Alberta oil and gas companies are wasting so much natural gas each year that Albertans are losing out on up to $21 million a year in provincial natural gas royalties.

Oil and gas companies let an estimated $253 million worth of natural gas escape through undetected leaks and the practice of venting annually.

According to Progress Alberta, a progressive advocacy group, the lost royalties could pay for five new schools, 84 new playgrounds or 36 new nurses.

“This is a valuable resource that Albertans own and it’s money that should be going to things Albertans want and need that’s just being lost to the atmosphere forever,” said Duncan Kinney, executive director of Progress Alberta, in an interview with DeSmog Canada.

In addition to the lost royalties, the potent greenhouse house is leaked into the atmosphere without paying the province’s $30/tonne carbon levy, which results in a further loss of up to $1.4 billion in revenue, according to a new analysis by the Pembina Institute. When that carbon price increases to $50/tonne, as Premier Rachel Notley has indicated it will, those lost revenues rocket to $2.25 billion.

So why is this valuable resource disappearing into thin air?

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Alberta underestimating methane leakage by 25 to 50 per cent

Reducing methane emissions from the oil and gas sector is considered to be one of the easiest ways to quickly reduce emissions. Methane has 34 times the “global warming potential” as carbon dioxide over a century.

And Alberta’s oil and sector emits a lot of it, with 31.4 megatonnes of methane entering the atmosphere in 2014 — although a recent study by Carleton University suggestedthe province is underestimating pollution by between 25 and 50 per cent, meaning annual emissions are more likely around the 45 megatonnes per year mark (which is about how much we thought all of Canada was emitting in 2016).

Fouty-five megatonnes a year is the greenhouse gas equivalent to 240,899 vehicles on the road.

Oil and gas companies have resisted changes that would require them to limit the leaking and venting of natural gas, arguing that it would result in job losses.

However, the federal government has committed to reducing methane emissions by 45 per cent below 2012 levels by 2025. Those reductions can be achieved through things like limiting the intentional “venting” of methane, using optical gas imaging cameras to detect unintentional leaks and installing flares to combust methane into carbon dioxide.

Federal draft regulations were released in May 2017, and proposed delaying full implementation of new rules by three years to 2023, instead of 2020. It was expected that Alberta would release its own version of regulations in November.

Industry  won a major concession from government in not having to pay any carbon tax on fuel used in the production of conventional oil and gas until 2023, including vented and flared gas.

The delay of action on reducing methane emissions ultimately impacts the entire country.

“What Alberta does will really make or break the ability to meet that [methane] target at the end of the day,” said Andrew Read, senior analyst with the Pembina Institute and report author.

Alberta oil and gas companies are wasting so much natural gas each year that Albertans are losing out on up to $21 million a year in provincial natural gas royalties. https://t.co/g0ExC0coTF

— DeSmog Canada (@DeSmogCanada) January 26, 2018

Improved leak detection and data collection critical

The federal government anticipates companies will need to spend $3.2 billion in between 2018 and 2035 to comply with the new regulations.

However, the government calculates the economic value of avoided climate change impacts will be more than $13 billion, with another $1.5 billion in conserved gas that can be sold by companies. That combines to a net benefit of $11.7 billion. In addition, a report by the Blue Green Alliance suggested methane regulations will create 1,500 jobs per year.

But for methane regulations to work, there  needs to be robust monitoring of leaked and vented methane.

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“Having specific requirements for monitoring the leaks and trying to address them is also very important, so that we can actually tell if this is working,” said Brenda Heelan Powell, staff counsel at Alberta’s Environmental Law Centre, in an interview with DeSmog Canada.

Alberta could be ‘reducing class sizes, or hiring more nurses’ with lost revenue

It’s already taken a long time to get to this point.

The regulator-led Methane Reduction Oversight Committee was formed in September 2016 by the province and included representatives from industry and environmental organizations. But as reported by the Financial Post, talks broke down in the summer of 2017. Discussions with remaining stakeholders were set to conclude by last December.

We’re now less than two years away from when the federal regulations are proposed to start taking effect — and time is running out quickly to get industry ready.

These delays matter.

Environmental Defence estimates that pushing back the full implementation of regulations from 2020 to 2023 will result in an additional 55 megatonnes of methane being released.

That will have serious climate impacts. But it also deprives provincial coffers of potential royalty revenue, which is a pretty big deal for a province facing down a $10 billion deficit.

“We could be reducing class sizes, or hiring more nurses, or building more schools or playgrounds,” Kinney said. “These are things that people want and are demanding.  We’re in this self-imposed austerity in Alberta, and it’s somewhat unnecessary if we were just to follow through on these methane regulations.”

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The Canadian Association of Petroleum Producers (CAPP), Canada’s largest oil and gas lobbyist group, asked the federal government to introduce a carbon pricing scheme that would “recycle” revenues back into oil and gas operations, documents released via Freedom of Information legislation reveal.

The documents, released to Greenpeace Canada, contain an August 2016 submission CAPP provided to the federal government in which the group argues a price on carbon should be revenue neutral for industry.

“One of the decisions governments need to make is what to do with the revenue generated from the carbon pricing mechanism,” the document reads. “There are many options available to enable innovation for distribution of this generated revenue; CAPP recommends that to enable innovation, revenue generated by industrial emitters is best recycled back to industry for technology and innovation.”

Keith Stewart, senior energy strategist for Greenpeace Canada, says, “The oil industry formally supports action on climate change (in exchange for pipeline approvals) but wants to shape how the policy is implemented so as to minimize the impact on its own operations.”

In a summary piece for Policy Options, Stewart says the recommendation to channel carbon taxes back into industry operations “dramatically weakens the effectiveness of the federal policy.”

“The primacy advantage of a carbon price is that it sends an economy-wide signal to investors and consumers, leading to a shift to lower-carbon options. If the largest share of the revenue goes back to the oil industry, the signal to investors to switch to low-carbon energy is muted.”

Pressure from CAPP comes as the federal government is preparing to release the first Gazette I version of greenhouse gas emissions for the oil and gas sector later this month.

Industry lobbying efforts successfully staved off greenhouse gas emission regulations for the oil and gas sector throughout the entirety of former Prime Minister Stephen Harper’s 10-year rule. Further lobbying efforts also stymied a European effort to label fuel from the Alberta oilsands as more carbon intensive than other fossil fuels.

Under the international Paris Agreement and the Pan-Canadian Framework on Clean Growth and Climate Change, Canada has committed to a 2030 target of reducing greenhouse gas emissions by 524 megatonnes of carbon dioxide equivalent, a 30 per cent reduction from 2005 emission levels.

Environment and Climate Change Canada estimates new oil and gas regulations will reduce emissions by 20 megatonnes (MT), greater than Nova Scotia’s total emissions at 17 MT.

The upstream oil and gas sector is Canada’s fastest growing source of greenhouse gas emissions.

In addition to imposing a nationwide carbon pricing mechanism — provinces have until 2018 to implement one or have one imposed — the federal government is also implementing regulations to reduce methane emissions from the oil and gas sector.

CAPP Lobbies Government to ‘Recycle’ #CarbonTax Revenues Back to Oil Industry https://t.co/U6ydduAMfn #ableg #cdnpoli @carollinnitt pic.twitter.com/JEtq49vlNk

— DeSmog Canada (@DeSmogCanada) March 3, 2017

CAPP’s Fight Against Methane Regulations

Additional internal documents released to Greenpeace Canada show CAPP overestimated the cost of implementation and argued the new rules will damage industry’s competitiveness.

“Canadian production is already at risk of being displaced by U.S. competition,” a CAPP presentation made to the federal government in September 2016 reads.

It is “not a good time to impose additional costs on industry,” a slide states.

In March 2016, former president Barack Obama and Justin Trudeau announced an ambitious plan to nearly halve methane emissions from the oil and gas sector by 2025.

In Canada the reductions would be the equivalent of removing every passenger car from the roads in both B.C. and Alberta.

Canada’s forthcoming methane regulations are expected to outline how the sector will achieve those reduction targets.

CAPP, however, recommended the federal government delay implementation of methane regulations beyond the currently proposed 2020 and argued some aspects of the rules, such as mandatory retrofitting of all equipment or regular equipment inspections, should be voluntary.

CAPP’s argument that the new rules are too costly is simply a negotiating tactic, Stewart says.

“CAPP says that the cost to industry of implementing the federal methane regulations would be roughly triple what Environment Canada calculates: $4.1 billion over eight years, compared with Environment Canada’s estimate of $1.3 billion,” Stewart writes.

“Industry push-back on environmental regulations is to be expected and is most effective when conducted behind closed doors.”

Image: Machinery operates in the Alberta oilsands. Photo: Kris Krug/DeSmog

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.