Canada Announces Regulations to Reduce Oil and Gas Emissions

On May 25, the federal Minister of Environment and Climate Change announced regulations to reduce the emissions of methane and volatile organic compounds (VOCs) from Canada's oil and gas sector. The Regulations Respecting Reduction in the Release of Methane and Certain VOCs – Upstream Oil and Gas Sector (Methane Regulations) and Regulations Respecting Reduction in the Release of VOCs – Petroleum Sector (VOC Regulations) have been published in the Canada Gazette for a 60-day comment period.

What You Need To Know

  • The proposed Methane Regulations will be phased in starting in 2020 and fully implemented by 2023. This is later than the 2020 target for full implementation as indicated by earlier plans. According to the Minister's announcement, the revised timeline is not anticipated to affect the overall methane reduction goal for the oil and gas sector (i.e., 40-45% below 2012 levels by 2025) as described by the Pan-Canadian Framework on Clean Growth and Climate Change.
  • The Methane Regulations contain both general requirements and requirements that apply to facilities producing and receiving at least 60,000 m3 of methane gas in a year. Targeted emission sources will include fugitive equipment leaks, well completions by hydraulic fracturing, compressors, facility production venting, and pneumatic devices. The regulations are expected to lead to methane emissions reductions of 21 megatonnes carbon dioxide equivalent (Mt CO2e) by 2025 (a 41% drop from 2012 levels) and 282 Mt CO2e cumulative between 2018 and 2035.
  • The proposed VOC Regulations would require the operators of petroleum refineries, upgraders and certain petrochemical facilities to implement leak detection and repair (LDAR) programs, ensure certain equipment components to prevent leaks, and to monitor VOC levels at facility perimeters. According to the May 25 announcement, these regulations would apply to a total of 26 facilities across Canada, and are expected to help eliminate 102 kilotonnes in VOC emissions between 2017 and 2035.
  • Interested parties may provide comments on the proposed regulations until July 27, 2017.

Highlights of the Proposed Regulations

Methane Regulations

The proposed Methane Regulations set out facility and equipment level requirements to reduce fugitive and venting emissions of methane and certain VOCs from the Canadian oil and gas sector. Based on the federal government's estimate, about 20% of Canada's crude oil facilities, which are responsible for about 75% of vented emissions, would have to take action under these regulations. The main regulatory requirements are as follows:

  • LDAR. As of January 1, 2020, upstream oil and gas facilities (except single well-heads) would need to put in place LDAR programs, including three or more inspections per year. Repairs that can be completed on operating equipment must be done within 30 days of detection. If a scheduled shutdown is necessary, corrective action must take place before the volume of gas from the leak exceeds the volume that would be released by shutting down the equipment. Where the equipment at issue is on an offshore facility and can only be repaired during a shutdown, such repairs are to be undertaken within 365 days.
  • Well completions by hydraulic fracturing. Where an upstream oil and gas facility includes a well that undergoes hydraulic fracturing and whose production has a gas-to-oil ratio of at least 53:1, then methane emissions from the facility would need to be conserved or destroyed (rather than vented) as of January 1, 2020. This requirement would not apply to British Columbia or Alberta due to existing provincial measures.
  • Compressors. As of January 1, 2020, the flow rate of methane emissions from sealing systems would be required at least once per year. Corrective action would need to be taken if those emissions exceed 0.023 m3/minute for reciprocating compressors and 0.17 m3/minute for centrifugal compressors. Compressors installed on or after January 1, 2020 would be required to capture gas from sealing systems.
  • Facility production venting. As of January 1, 2023, upstream oil and gas facilities would be required to limit vented volumes of methane to 250 m3 in a month. Vented gas is to be captured for on-site use, injected underground, transferred to a sales pipeline, or routed to a flare. This limit does not apply where the cumulative volume of methane vented or destroyed at, or delivered from, a facility was less than 40,000 m3 in the previous 12 consecutive months.
  • Pneumatic controllers. Controllers at facilities with a total compressor power rating of 745 kW or more would be prohibited from functioning using methane as of January 1, 2023. Controllers at other facilities (with compressor power rating of less than 745 kW) may function using methane only if it runs at an operational setting for which the design bleed rate is 0.17 m3/h or less.
  • Pneumatic pumps. As of January 1, 2023, unless otherwise authorized by a permit issued under the Methane Regulations, pneumatic pumps would be prohibited from functioning using methane if it has, in a month, pumped more than 20 L of liquid per day on average.

VOC Regulations

Generally speaking, the VOC Regulations would apply to petroleum refineries, upgraders and certain petrochemical facilities. The current proposal includes the following:

  • LDAR. Facility operators would be required to implement LDAR programs for undertaking inspections (at least three per year) and repairs, as well as maintaining an inventory of equipment components. Any identified leak would need to be quantified prior to repairs being carried out. "Significant leaks" are to be repaired within specified timelines. While the LDAR requirements are proposed to take effect on July 1, 2019, only one inspection would be required for equipment components in the inventory (rather than three) in order to allow facilities time to implement the more comprehensive program beginning in 2020.
  • Preventive equipment requirements. As of July 1, 2019, for purposes of minimizing releases into the environment, facility operators would need to ensure that the applicable design and operating criteria are met with respect to certain equipment components, including open-ended lines, sampling systems, pressure relief devices, and compressors.
  • Fenceline monitoring. As of January 1, 2018, facility operators would be required to establish sampling locations along the perimeter of the facility and to collect and analyze samples in accordance with specified criteria. These criteria align with specific elements of U.S. EPA Methods 325A and 325B relating to VOCs from fugitive and area sources.
  • Other requirements. The VOC Regulations also include requirements relating to recordkeeping, reporting and audits, which are proposed to come into effect on January 1, 2018 in relation to fenceline monitoring, and on July 1, 2019 in relation to LDAR and preventive equipment. Annual reports and third-party audit reports would be required starting in 2019 and 2021, respectively.

Next Steps

Until July 27, 2017, interested stakeholders may submit comments regarding the proposed regulations to the contacts set out in the Canada Gazette postings.

For further details, please see the Government of Canada's website and the regulatory text and impact statement for each of the Methane Regulations and VOC Regulations.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

© 2017 by Torys LLP.
All rights reserved.

Tags:

Get in Touch