The One-Per-Cent Solution: Producers take initiative to reduce methane emissions, maintain green cred

In mid-August, when the United States Environmental Protection Agency (EPA) announced its proposed new standards to cut methane emissions in the oil and gas sector to about 45 per cent below 2012 levels in the next 10 years, mainstream media coverage in Canada left the impression the country lagged far behind the Americans in dealing with the powerful greenhouse gas (GHG).

In fact, according to Alex Ferguson, vice-president, policy and performance for the Canadian Association of Petroleum Producers (CAPP), which represents Canada’s oil and gas producers, Alberta and other producing provinces have long led the world in imposing regulations to limit emissions of methane, a key component of natural gas that is more than 20 times more effective at trapping heat in the atmosphere than carbon dioxide over a 100-year period.

“Our position is that Canada is operating from a position of strength on managing upstream methane emissions,” says Ferguson, who deals with environmental issues for CAPP and should know something about methane and other GHG emissions in the energy sector, having been the past commissioner and CEO of the British Columbia Oil and Gas Commission, as well as having sat as the province’s representative on a cross-border oil and gas commission.

But if one had followed mainstream Canadian media coverage about the country’s approach to GHG emissions, at the Globe and Mail and the CBC, for instance, they would think the country is falling far behind the U.S.

In mid-May, for instance, after Environment Minister Leona Aglukkag announced a national commitment to reduce GHG emissions by 30 per cent from 2005 levels by 2030, including a commitment to match the proposed U.S. standards on methane emissions from oil and gas production, while also introducing tougher standards over emissions from natural gas–fired plants and chemical plants, environmental groups and opposition politicians complained that the moves weren’t going far enough.

“Let’s look at the last targets they set,” said New Democratic Party deputy leader Megan Leslie. “We’re not even halfway there. I almost feel like asking why bother on their part. Where’s the plan?”

In fact, Ferguson says producing provinces like Alberta and B.C. have long been international leaders in dealing with methane emissions.

Natural gas, the cleanest burning of the fossil fuels, is mainly composed of methane. But when methane escapes into the atmosphere it becomes a potent GHG.

“It’s a complex area,” says Ferguson.

The surge in unconventional gas production in the U.S. in recent years—with production up by 44 per cent between 2005 and 2014, a figure expected to climb by another 30 per cent by 2040—is what largely led to the new standards in that country.

In Canada, meanwhile, which once sent most of its natural gas to the U.S., production has fallen by about 40 per cent in that period.

Ferguson points out that the toughened U.S. standards only apply to new production, with legacy production not being included. “In the U.S. it’s a go forward approach,” he says. “But in Canada our regulations apply to both new and legacy assets.”

He says that’s partially because Alberta, where much of Canada’s legacy natural gas production has occurred, created tough regulatory standards because about 35 per cent of its production was sour gas, potentially hazardous to human health. For that reason, the province has strict regulations controlling venting and flaring, two of the most common sources of methane emissions. Other provinces have followed with similar standards.

“That’s what drove the right regulations in Alberta, B.C. and Saskatchewan too,” he says.

As a result, Environment Canada has access to historic emissions management statistics that don’t exist in the U.S., since regulations have been based on a state-by-state approach in the past, with virtually no EPA involvement.

He points to Canada’s key role in the Global Flaring Initiatives as an example of the leadership role the country has assumed worldwide to point out that it is anything but a laggard. In fact, Ferguson argues that Canada can now play a leadership role in forming a continent-wide effort to deal with methane emissions.

“We should be working with the U.S. and Mexico on a continent-wide effort,” he says. “If we can’t work with the U.S. and Mexico, who else can we work with?”

Meanwhile, he says the three countries’ methane emissions management can be improved through producers, pipeline firms and others improving their efficiency.

Ferguson points out that many of CAPP’s members operate in both the U.S. and Canada, so any efforts to reduce emissions in one country would help them improve their overall environmental performance.

GUARANTEED CLIMATE BENEFIT

One such initiative is the ONE Future Coalition, which aims to reduce average methane emissions across oil and gas operations to one per cent or less.

The group was founded by Apache, which operates in the U.S. and Canada (although it has sold most of its assets in Canada), BHP Billiton, Kinder Morgan, Hess and others.

The one per cent target was identified as a “magic number” in a study conducted by the Environmental Defense Fund. It ensures that natural gas would continue to provide climatic benefits over other fossil fuels. It includes the use of natural gas as a transportation fuel.

Instead of proposing the use of specific technologies, practices or procedures, ONE Future is designing a system that offers each company the flexibility to determine the most cost-effective way to achieve the goal. It could include a new technology, a new work practice or the retirement of an aging asset.

To achieve the target, the coalition plans to identify sectoral performance targets for four major industry sectors: exploration and production, gathering and processing, transportation and storage, and distribution and retail.

Companies involved in ONE Future have agreed to measure their starting point emissions and track their progress, using an EPA-approved reporting protocol.

In a recent news story, Tom Michels, executive director of the coalition, says it is now working on the details of its approach, which would help determine which sector will need to reduce its emissions the most to meet the overall target. It should have its system in place by later this year or early next year, he says.

He says methane emissions can be easily tracked. “People tend to think of methane emissions as unknown leaks,” he says. “That’s not true.”

In fact, methane is emitted by activating devices. The EPA assigns most pieces of equipment an emissions rate now. It asks companies to count the number of devices and how many times the devices have been activated, then multiply that by an emissions factor for each category. The same kind of approach is taken by Canadian regulators.

“Everybody knows that emission factors EPA assigns are wrong,” says Michels. “Some people say the factors are too high or too low, but almost everyone agrees that they’re wrong.”

He says most of those miscalculations stem from assuming older devices and equipment are being used.

Michels says ONE Future is focusing on what it calls “super-emitters,” devices mentioned in the Environmental Defense Fund report. “These are pieces of equipment that look like other equipment, but for some reason, either through operator error or malfunction, put out way more methane than peer devices.”

He says the coalition will focus on how those devices are malfunctioning and what kind of inspection and maintenance schedule is needed to pinpoint malfunctioning devices.

One group that makes up the coalition has been concentrating on pipelines, working with the Pipeline Hazard Mitigation and Safety Administration, which has increased inspection standards in the wake of the San Bruno pipeline explosion in California in 2010 that claimed eight lives and led to a record US$1.6 billion penalty against Pacific Gas & Electric.

Following that incident, several new requirements were implemented, including a hydraulic pressure test for pipelines. However, Michels says a more cost-effective and environmentally sound approach is to have a good inspection and maintenance program in place.

“By and large, most of this is not about new technology,” but about effective maintenance and inspection programs, he says.

WASTE GAS INCINERATOR

But that doesn’t mean new technologies can’t offer a solution. That’s definitely the position Audrey Mascaranhas takes.

She’s the president and chief executive officer of Calgary-based Questor Technology, which manufactures high-efficiency waste gas incinerators that destroy noxious or toxic hydrocarbon gases.

While the 21-year-old company has struggled to grow, Mascaranhas, who spent 17 years as an executive with the former Gulf Canada Resources before joining Questor, argues that the company’s cost-efficient technology can eliminate flaring and emissions.

The company’s proprietary incinerator technology destroys hydrocarbon gases, assuring regulatory compliance. Questor engineers ensure that every incinerator fits the specific application, based on gas composition and flow rates.

“Questor focuses on waste gas and how to use that energy wisely,” she says, allowing it to be used to generate power or for recycling water.

She points to Colorado as a leader in dealing with GHG emissions in the oil and gas sector, arguing that Canada is lagging in that regard. The company has several projects underway in Colorado.

Its technology, which can be used at virtually all phases of production and transportation of hydrocarbons, is not costly, she argues.

“We rent out our units typically for $600–$1,500 a day. In Alberta we could reduce emissions by seven million tonnes a year at a cost of $3 a tonne,” if the technology was more widely used, she says.

Kevin Heffernan, president of the Canadian Society for Unconventional Resources, which represents most of the unconventional oil and gas producers in Canada, is familiar with Questor’s technology and sees its merits. But in a low-cost commodity environment any additional cost, even if it leads to longer-term benefits, isn’t likely to be embraced, he says.

“Certainly companies have recognized the value of managing emissions, but in this price environment not everyone can do that,” he says.

It’s also a resource- and site-specific issue, he says. “If it’s an oil well and emissions are low and it’s located in an isolated area, there’s not likely to be an incentive,” he says. “But if it’s a gas well and there is infrastructure nearby, it’s more likely to be considered. But with oil and gas at these prices it might not make a lot of sense.”

He says most operators do a good job of managing emissions in their everyday operations. “Sometimes what gets lost is that by simply capturing the methane and flaring it you achieve 95 per cent of [required] emissions reductions,” he says.

Heffernan says one also has to do a life cycle analysis of the natural gas sector to measure its overall environmental footprint. For instance, if one compares the production of gas and its transportation by pipeline to coal production and the need to move it by rail, total emissions from gas are much lower.

“Natural gas is still the cleanest of the fossil fuels,” he says.

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