Stricter Methane Rules for Oil and Gas

Summary#

This is a proposed rule published in the Canada Gazette, Part I on December 16, 2023, that would tighten Canada’s methane rules for the upstream oil and gas sector. The Regulations Amending the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) would ban routine venting, require more inspections and faster repairs, and offer a performance-based monitoring option. The government estimates incremental costs of $15.4 billion and climate benefits worth $27.8 billion, with net benefits of $12.4 billion over 2027–2040.

What it does#

• Applies to onshore upstream, midstream and transmission oil and gas facilities and would remove most offshore-specific federal rules.
• Bans routine venting of natural gas to the air, with narrow exceptions for safety, poor gas quality, or to avoid prolonged interruption of public gas supply.
• Requires equipment to be linked to gas-conservation or gas-destruction systems (for combustion systems: minimum carbon conversion efficiency 98%; small catalytic systems allowed at 85% for up to 60 m3/day).
• Tightens rules on flaring: non-emergency flaring must be justified by an engineering study. Routine flaring is to be eliminated where feasible (phase-in starts for growing facilities in 2027, sector-wide by 2030).
• Strengthens fugitive‑leak programs:
  • Creates two facility classes: Type 1 (higher-risk) and Type 2 (lower-risk).
  • Type 1: comprehensive inspections once per quarter. Type 2: once per year. Monthly screening whenever staff visit.
  • Instruments used for comprehensive inspections must meet a 500 ppm detection standard (EPA Method 21 or equivalent optical gas imaging requirements).
  • Repair timelines scale with leak size (examples: immediate or within 24 hours for very large leaks; up to 90 days for leaks under 1 kg/hr in some cases).
• Adds an alternative, performance-based compliance route:
  • Facilities may install continuous monitoring systems with alarms that detect emissions at 1 kg/hr (sensor readings at least every 15 minutes for Type 1, every 12 hours for Type 2).
  • If continuous monitoring finds total emissions ≥ 1 kg/hr, the operator must reduce them to < 1 kg/hr within specified timelines (e.g., 30 days for 1–10 kg/hr, 7 days for 10–100 kg/hr, 24 hours for ≥ 100 kg/hr).
  • Event analysis is required for events above 10 kg/hr.
• Phased coming-into-force: many inspection and monitoring rules start on January 1, 2027, with full sector application by January 1, 2030.
• Administrative/housekeeping changes and new record‑keeping requirements (registration, inspection and emissions records).

NOTE: This is a proposed amendment. It is not law yet. The Gazette notice invited comments within 60 days of publication.

Who's affected#

• Upstream oil and gas operators, and some midstream and transmission facilities across onshore Canada.
• Companies of all sizes. The government estimates about 730 companies would be affected, including 484 small businesses.
• Producers and service providers who supply or install equipment like vapour recovery units, combustors, seals, non‑emitting instruments, and continuous monitors.
• Provinces with existing federal equivalency agreements — Alberta, British Columbia, and Saskatchewan — (those agreements currently delay federal application; they expire on December 31, 2024 for Saskatchewan, March 25, 2025 for British Columbia, and October 26, 2025 for Alberta). If provinces keep equivalent rules, they may remain the primary regulator.
• Local communities and people living near oil and gas sites could see reduced local air pollution (volatile organic compounds and toxics) and fewer large release events.
• Indigenous organizations were consulted and expressed interest in local monitoring; the proposals do not change obligations under modern treaties, according to the regulatory assessment.

Why it matters#

• Methane is a powerful, short‑lived greenhouse gas. Faster reductions give bigger near‑term climate benefits. The proposal aims to meet Canada’s oil‑and‑gas methane target of at least 75% below 2012 levels by 2030.
• The government’s analysis projects total GHG reductions of about 217 Mt CO2e over 2027–2040, and reduced methane and VOC emissions that would also improve air quality.
• The proposal targets both big sources (flaring, compressor systems, blowdowns) and numerous small leaks across hundreds of thousands of sites. It also creates a technology pathway (continuous monitoring) that could find large emissions sooner.
• Cost and benefit snapshot (government analysis):
  • Incremental industry and administrative costs: $15.4 billion (present value, 2027–2040).
  • Monetized climate benefits: $27.8 billion (present value).
  • Estimated net present value: $12.4 billion.
  • Average cost per tonne of CO2e reduced: $71.
• The rules would also reduce wasted gas that could be used or sold — an estimated 686 PJ of gas conserved — and lower VOCs by about 1,485 kt (with health‑related benefits not fully monetized).
• This is a proposal open for comment. The design includes phased timing and some flexibilities to account for different facility types and regional circumstances.