Tougher methane measures prompt cost worries

CALGARY — Tougher methane emission regulations unveiled Thursday are expected to create oil and gas services jobs, but have raised concern that the costs of implementation could further weaken an industry hit hard by two years of commodity price uncertainty.

The new restrictions to be phased in between 2020 and 2023 will require energy companies to regularly check equipment for leaks, make repairs, use cleaner technologies, monitor emission levels and report results to Ottawa.

The federal government estimates the regulations would cost industry $3.3 billion from 2018 to 2035, but says the costs of avoiding action on climate change would be more than four times that.

Mark Salkeld, CEO of the Petroleum Services Association of Canada, said the initiative would likely create jobs for his members, but noted the cost is too high when added to provincial and federal carbon price proposals.

“There’s more concern right now that it’s going to hurt the industry than there is excitement about opportunities,” he said.

Terry Abel, executive vice-president of the Canadian Association of Petroleum Producers, said his organization will be recommending changes to the proposed regulations that will reduce the cost of implementation by half or more while retaining the targets and timeline.

“Our industry is facing increased competition globally for capital … Any incremental cost just contributes to that overall competitiveness burden,” Abel said.

Methane is considered far more potent than carbon dioxide in trapping heat in the atmosphere. It is the main component of natural gas.

The United States and Canada agreed last year to jointly slash oil and gas methane emissions to between 40 and 45 per cent over 2012 levels by 2025.

Canada planned to implement regulations between 2018 and 2020 to reach the target, but Ottawa decided in April to delay for three years after U.S. President Donald Trump signed an executive order to reconsider the methane cuts.

The Trump order was blocked this month in the U.S. Senate, but Environment Minister Catherine McKenna said Thursday that Canada will follow the delayed schedule to ensure industry has sufficient time to implement the measures.

She added the 2025 target timeline also remains in place. The regulations are expected to be finalized next year.

“Today our climate plan is quickly moving into the implementation phase where we will see real results and spark real change,” McKenna said.

She said the new rules will be less stringent than those in the U.S., where federal law has restricted methane emissions since 2012 and oil and gas producing states like California, Colorado and Wyoming have added their own laws.

Environmentalists welcomed the new regulations, but said they don’t go far enough.

Diane Regas, executive director of the Environmental Defense Fund, said stronger rules are needed for Canada to meet its climate targets and match U.S. methane controls.

“This is a critical first step,” said Duncan Kenyon, a policy director at the Pembina Institute. “It’s going to start everyone thinking about how we’re actually make this happen in practise.”

The federal government said it is also moving ahead with regulations to reduce leaks of air pollutants from refineries, oilsands upgraders and petrochemical plants, estimating the cost to industry at $254 million.

McKenna wouldn’t directly answer the question of what the government will do if energy producers refuse or can’t afford to comply with the regulations, instead pointing out captured methane can be sold and thus provides a financial incentive to stop leaks.

She said provinces and territories will have the option to develop their own regulations if they achieve the same results.

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