Canada: Key Takeaways From The Proposed Amendments To Canada's Methane Emissions Reduction Legislation
Global Energy and Climate Bulletin

Introduction

In 2021, Canada joined 110 countries in endorsing the Global Methane Pledge at the UN Climate Change Conference ("COP26"), committing to an ambitious target of 75% reduction in oil and gas sector methane emissions below 2012 levels by 2030. In September 2022, Canada reiterated its commitment to this target and to the publishing of amendments to the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector), SOR/2018-66 (the "Federal Regulations"), which originally came into force in 2018. On December 4, 2023, Steven Guilbeault, Minister of Environment and Climate Change, announced the publishing of the proposed amendments to the Regulations (the "Proposed Amendments").

Key Elements

A. Building on Provincial Methane Initiatives

The Proposed Amendments build on an established history of provincial-level methane emissions reduction regulations in the oil and gas industry, particularly in Alberta. Starting in the 1990s, Alberta was the first jurisdiction to regulate flaring emissions. In 2014, Alberta committed to methane emissions reduction by 45% below 2014 levels by 2025 through an emissions framework aimed at controlling flaring, venting, and fugitive emissions. In 2018, Alberta enacted the provincial Methane Emission Reduction Regulation, Alta Reg 244/2018, or MERR, which was a key element in Alberta achieving its 45% methane reduction goal in 2022, three years ahead of schedule. The federal government also entered into an equivalency agreement with Alberta on September 29, 2020, recognizing Alberta's MERR as demonstrating equivalent expected methane emissions reduction when compared with federal methane regulations.

B. Emphasis on Continuous Monitoring

Continuous monitoring features prominently in the Proposed Amendments, as part of a performance-based approach. "Continuous monitoring system" is defined as a system in which sensors and other equipment continuously monitors hydrocarbon gas emissions at an upstream oil and gas facility. Operators that install a continuous monitoring system are exempt from certain requirements under the Federal Regulations. The Proposed Amendments also implement an oversight mechanism for continuous monitoring. Under section 2(1) of the Federal Regulations, an "auditor" is a person independent of the operator and owner of a facility who has knowledge of, and experience with, emissions monitoring systems. The auditor would perform an annual inspection for fugitive emissions at upstream oil and gas facilities, and for hydrocarbon emissions at facilities that are using a continuous monitoring system. As the certification process for the auditor role is not yet clear under the Proposed Amendments, engagement with the provinces during the creation of a certification process will be critical.

In contrast, Alberta's robust approach to continuous monitoring of methane emissions is captured in Directives 017 and 060, enacted by the Alberta Energy Regulator (AER). The Directives provide a detailed and empirically-backed framework for emissions monitoring and measurement to ensure precise measuring of gas flow in various conditions and facilities. The Directives ensure standardization of data collection and limit the risk of human error in emissions measurement.

C. Facility Classifications

The Proposed Amendments also define two types of facilities subject to different regulatory requirements. A Type 1 facility consists of an upstream oil and gas facility at which any of the following equipment is installed: (a) a natural gas compressor, (b) a storage tank for produced liquids, (c) a flare, or (d) a gas-liquid separator. A Type 2 facility is an upstream oil and gas facility that is not a Type 1 facility. Type 1 facilities are subject to more frequent comprehensive inspections for fugitive emissions than Type 2 facilities. Another distinction is that continuous monitoring systems must also provide emission flow readings at a much more frequent rate for Type 1 facilities than for Type 2.

Takeaways

The Proposed Amendments are a step towards more aggressive climate action necessary to meet Canada's commitment to a 75% reduction in oil and gas sector methane emissions below 2012 levels by 2030. Engagement with Alberta on realizing this commitment will be a beneficial strategy for the Government of Canada, due to the province's long-standing history of methane emissions regulation and success in significantly reducing its methane emissions in recent years. The MERR and Directives, particularly 017 and 060, will supplement the broader oversight and continuous monitoring requirements introduced by the Proposed Amendments with a sound technical basis. The Proposed Amendments will undoubtedly evolve through public feedback and negotiation with the provinces in the months ahead, and we will explore these developments as more details come to light.

Canada is accepting comments on the Proposed Amendments beginning December 16, 2023 until February 14, 2024, to be provided through its new Online Regulatory Consultation System

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