, how these regulations will tie in with other emissions-limiting programs, such as the Alberta TIER system, and if failure to comply with these regulations may result in penalties in the form of carbon taxes is unknown.
What is known:
Regardless of exactly which proposed changes make it into the final ruling, significant changes are coming for Canadian producers. Canada has demonstrated its commitment to reducing industrial emissions from the oil and gas sector. Oil and gas producers should prepare for these changes and should begin implementing them sooner than later. Canadian producers have the ability to become global leaders in the reduction of methane emissions and can set a precedent for the rest of the world.
- Canada, E. and C. C. Paris Agreement. https://www.canada.ca/en/environment-climate-change/services/climate-change/paris-agreement.html (2015).
- Canada, E. and C. C. Greenhouse gas emissions. https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html (2007).
- Parameters for Properly Designed and Operated Flares- US EPA Office of Air Quality Planning and Standards (2012). https://www3.epa.gov/airtoxics/flare/2012flaretechreport.pdf
- Natural gas explained – U.S. Energy Information Administration (EIA). https://www.eia.gov/energyexplained/natural-gas/.