Policy and Targets
Background and the Role of Reductions in Meeting Environmental and Economic Objectives
Saskatchewan accounts for nearly 30 percent of liquids production in Canada. Gas production is associated mostly with gas from oil wells; it accounts for only 2–3 percent of total Canadian production. Associated gas production was rising until 2020, along with increased tight oil activity.
The largest GHG sources in Saskatchewan are emissions from flaring and venting and fugitive emissions during oil, natural gas, and coal and oil sands mining operations. They account for approximately 17 percent of total emissions in the province. Between 2005 and 2018, overall GHG emissions in Saskatchewan increased by 12 percent, or 8.4 million tCO2e, while the amount of GHG emissions from associated gas decreased.
As part of the 2016 Pan-Canadian Framework on Clean Growth and Climate Change, the government of Canada committed to reducing methane emissions from the oil and gas sector by 40–45 percent from 2012 levels by 2025. The Saskatchewan government committed to reducing GHG emissions from flaring and venting in the province’s upstream oil and gas sector by 40–45 percent of the 2015 levels as part of the province’s Methane Action Plan. O-2 Reg 7: Oil and Gas Emissions Management Regulations, 2019 (Oil and Gas Emissions Management Regulations, 2019, hereafter) required companies to submit methane emissions reduction plans by September 2019, before compliance obligations took effect on January 1, 2020.
In 2018, the ECCC published SOR-2018-66, Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector). Provinces can adopt these regulations or draft their own to meet or exceed the federal targets. Saskatchewan has released and periodically updated several sets of regulations to reduce GHG emissions from flaring and venting in the upstream oil and gas sector, including the Oil and Gas Emissions Management Regulations, 2019 Directive PNG036: Venting and Flaring Requirements, 2019, and Directive PNG017: Measurement Requirements for Oil and Gas Operations, 2015.
Section 10 of the Canadian Environmental Protection Act, 1999 authorizes the minister of the environment to defer to equivalent regulations promulgated by a provincial government. In May 2020, the federal government concluded that the Saskatchewan regulations would not be equivalent to federal regulations, mainly because the latter fixed the emission intensity limits after 2025 with no further reduction required. As the equivalency agreement between the government of Canada and the government of Saskatchewan terminates at the end of 2024, the government of Saskatchewan will have to introduce additional regulatory measures for a new equivalency agreement to be concluded beyond 2024.
Targets and Limits
Directive PNG036: Venting and Flaring Requirements, 2019, imposes several restrictions on flaring and venting:
- Section 5.1 states that oil wells and facilities that flare and vent a combined volume of associated gas greater than 900 m³ a day should flare all nonconserved associated gas unless it must be vented to avoid emergencies. All existing oil wells or oil facilities should comply by July 1, 2020. All new wells must comply immediately.
- Section 5.2, on “Associated Gas Venting,” states that no operator should vent any volume of gas from a well or facility that contains hydrogen sulfide in a concentration greater than 10 mole per kilomole of gas, cause off-lease odors, or exceed Saskatchewan Ambient Air Quality Standards.
The O-2 Reg 7:Oil and Gas Emissions Management Regulations, 2019, aim to reduce methane emissions in the province by more than 40 percent between 2020 and 2025. Table 2 (Appendix) limits the methane emission intensity by production class and year, starting in 2020 and ending in 2030. An Emissions Reduction Plan is due if the combined potential annual emissions are higher than 50,000 tCO2e, calculated by Saskatchewan’s Ministry of Energy and Resources (MER) based on government data (Petrinex or Integrated Resource Information System [IRIS] reporting information).
Legal, Regulatory Framework, and Contractual rights
Primary and Secondary Legislation and Regulation
The province’s legislation—the Crown Minerals Act, 1985, and the Oil and Gas Conservation Act, 1978—governs oil and gas rights for exploration and production of these resources. Directive PNG036: Venting and Flaring Requirements, 2019 limits flaring and venting in oil and gas facilities and restricts temporary flaring during well completions. Revisions in 2020 require companies to implement a leak-detection-and-repair program for gas facilities. Applicable facilities include gas storage facilities, gas-processing plants, and gas-gathering systems. O-2 Reg 6: The Oil and Gas Conservation Regulations, 2012 (Oil and Gas Conservation Regulations, 2012, hereafter) stipulate gas flaring and venting abatement rules and set penalties for noncompliance.
Directive PNG017: Measurement Requirements for Oil and Gas Operations details how fuel gas, vented gas, and flared gas are measured for accounting and reporting purposes in Saskatchewan. It also requires enhanced quantification of associated gas at heavy-oil facilities. Directive PNG032: Volumetric, Valuation and Infrastructure Reporting in Petrinex provides guidance on reporting volumes in Petrinex.
Directive S-20: Saskatchewan Upstream Flaring and Incineration Requirements, 2019, applies company-level GHG emissions intensity limits to venting emissions from oil facilities. The Oil and Gas Emissions Management Regulations, 2019 require mandatory, results-based methane emissions reduction at the company level, not at the level of individual facilities or pieces of equipment.
Saskatchewan has jurisdiction over flaring, venting, and incineration, for which the province has comprehensive regulations. Emission regulations are aligned with federal legislation and regulations.
Associated Gas Ownership
Ownership of oil and gas is split between the provincial government, the federal government, private freehold owners, and First Nations. The rights to explore for, develop, and produce oil and natural gas, including associated gas, are transferred to participants through licenses or leases.
Regulatory Governance and Organization
The MER is the primary regulatory authority for the oil and gas industry. It develops and implements policies and programs to promote responsible growth and development of the province’s natural resources.
Regulatory Mandates and Responsibilities
The MER is responsible for regulating licensees of oil and gas wells and facilities and managing flaring and venting in accordance with Directive PNG036: Venting and Flaring Requirements, 2019. It is responsible for gathering and analyzing data, reporting requirements for flaring reduction, compliance, and enforcement.
The environmental screening process for oil and gas exploration and development activities is outlined in the Environmental Review Guidelines for Oil and Gas Activities. They clarify which branch of the Saskatchewan Ministry of Environment should be contacted first.
Monitoring and Enforcement
Directive PNG076: Enhanced Production Audit Program, 2016, describes the procedures of the province’s audit program for the oil and gas industry. Section 15 of the Oil and Gas Emissions Management Regulations, 2019 empowers the minister to audit the measurement and reporting of volumes of associated gas at oil facilities of the licensee at any time to determine whether the measurement and reporting comply with the act, implementing regulations, and any applicable directives. Section 10 of the Oil and Gas Conservation Regulations, 2012 provides that the minister may issue administrative penalties (see the Monetary Penalties section and the Nonmonetary Penalties section of this case study).
Flaring or Venting without Prior Approval
The Oil and Gas Conservation Regulations, 2012 stipulate that gas flared or vented at an oil well or facility should not exceed 900 m³ a day unless it is an emergency and a reasonable level of precaution has been taken to protect human health, public safety, property, and the environment. Section 6 of Directive PNG036: Venting and Flaring Requirements, 2019 states that gas venting from a well or facility, including gas plants, is not permitted unless there is an emergency and venting is required to protect human health, public safety, property, or the environment, including prevention of a fire or explosion.
Authorized Flaring or Venting
Operators of oil wells and facilities are authorized to flare all nonconserved gas volumes of more than 900 m³ a day if they meet the requirements of Directive S-20: Saskatchewan Upstream Flaring and the Incineration Requirements, 2019. However, if flared volumes exceed 900 m³ a day, and the flare is within 500 meters of an occupied dwelling, public facility, or an urban center, the gas should be conserved unless the operator obtains consent from the occupants or approval from the regulator.
No evidence regarding development plans could be found in the sources consulted.
Section 50 of Part VIII, “Production Operations,” of the Oil and Gas Conservation Regulations, 2012 states that for conservation purposes, the minister may require the operator of an oil well to collect and either use or sell the gas produced. Section 50 states that the minister may require the operator to analyze gas composition. If a product is present in a quantity that can be economically extracted, the minister may require the product’s separation, conservation, and utilization.
Measurement and Reporting
Measurement and Reporting Requirements
Directive PNG017: Measurement Requirements for Oil and Gas Operations, 2015 provides the regulatory requirements for the measurement, accounting, and reporting of flaring and venting across a variety of oil and gas operations, including flaring and venting at various sites. Directive PNG032: Volumetric, Valuation and Infrastructure Reporting in Petrinex, 2016 requires all operators to provide well and facility infrastructure information, monthly pipeline split, and volumetric and valuation information electronically via the website of Petrinex. This requirement is stipulated in Section 66 of the Oil and Gas Conservation Act, 1978 and Section 3 of the Petroleum Registry and Electronics Documents Regulations, 2012. Directive PNG032 also requires all emissions to be calculated and expressed in CO2e. Directive PNG076: Enhanced Production Audit Program, 2016 sets out the requirements for operators to declare the degree to which they have the infrastructure in place to ensure compliance with the regulator’s measurement and reporting requirements.
Measurement Frequency and Methods
Directive PNG017: Measurement Requirements for Oil and Gas Operations, 2015 provides regulatory requirements with respect to measurement points used for accounting and reporting purposes. It specifies what volumes must be measured and how (including estimation methods), the volumes to be reported to the regulator, the accounting procedures to determine those volumes, and the data to be kept for auditing. The principal measurement technologies and procedures include, among others, meters for flow volumes, calculated volumes using a proration formula based on test volumes, estimates of volumes based on production facility and product characteristics, and gauge boards for tanks. The directive provides “standards of accuracy for gas and liquid measurement that take into account potential impacts to royalty, equity, reservoir engineering, declining production rates, aging equipment, environment, public safety, accuracy and completeness.”
There are detailed guidelines specifically for venting from different facilities in Guideline PNG035: Estimating Venting and Fugitive Emissions, 2019. An Excel-based gas estimation tool has been developed to aid operators in estimating vent volumes consistently and accurately. There are also special guidelines for heavy-oil projects.
Section 4 of Guideline PNG035: Estimating Venting and Fugitive Emissions, 2019, allows the use of vent gas factors or engineering estimates unless an operator is otherwise required to meter or test, as per Directive PNG017: Measurement Requirements for Oil and Gas Operations, 2015.
Section 9 of Directive PNG036: Venting and Flaring Requirements, 2019 states that the licensee should maintain a log of flaring and venting events and respond to public complaints. The logs should:
- include information on complaints related to flaring and venting events and their resolution
- describe each nonroutine flaring and venting incident and any changes implemented to prevent future nonroutine events
- include the date, time, duration, gas source, hydrogen sulfide concentration, and volumes of each incident
- keep records for a minimum of 12 months.
Flaring and venting records should be made available to the MER upon request. Every person who submits a report or return following Section 29 of the Management and Reduction of Greenhouse Gases (Standards and Compliance) Regulations, 2019, should retain all documents, methodologies, and information used to prepare the report for a minimum of seven years.
Data Compilation and Publishing
The MER publishes monthly Natural Gas Volume and Value Summary reports. Reports detailing the gas produced from wells, total gas production, gas flared or vented, and gas available for use or sale can also be downloaded. Under Section 20 of the Oil and Gas Emissions Management Regulations, 2019 the minister is required to publish an annual report setting out:
- the total of combined emissions at all oil facilities in Saskatchewan
- the total of combined potential emissions at all oil facilities in Saskatchewan
- the emissions for all oil facilities that are licensed by each licensee for the year.
Starting in 2021, the government of Saskatchewan will release an annual progress report on all commitments, targets, programs, and policies listed in the Methane Action Plan.
Fines, Penalties, and Sanctions
Section 10 of the Oil and Gas Conservation Regulations, 2012 provides that the minister may issue administrative penalties if an operator exceeds the combined emissions limit at its oil facilities according to the formula defined in the regulations. The operator may apply to the minister within 30 days of receipt of the assessment notice to defer payment of all or part of the assessed penalty.
The Oil and Gas Emissions Management Regulations, 2019 set out the penalties for failing to comply with the regulations and directives with respect to submitting the information in Table 1 of Part III of the Appendix. Section 10 states that the minister may impose a penalty on a company whose oil facilities produce, in any year, combined emissions that exceed the limit determined in the regulations calculated using the formula A = B x C, where A is the total penalty to be paid; B is the amount by which the combined emissions exceed the combined emissions limit, expressed in tCO2e and calculated for the year in accordance with subsection 11; and C is the dollar amount per tonne of excess emissions set out in Table 3 of the Appendix. The penalty per tCO2e increases every year until 2024, when the unit penalty is fixed in nominal terms (Table 3 in Appendix).
If a correction results in a change in the combined emissions for a licensee on December 31 of the year for which the combined emissions are calculated, the licensee is required to pay, within the period specified by the minister, a penalty on any amount by which the combined emissions at the oil facilities exceed the limit on combined emissions, calculated in accordance with Subsection 11, plus interest, calculated, at a rate of 10 percent a year. This payment is in addition to any penalty already paid for that year.
Section 13 of Directive PNG076: Enhanced Production Audit Program, 2016 states that if a declaration is not submitted via Petrinex, the Petrinex error EPP001 will trigger a penalty in accordance with the Oil and Gas Conservation Regulations, 2012. Penalties can also be charged for failing to promptly submit the documentation requested by the regulator.
Part XII of the Oil and Gas Conservation Regulations, 2012, authorizes the minister to suspend or shut down wells and other production facilities and seal any meter valves.
Directive S-20: Saskatchewan Upstream Flaring and Incineration Requirements, 2011 provides comprehensive specifications for upstream oil and gas flaring and incineration performance, equipment spacing, and set-back distances.
Fiscal and Emission Reduction Incentives
Associated gas that is flared or vented within permitted levels is not subject to royalties. According to the Administrative Procedures Related to Associated Gas Royalties/Taxes and Crude Oil and Natural Gas Royalty/Tax Factors Information Circulars, companies are exempt from royalties if royalties make gas production uneconomic. In addition, any gas used for on-site power generation is exempt from royalties. The gas royalty rate may be as high as 12 percent, depending on the type of gas well and the production rate of the well. SaskEnergy is launching a new Associated Gas Conservation Program to create more opportunities in the upstream sector for the sale and movement of methane between oil production facilities for on-site use.
The Saskatchewan Petroleum Innovation Incentive provides a royalty credit for commercial innovation projects new to Saskatchewan that can better manage GHG emissions. The Oil and Gas Processing Investment Incentive offers transferable royalty or freehold production tax credits at a rate of 15 percent of eligible program costs to value-added projects across all oil and gas industry segments such as gas-gathering transportation infrastructure and methane gathering projects. The Oil and Gas Conservation Regulations, 2012 allow operators to build pipelines to capture associated gas as qualifying conservation projects to avoid paying penalties.
Use of Market-Based Principles
The 2016 Pan-Canadian Framework on Clean Growth and Climate Change set a federal benchmark, requiring all provinces and territories to implement carbon pollution pricing systems by 2019. Saskatchewan’s system for large GHG emitters started in January 2019. The federal pricing system is being applied to electricity generation and natural gas transmission pipelines.
Negotiated Agreements between the Public and the Private Sector
The Saskatchewan Petroleum Industry/Government Environment Committee was formed in 1992 to respond to the need for the government and industry to work cooperatively to resolve provincial environmental management issues. The provincial government agencies represented include the Ministry of Environment, the MER, and the Ministry of Agriculture, on a project-specific or issue-specific basis. Several industrial associations are also represented. The committee addresses matters including climate change, flaring and venting, remediation guidelines, and management standards.
Interplay with Midstream and Downstream Regulatory Framework
Many of the regulations on flaring, venting, and emissions cover pipeline and storage facilities. Most oil production in Saskatchewan is exported to other provinces or the United States via pipelines. The gaps in the synchronization of drilling activity with the development of sufficient gas midstream capacity can create bottlenecks and lead to increased flaring or venting.