Looming Methane Rules Putting Pressure On Technology Development, Equivalency Deals
A deal signed by Canada, the U.S., and Mexico in 2016 to reduce emissions of methane from their oil and gas sectors by 40-45 per cent below 2012 levels by 2025 is coming home to roost. With just weeks remaining before federal regulations come into play on Jan. 1, the industry is stepping up efforts to develop and deploy new technologies to cost effectively meet the target, while producing provinces seek equivalence for their regulations.
It’s an objective the industry has already mobilized to tackle on a number of fronts, with initiatives ranging from increased collaboration and research and development to advancing detection, quantification and mitigation/control technologies used to address targeted emission source areas.
But more work needs to be done to bring down the cost of implementation, according to Soheil Asgarpour, Petroleum Technology Alliance Canada (PTAC) president. That’s one of the main topics of PTAC’s second annual Methane Emissions Reduction Forum in Banff on Nov. 26-27.
Through its consortia and initiatives, PTAC has already developed the collective technology capacity to reduce methane emissions by 30 per cent at a cost of under $5 per tonne reduced, Asgarpour said. “Our target is to get this capacity increased to 45 per cent by 2020 to allow industry to meet its 2025 targets.”
PTAC estimates accomplishing that will reduce the industry’s costs by $550 million per year, while creating 2,300 jobs. It would also create a robust innovation ecosystem driven by markets and provide a one-stop-shop model for use beyond the oil and gas industry.
PTAC has undertaken a number of initiatives to develop and deploy the technologies that will enable companies to detect and cut emissions. In addition to assisting technology providers, small and medium sized enterprises and entrepreneurs to market and sell their technologies in Canada and abroad, it is creating a testing facilities consortium for the verification and validation of market driven new technologies.
“The bottom line is that we may have technologies for certain types [of solutions], but in many cases they are not cost effective and the objective of our testing facilities is to help testing and verification of cost-effective methane detection and mitigation technologies,” said Asgarpour.
“My vision is to reduce methane emissions with a cost of $5 per tonne of CO2 equivalent — essentially significantly below ten times of cost of reducing CO2.” Reducing CO2 emissions typically starts at a cost of about $50 per tonne reduced for some low hanging fruit opportunities, he said.
In a crowd sourcing exercise PTAC found that while producers have started coming together to share detection and mitigation technologies, the ecosystem remains somewhat fragmented in terms of measurement and reporting, technology development and testing, and deployment. “There is a lack of a systematic, coherent approach from articulation of challenges to deployment of technologies,” said Asgarpour. “The shot gun approach to technology validation, verification and field testing needs a single window.”
Leveraging its over 220 member organizations and the over 950 members of the Clean Resource Innovation Network (CRIN), a subsidiary of PTAC, the organization has created a unique innovation ecosystem, he explains.
The PTAC-facilitated Methane Emissions Reduction Network (MERN) champions projects and initiatives to reduce methane emissions, as well as identifying and addressing technology gaps. Its Digital Innovation Network serves as another research and development hub. “We need to use digital and methane technologies together,” notes Asgarpour.
And PTAC recently established the Canadian Emissions Reduction Innovation Network (CanERIC), a testing facility consortium that tests near-commercial tech solutions. Its membership includes eight Canadian and two U.S. learning institutions, six public sector laboratories, five industry associations and facilitators, and 15 producers/transporters, encompassing field assets and testing facilities worth over $1 billion to trial new technologies at a complete range of upstream oil and gas assets.
CanERIC covers the full spectrum of methane emissions sources and solutions, from detection, quantification and mitigation to flaring, conservation and short-lived climate pollutants in oil and gas, Asgarpour says.
“Our mandate is to strongly encourage national integration and collaboration — it is about the whole country while collaborating with other international jurisdictions. CanERIC will close gaps in technology and field-testing, and avoid duplication; it will provide a one-window access to a full range of specialized facilities and support for Canadian innovators, regulators, policy makers and producers, and transporters.”
Some $22 million will be invested in funneling new technologies through screening, pre-qualification, techno-economic assessment, development testing, field testing and field demonstration, with the realization that some technologies will succeed while many others won’t, but that the best of the technologies won’t be left stranded.
Among the projects underway, Asgarpour points to the development of a zero-emission fail-safe electric dump valve actuator and to the Fugitive Emissions Management Program Effectiveness Assessment (FEMP EA). The electric dump valve actuator will replace pneumatic actuated valves that vent methane to atmosphere. Field-testing will take place across western Canada. Existing pneumatic instruments and pumps are a large source of methane emissions, contributing to almost 40 per cent of overall releases.
Launched last year, FEMP EA is the world’s largest methane detection and quantification project, covering 2,500 square kilometres in the Red Deer region and including participation from 30 producing companies and nearly 200 oil and gas facilities. Its goal is to find the optimum frequency of methane detection as well as to develop an analytical platform using drones and other technologies to reduce cost and improve accuracy.
Clean technology uptake
One success story PTAC points to is Spartan Controls’ REMVue air/fuel ratio controllers and SlipStream vent-gas capture controller. SlipStream uses vented and flared natural gas emissions as supplementary engine fuel. Combined, the technologies significantly reduce fuel usage and greenhouse gas emissions.
The technology has already saved the equivalent emissions of taking 130,000/year cars off the road and resulted in $15 million/year in value creation. Full industry uptake would result in $160 million per year in value creation and emissions reductions equivalent to taking 1.6 million per year cars off the road.
But industry uptake of such emissions reducing technologies is not always an easy sell. Brian Van Vliet, Environment Solutions lead at Spartan Controls, points to the downturn in the oil and gas industry as well as uncertainty surrounding the implementation of methane rules as additional barriers to uptake faced by the industry today.
“In today's oil and gas environment, industry professionals are very mindful of the balance sheet and accountability to their shareholders, and the additional costs for carbon compliance. Understanding ultimately how they can reduce the compliance cost to their organization is what's really important today.”
“And so, if you are spending dollars on new technology that helps mitigate methane, that's great, but do you need to actually spend those dollars today or can that be postponed? That's part of that conversation,” says Van Vliet, who will join a panel at the Methane Emissions Reduction Forum addressing commercialization of new technology. Among other things, the panel will address overcoming the valley of death faced by technology providers to successfully develop and deploy cleantech solutions.
Van Vliet adds that early adopters of implementation ready emissions reductions technologies stand to benefit by, for example, acquiring emission reduction offset credits before the measures become mandatory. “Those who act sooner, especially in the carbon offset space, will have the highest return on investment because they have the longest period of time that they can be earning offsets on a deployment with that technology type,” he says.
They may also benefit from opting into the Technology Innovation and Emissions Reduction (TIER) program requiring companies achieve a 10 per cent emission intensity reduction relative to their baseline or comply relative to a high performance benchmark for their product type, because that could exempt them from paying the carbon tax on their combusted emissions. (Facilities under TIER cannot generate Alberta emission offsets and Dec. 1 is the deadline for facilities that opted-in to the Carbon Competitiveness Incentive Regulation to opt-out of TIER for 2020 compliance year.)
However, uncertainty over if and when Alberta will receive approval to enact its own equivalency rules rather than federal backstop regulations risks leaving companies out on a limb when it comes to opting in. After an extensive consultation process Alberta was on track to enact its own rules, but a change in government last spring has created uncertainty in the process. For example, the province’s energy efficiency program has been cancelled, as has its carbon tax, which puts the federal carbon tax into play. The previous provincial carbon tax exempted upstream oil and gas production until 2023 — the federal tax that comes into force in January does not.
Now B.C. and Saskatchewan appear closer to achieving equivalency for their own regulations, Van Vliet says, while in Alberta the industry isn’t yet up to speed on the details pertaining to TIER. “That may have created that lack of certainty on what the playbook is going to be,” he says. “It's tricky to have competing deadlines for opting in or opting out when we don't know yet if equivalency is not certain.” That said, Van Vliet also highlighted that, “Producers today can determine what the methane regulation compliance cost to their organization will be either way, which helps them be in a trigger ready position to make that informed decision.”
Government representatives from all three provinces speaking at the PTAC Methane Emissions Reduction Forum at the end of the month may be able to offer some answers.
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