Albertans lose money while energy companies continue to let escaping methane make climate change worse

Posted on January 25, 2018, 11:02 am
5 mins

PHOTOS: Gas wells a-flaring in the United States’ Bakken Field (Photo: U.S. National Oceanic and Atmospheric and Administration). Below: Canadian Environment Minister Catherine McKenna (Photo: Wikimedia Commons) and Progress Alberta Executive Director Duncan Kinney (Photo: Progress Alberta).

CALGARY

Methane released from oil and gas operations in Alberta represents lost natural gas royalties of up to $21 million a year and lost Alberta carbon tax revenues of as much as $2.3 billion yearly, according to a briefing note released yesterday by the Pembina Institute.

On their own, the foregone royalties, lost when oil and gas companies allow natural gas to escape through undetected leaks or intentional venting, would be enough to pay the annual salaries of 180 newly employed nurses, build 25 new schools, or construct 420 new playgrounds, the advocacy organization Progress Alberta said this morning.

According to the note from the Pembina Institute – an energy issues think tank founded in Alberta in 1985 – recent research by Carleton University using measuring instruments on aircraft indicates that Alberta releases of methane are likely 25 to 50 per cent higher than currently reported. Methane is a potent greenhouse gas that is the main component of natural gas. Other studies elsewhere in the world have made similar findings.

Since the industry reported emitting approximately 30 million tonnes of carbon dioxide equivalent, the Carleton research would suggest 38 to 45 million tonnes were actually emitted by the Alberta oil and gas industry. So right off the top, the Pembina briefing note argues, “wasted methane represents lost value to oil and gas operators due to lost sales volumes of natural gas, and lost value to the government through lost royalty collection.”

“Based on the Carlton University research, annual lost sales from all methane releases in the Alberta oil and gas sector are roughly between $213 million and $253 million, with lost royalty estimated at between $17 million and $21 million,” the briefing note concluded.

Since Alberta’s carbon levy doesn’t apply to wasted natural gas under the NDP Government’s Climate Leadership Plan, no tax is applied to these releases. If the carbon levy were applied, they would generate up to $1.4 billion at $30 a tonne and up to $2.3 billion at $50 a tonne, Pembina’s note said.

Under the Alberta Climate Leadership Plan, oil and gas companies were excused from the carbon tax because they made a commitment to curb methane emissions by 45 per cent by 2025. However, according to Progress Alberta Executive Director Duncan Kinney, “as a result of industry foot dragging, those regulations are still not in place.”

Reports in the business press last fall suggest this interpretation is correct. The Financial Post reported in November that negotiations among the Alberta government, industry and environmental groups broke down last summer. “Central to the dispute was industry’s claim that government should not prescribe which sources of methane emissions it should be forced to measure and reduce.”

According to Progress Alberta’s statement this morning, “Albertans are losing money and the oil companies continue to put what is convenient to them ahead of what is good for Alberta.” The group called for industry to have to pay the carbon tax on such emissions, “like every citizen in Alberta does on their home heating natural gas, gasoline or diesel.”

In May last year, in an announcement of new regulations to reduce methane emissions and air pollution across Canada by Environment Minister Catherine McKenna, the Canadian government said “reducing methane emissions is one of the lowest cost actions Canada can take to reduce greenhouse gases.”

Ms. McKenna said Ottawa’s intention was to reduce methane emissions by 40 to 45 per cent by 2025, aiming “to catch up on the action taken by such U.S. states as California, Colorado, and North Dakota.

The federal Liberal government’s plan announced by Ms. McKenna allowed provinces and territories to develop their own regulations to replace the federal ones if they can achieve similar outcomes.

While natural gas is a valuable natural resource that all Albertans own, “the only time that Albertans get paid for this resource is when oil and gas companies pay royalties to the provincial government,” Kinney observed.

“Without regulations, there’s little incentive for companies to restrict the venting and leaking of natural gas and money that could be going to schools, playgrounds and nurses is instead just floating away into the atmosphere making climate change even worse,” he concluded.

4 Comments to: Albertans lose money while energy companies continue to let escaping methane make climate change worse

  1. David

    January 25th, 2018

    In general people are more careful not to waste something that is valuable rather than something that is not, which of course is why you are more likely to see a plastic bag from Safeway lying in the street than a bar of gold. While oil prices have been recovering nicely (not as much felt in Alberta because of current shipping bottlenecks), natural gas prices have continued to really languish in the basement. It doesn’t excuse wasting natural gas, but perhaps explains it. There is a cost to waste less and perhaps it is higher than current gas prices. In any event, there are two related problems for Alberta – the low price of natural gas and reducing waste of it.

    In some ways the price problem is similar to oil, we are landlocked and far from major consumer markets. There are some things our government and others can do to help things out. Encouraging more value added processing locally using our natural gas feed stock is one thing. BC is still considering LNG export facilities to Asia. I am not sure if that will happen or if it does whether it will help us, but it might. Lastly, I suppose we can hope or pray for natural gas to return to the price levels it was at when Klein was Premier. The boom then was mainly in natural gas rather than oil or bitumen. However, as I recall home heating bills got quite scary at that time too, so perhaps one should be careful what one wishes for.

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  2. Lars

    January 25th, 2018

    I have to confess to being somewhat puzzled about the overwhelming desire to sell off our energy resources now, when there’s competition from other countries and dissension in our own about how we should transport them abroad once they’re out of the ground.
    Oil and gas are finite resources. They also don’t decay in their reserves at any humanly-meaningful time scale. What we don’t take out of the ground now will be available for the foreseeable future.
    Renewables might not be able to fulfill modern society’s energy requirements if cheap oil isn’t available. Nuclear power? Fission has problems and commercial controlled fusion is still less than thirty years in the future, the way it’s been for at least the last half a century. Alberta could find itself sitting on a resource base that is becoming steadily more valuable as the 21st century proceeds, and one that could supply domestic needs here for a very long time. But we’re selling it off as fast as we can.

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  3. Albertan

    January 27th, 2018

    Along with the hit to revenue and climate change is the issue of human health from exposure to the toxins emitted in oil and gas activity. The irony of the cost of cancer treatment facilities in Alberta, for example, and the personal cost of being ill should not be lost on us. It seems that the proactive thing to do is prevention in the first place, which includes not being exposed to the emitted toxins. The following article explains why, and that the toxins can be spread for miles downwind, not just close to oil and gas facilities.
    “Methane Pollution from the Oil and Gas Industry Harms Public Health”
    http://www.edf.org/sites/default/files/content/methane_rule_health_fact_sheet_reboot_final_no_citations.pdf
    Quote from the article: “Toxic chemicals such as hydrogen sulfide, toluene, xylene and benzene are also released alongside methane during oil and gas production activities. And formaldehyde, another toxic air pollutant, is often released from the exhaust of natural gas compressor engines.”
    It is also to be noted that one of the worst illnesses which can result from exposure to benzene is leukemia, which can, particularly, impact children. It is even being reported from studies in the USA that children, in utero, exposed to toxic emissions from gas wells are being born with an increased incidence of heart defects.
    Perhaps questions could be: What the hell are we doing to ourselves? And, why isn’t the impact to human health being brought to the public’s attention, more?

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  4. Farmer Dave

    January 27th, 2018

    David, agreed with your post about the natural gas boom in Alberta when Klein was Premier and the government went to resource based budgeting and that is why Alberta is in this mess today (Ralph thought natural gas prices would continue going up). Stelmach, Redford, Prentice and Notley struggled with Ralphs budget policy and know that a sales tax should be the way to go however all of them knew or know that whoever brings it in will be the end of their government in Alberta. A sales tax would be the fairest tax and if any resources go up in value and the government makes money it should go into a heritage fund. If the fund is managed properly some of the money could go back to the taxpayers however it should not be used to prop up business deals such as the Carillion collapse. Harper dropped the GST tax by 2% (for his election promotion something like Ralph bucks) which is part of the reason Canada is in a deficit position today.

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