Oil and gas operators can mitigate risks and capitalize on opportunities in an evolving environmental regulatory landscape but they must collaborate early and often, this week's CERI Oil & Gas Symposium heard.
This is particularly the case around developing methane and carbon rules.
“When you’re looking at the regulatory risk profile for your organization, all of these risks, whether it’s NOx, benzene or [greenhouse gas] emissions, [they] are going to be or should be a part of your management strategy around your environmental liability,” said Jackson Hegland, executive director of the Methane Emissions Leadership Alliance (MELA).
MELA provides data, services and solutions for methane emissions management in Canada. Launched in September 2016, the alliance is forming partnerships with government, industry and other key stakeholders, focused on building a clean economy and generating new jobs.
In November 2015, the Alberta government announced Alberta’s Climate Leadership Plan, designed to reduce methane emissions by 45 per cent from 2014 levels by 2025.
Alberta’s plan includes a carbon levy on all emitting fuels used for transportation and heating. It starts at $20 per tonne in 2017 and increases to $30 per tonne in 2018.
Hegland urged his audience to begin planning now. “There is a very short timeline to get a handle on this within each of our organizations. Don’t wait. It’s a very intense process to go through and understand where your opportunities and risks are and ultimately what you’re going to do from an actionable perspective and what projects you’re going to pursue.”
An output-based allocation system for large industrial emitters will be designed to reward top-quartile performance in the sectors to which it applies.
With carbon pricing already in place and an oil and gas methane regulation under development, Alberta’s announced policies cover the major emitting sectors in the province.
Meanwhile, the federal government has a plan of its own. That plan is expected to be released in the next 30 to 60 days while the Alberta government’s plan is expected in the next 90 days or so, followed by a comment period of up to 120 days then subsequent release.
Data collection is especially important, said Hegland.
“Don’t wait for the draft regulations to come out,” he said. “We know enough on the policy-development side without having to know the details of the regulations to determine that our data collection management systems need to be airtight by the time these regulations come through,” he added. “There is a whole lot of them to manage at once.”
The six primary regulatory impacts on an organization are: operating costs, capital cost/allocation, revenue, planning (LRM), regulatory risk mitigation, and acquisition and divestiture.
“There are a lot of pieces here,” said Hegland. “It involves operations, it involves finance, it involves investor relations, it involves pretty much everybody along the supply chain internally because there are regulatory impacts, especially now that we are having more stringent regulations — regulations for source categories that weren’t regulated in the past.”
For both the Alberta and federal governments, emission sources are the same: compressors, fugitives/leak detection and repair, pneumatics and venting.
He recommended building internal data management systems of field operations now. Once a policy impact assessment has been completed, evaluate liabilities and project opportunities. Next, review funding mechanisms, to be followed by a best-practice leak detection and repair program.
Once that’s done, collect an inventory of pneumatic devices and pumps, and build carbon into economic models, he said.
Both the Alberta and federal governments have set prices of $30 per tonne of carbon emission, which equates to $1.50 per gigajoule on combustion and $11.85 per gigajoule on venting.
“It’s undetermined exactly what the Alberta government will do once [the federal government’s] $50 per tonne price comes into play but ... with the $30 per tonne carbon levy, the impact being $1.50 per GJ on combusted fuel, you’ve got a pretty significant impact if you have to move that from $30 to $50, plus if you’re including a more inclusive exhaustive source of GHGs like your vented emissions then you’re talking some serious dollars,” said Hegland.
The plan will only be efficient and cost effective if there is collaboration among industry, which must be transparent to each other, regulators, government and technology and service providers, he said.
“Everybody needs to be together on this because yes, there are certainly some unknowns from the regulatory development side, but [they will have] significant impact once the regulations come into play, so collaboration early and often is really, really critical.”