Gas Flaring and Venting Regulation in Alberta: Shared Experiences and

Lessons Learned

Taller National: “Impulsando la Alianza para Reducir la Quema de Gas en Ecuador

Michael Brown, M.Eng, P.Eng., Senior Production Engineer

September 26, 2006 Alberta Energy and Utilities Board

Topics for Discussion Background on Alberta History on Flaring in Alberta Flaring and Venting Reduction Results How we got there:

Multistakeholder approach Guide 60 Reduction Targets Decision Tree Economic Evaluation of Gas Conservation Public Reporting Enforcement

Lessons Learned Recap

Alberta Oil and Gas Production (2004)

Conventional oil……...……..600 000 B/d (95 000 m3/d) Bitumen

in situ…………………..…...386 000 B/d (61 000 m3/d)surface-mineable………….703 000 B/d (112 000 m3/d)

Natural gas……….....…….….13,3 BCFD (373 106 m3/d) Oil / Gas producing wells ...133 000 Pipelines………………………355 000 km Producing Companies .…… 1 600 Drilled last 3 yrs ………..….. 50 000 wells

(about 75% of production exported to U.S.)

Note: million = 106

Applications to EUB (2004)

•Wells………………………24 379•Production facilities……... 3 499•Pipelines…………………. 14 317•Oil sands

In situ…………………. 205Mineable……………… 6

•Coal………………………. 10•Reservoir development… 4 353•Environmental review…... 438•Utilities……………………. 628

Who is the EUB?

9 Board Members – Government appointed(4 engineers, 2 lawyers, 1 accountant, 2

public)

850 Staff (engineers, geologists, technicians,

accountants, lawyers, 120 field staff)

To ensure that the discovery, development and delivery of

Alberta’s resources take place in a manner that is fair,

responsible and in the public interest

Who is the EUB? Agency form

- independent and quasi-judicial

Legislated mandate

- consider the broad public interest social and economic effects

environmental impacts

Key to effective independence“Nobody controls the Regulatory Authority but the

Regulatory Authority remains under control”

History on Flaring and Venting in Alberta

EUB (previously ERCB) – established in 1938 due to flaringStop wasteful flaring in Turner Valley, Alberta

• “Hell’s Half Acre”• 5,63 x 106 m3 /d for a decade

Conserve and prevent waste of reserves

In 1996, flaring and venting about 1800 106m3 per yearA little better, but public still concerned

By 2005….

The Results flaring reduced 72%, venting reduced 58%

89

9091

9293

9495

9697

98

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Perc

enta

ge U

tiliz

edFlared and vented (bcm

*)Percentage UtilizedVolume Flared and vented

*bcm = billion cubic metres

Year 1996 - baseline for flaring

Year 2000 – baseline for venting

2001 2002 2003

1.2

1.4

1.6

1.8

2.0

2.2

1.0

0.8

1996 @ 1,8 bcmIssue

2004

96%

0,73 BCM

Looking back…

What were the drivers? How did we get there? What worked? What lessons did we learn?

(and what can we share through GGFR?)

What were the drivers?

Public concerns regarding human and animal health poor combustion efficiency harmful pollutants

Waste of a valuable and non-renewable resource

Unpleasant aesthetics of flaring

How our latest process began

In Alberta, the producers group (CAPP - Canadian Association of Petroleum Producers) identified a need to address concerns about associated gas flaring

CAPP requested that the Clean Air Strategic Alliance (CASA – www.casahome.org) form a multistakeholder team to address

But any stakeholder could initiate process

What is the Clean Air Strategic Alliance (CASA)?

Partnership Non-government organization (NGOs) Industry Government

Accountable to the Alberta ministers of: Resource Development Environment Health

VisionThe air will be odourless, tasteless, look clear and have no measurable short or long term adverse effects on people, animals or the environment.

How does CASA work?

CASA operates on a multistakeholder, consensus basis “A process in which participants work together as equals to

realize acceptable actions or outcomes without imposing the views or authority of one group over another”

National Round Table on Environment & Economy Building Consensus for a Sustainable Future, 1998

“A process in which all those who have a stake in the outcome aim to reach agreement on actions and outcomes that resolve or advance issues related to environmental, social, and economic sustainability”

National Round Table on Environment & Economy Building Consensus for a Sustainable Future, 1993

When to use a consensus-based approach?

Not all issues are appropriate for consensus Issues that benefit from broad stakeholder

participationNeed to access stakeholder expertise

Issues where difference of opinions exists and parties have strong positions (e.g. flaring)

Issues needing solutions that are credible to all stakeholders

Transparent and open process needed

What is required? Commitment and goodwill Common understanding of what consensus means

Not comprimise: no one gives up what is important, just to reach agreement Must result in an outcome that is better than next-best for each member

Shared goals and objectives For example: environmental protection, resource conservation / less waste of

gas

Transparent process Fair and open

Fallback option (if consensus not achieved, then…)

Who do you include?

Identify key stakeholders Who could be affected? Who has expertise?

Alberta flaring stakeholders: Oil producers, producers groups (CAPP, Small Producers) Relevant government sectors

• (oil + gas regulator (EUB), environment regulator, royalties regulator) Public representatives

• (NGOs = Non-Government Organizations, people’s groups, environmental groups, land owners, land users (farmers, forestry, etc))

Benefits of NGO involvement New era of citizens becoming more involved,

active participation is more common Citizens well informed and aware of rights

Access to information is increasing

Citizens seeking accountability, fairness and input into decision-making

Leads to better solutions than confrontational tools like media, protests, etc.

Benefits of NGO involvement Public opinion on values and choices is an “expert

opinion” Technical expertise that resides within NGOs Often have creative new ideas, new approaches

Different style of thinking

Bring legitimacy to the process and results

What will it look like?

NGO

NGO GOVT

GOVT

IND

IND

PUBL Government as ArbitratorSpecial Interest LobbyingWin/Lose Outcom es

Government as PartnerGovernment as FacilitatorWin/Win Outcom es

PUBL

Learnings from Multistakeholder Consensus Multistakeholder consensus-based decision

making can work Takes more time

To build trustTo develop understanding of issuesTo develop workable solutions

All members must be prepared to participate! Silence means consensus.

Can lead to better approaches and solutions

Outcomes: Guide 60

Combines all of Alberta’s flaring requirements into one document

Makes compliance easier Improves consistencyMakes enforcement easier

Voluntary Reduction Targets Industry reduction targets

year-end 2000: Target 15% >> 38% reductionyear-end 2001: Target 25% >> 53% reductionyear-end 2002: Target 50% >> 62% reductionyear-end 2003: No further target est.) >>70% reduction

clear objective for flare reduction actionsProvided industry with the flexibility to determine how Initially, there may be lots of “low hanging fruit” that can

be captured improved public confidence in process

Learning: Voluntary targets can work!(but regulatory backstop was key)

Flaring/venting management decision tree

Eliminate solution gas flaring and

venting

Reduce solution gas flaring and

venting

NO

Meet flaring and venting

performance requirements

NO

YES

YES

Implement

Performance requirements

EUB Guide 60 Gas Combustion & Venting and Fugitive Emission Management Requirements

Tests

•Public concern?

•Health impacts?

•Economic alternatives?

•Environmental impacts/benefits?

Defined Economic Evaluation Process Feasibility of associated gas utilization is

determined by an economic test Economic test compares financial benefits vs.

costs of gas utilization Standard calculation methodology provided by

EUB (found in EUB Guide 60) Must utilize if economic (i.e. net present value

greater than $0 (soon changing to -$50,000 CDN)) If not economic, can flare but evaluation must be

kept for audit

Economic Evaluation Assumptions

Before-tax analysis Only includes revenue from gas and byproducts

that would otherwise be flared Must include savings resulting from flare

elimination such as: reduced maintenance, fuel and operating costs

Must consider options such as tie-in to gathering system (i.e. gas to market), use of gas for electrical power generation, re-injection, or other technical options

Economic Evaluation - Requirements

Gas price forecast Electricity price forecast Reserves estimate and production forecast

(decline analysis) Capital and labour cost estimates for

conservation project Operating cost (estimated as a percentage of

capital cost)

Economic Evaluation – Requirements Current and predicted inflation rate Discount rate (cost of borrowing money)

Prime lending rate at a recognized financial institution plus a “cost of borrowing” percentage (3%)

A simple spreadsheet for standardizing and automating the calculation

Barrier removed: royalty on otherwise-flared associated gas

Can apply for royalty waiver if it would make utilization feasible

Measurement and Reporting

Why measure?Monitor emissionsUnderstand impact of flaring on reservoirConduct proper economic evaluations Information and statisticsCalculate production and balance facilities

“What gets measured gets managed”

Reporting Requirements

Production reporting is done monthly Includes production volumes of gas, condensate, oil

and water, and production hours for each well All gas flared and vented must be reported,

including:Routine operationsEmergency conditionsDepressuring of pipeline, compression and

processing systems All gas flaring, incinerating and venting are

reported at the location where it occurred

Publication of Flaring and Venting Data EUB publishes an annual report of flaring and venting –

Report ST60B (available on EUB website at eub.gov.ab.ca)

Report shows annual volume of gas flared and vented for every company

Report shows annual oil production and associated gas production for every company

Report ranks companies, from worst to best based on gas utilization percentage

Learning: Making data available to public provides positive pressure for improvement by companies

Enforcement Principles Goal is to have lasting compliance without

continuous regulator involvement Level of enforcement actions should match the

severity of the situation Enforcement actions should be consistent Expectations and enforcement actions should

be clearly communicated (defined in EUB requirements)

Operator can appeal

Enforcement Process Any repeat or similar noncompliance results in escalating

enforcement actions (“ladder”) The EUB will deal firmly with companies where there is

obvious disregard for requirements The EUB will consider companies’ response to warnings

and obligations when deciding to approve or deny applications (REFER status)

The EUB may shut down facilities until root cause is determined and permanent improvements have been implemented

Removal from the “ladder” occurs when compliance is achieved

Conclusions – Lessons learned in Alberta Multistakeholder consensus worked

NGO involvement increases credibility of results Clear, compiled regulations increase compliance

(and look for barriers!)

Enforcement must be applied, consistently Voluntary targets can work – but need backstop The Decision Tree works (eliminate, reduce, …)

Economic feasibility evaluations can workCalculation parameters need to be clearly defined

Measurement and public reporting are key

The Results flaring reduced 72%, venting reduced 58%

89

9091

9293

9495

9697

98

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Perc

enta

ge U

tiliz

edFlared and vented (bcm

*)Percentage UtilizedVolume Flared and vented

*bcm = billion cubic metres

Year 1996 - baseline for flaring

Year 2000 – baseline for venting

2001 2002 2003

1.2

1.4

1.6

1.8

2.0

2.2

1.0

0.8

1996 @ 1.8 bcmIssue

2004

96%

.73 BCM

Gracias!

Thank you!

Extra slide….

Performance Requirements

Detailed in Sections 7 and 8 of EUB Guide 60 Contains requirements for:

IgnitionFlame stability and heating value (based on latest

research at University of Alberta)Stack heightLiquid separationSpacing from other equipmentNoiseSmoke / visible emissionsMust meet air quality standards