Alberta is Losing Out on Millions in Natural Gas Revenue. Here's Why

By James Wilt - DeSmog Canada, January 25, 2018

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?

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.

“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.”

Disclaimer: The views expressed here are not the official position of the IWW (or even the IWW’s EUC) and do not necessarily represent the views of anyone but the author’s.