U.S., Canada Agree to Oil and Gas Well Emission Cuts

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March 10, 2016

By Justin Sink, Josh Wingrove and Jennifer A. Dlouhy

(Bloomberg) — President Barack Obama and Canadian Prime Minister Justin Trudeau announced steps to limit methane emissions from existing oil and natural gas wells, a move intended to underscore their commitment to combat climate change.

Canada and the U.S. are agreeing to reduce methane emissions from oil and gas by as much as 45 percent below 2012 amounts by 2025, according to a joint statement by the countries issued Thursday, as Trudeau meets with Obama in Washington.

Oil and gas companies, whose profits are suffering because of a drop in prices, probably will seek to derail the plan.

Both Trudeau and Obama have described climate change as among the world’s most pressing challenges. The announcement underscores the extent to which an outgoing president and an incoming prime minister who are ideologically aligned are eager to address areas of mutual interest.

The two leaders also professed their support for halting routine flaring at oil and gas sites by 2030, committed to collaborate on boosting the fuel efficiency of post-2018 model year heavy-duty vehicles and said they would work together to integrate U.S. and Canadian electric grids, allowing more renewable power to be brought online and shared across the border.

The two leaders are also expected to talk over more prickly issues, including security-induced traffic jams at the U.S.-Canadian border and Canada’s halting participation in the bombing campaign against Islamic State. Trudeau will be treated to a state dinner, the first for a Canadian prime minister since 1997.

Obama sees himself in the younger Trudeau, 44, whose ascent in Canadian politics was built on pledges of hope and change and an inclusive vision of his country, and whose children are roughly the same age as Obama’s when he was elected in 2008. Trudeau told Bloomberg News in an interview earlier this month that he shares “a great compatibility right now in terms of the issues we’re looking at” with Obama.

Methane Rules

Next month, the U.S. Environmental Protection Agency will begin a formal process to compel energy companies to provide information about the methane emissions produced along a series of oil and gas activities, including production, transmission, processing and storage.

The EPA is already finishing a rule that would require oil and gas companies to upgrade equipment and search out methane leaks at new and modified wells. Thursday’s announcement that the federal government will also clamp down on leaks at existing equipment may assuage concerns from environmentalists who say cutting leaks at new wells isn’t enough to meet Obama’s carbon-cutting pledges.

According to the statement, the EPA “will move as expeditiously as possible to complete this process.”

If the EPA is unable to complete work on its methane regulation before the end of the Obama presidency, a Republican successor likely would withdraw the rule.

The government in Canada’s Alberta province is considering stricter methane rules for new equipment, though they likely won’t be as prescriptive as U.S. regulations, according to Bloomberg Intelligence analyst Bernard Chen. Environmental regulators in Canada intend to publish an initial phase of proposed methane regulations by early 2017, according to the joint statement.

About 25 percent of global warming is attributed to methane emissions, said Mark Brownstein, vice president in the Climate and Energy Program at the Environmental Defense Fund. Methane is 84 times as potent as carbon dioxide at warming the atmosphere over 20 years, and the oil and gas sector accounts for about a third of U.S. emissions, according to the EPA.

“There’s very little else that can have that kind of dramatic impact on the rate of warming today in such a technologically feasible and cost-effective way as reducing oil and gas methane emissions,” Brownstein said. “The opportunity here is enormous, and it speaks to the significance of what both Canada and the United States are committed to.”

Methane emissions from oil and gas development have fallen, despite a domestic drilling boom. Energy industry leaders say that illustrates they already have enough incentive to plug methane leaks and capture it at wells. Methane, the main component of natural gas, is a valued commodity.

Arctic Management

Obama and Trudeau also are promising to collaborate in managing the Arctic, including taking unspecified “concrete steps” to protect at least 17 percent of the region’s land and 10 percent of its water. From shipping to oil development, commercial activities in the region should only occur when the highest environmental standards are met, the countries said. According to the joint statement, the U.S. and Canada will work to develop a shared, science-based standard for considering the broad environmental impacts of commercial activities in the region — reviews that could incorporate climate change considerations.

“Neither the Arctic Ocean nor the threats confronting it are confined by political boundaries,” said Michael LeVine, senior pacific counsel for the conservation group Oceana. “Today’s agreement will make the United States and Canada accountable to each other for choices that affect the shared region.”

Trudeau is bringing with him to Washington his fisheries minister, Hunter Tootoo, an aboriginal Canadian who represents the district of Nunavut, a thinly populated and developed northern territory.

“As an Inuk, I’m keenly aware of the issues in the North,” he said in an interview. “We’re on the front lines of climate change and we’re feeling the impacts of it already.”

Canada’s contributions to the fight against the Islamic State militant group have caused some heartburn for the White House. Trudeau withdrew Canada’s six fighter jets from the coalition bombing Islamic State in February, while increasing the number of Canadian troops helping to train Iraqi forces fighting the group.

Trade is another difficult issue for Obama and Trudeau. The Canadian leader remains noncommittal on the Trans-Pacific Partnership, a free-trade deal between the U.S. and 11 other Asia-Pacific countries, including Canada, that Obama views as a cornerstone of his legacy.

The pact was hammered out in the middle of Canada’s election. Canada meanwhile hopes to enact its own free trade agreement with Europe after revising it to avoid fears that corporations would be over-empowered, a concern that has stalled trade negotiations between the U.S. and the European Union.

–With assistance from Angela Greiling Keane.

© 2016 Bloomberg L.P

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