Environmental, Indigenous and Natural Resources Blog

Late last week, the Government of Canada released a proposed methodology for estimating upstream GHG emissions from proposed oil and gas projects undergoing federal environmental assessment. This comes on the heels of the Government’s announcement in late January of its new guiding principles for project review, one of which included assessment of “direct and upstream greenhouse gas emissions linked to the projects under review” (see our previous blog post here). Interested parties have until April 18 to provide comment to the Oil, Gas and Alternate Energy Division of Environment and Climate Change Canada, following which a final methodology will be developed.

What does “upstream” mean? The proposed methodology defines upstream to include all industrial activities from the point of extraction to the project under review. While the specifics will vary by resource and project type, in general this would include extraction, processing, handling and transportation. The example provided in the proposed methodology is that an upstream GHG assessment of a crude oil pipeline project would include the following activities:

• Extraction — crude oil and gas wells and oil sands mining and in situ facilities;
• Processing — field processing and upgrading, if occurring;
• Handling — product transfer at terminals; and
• Transportation — any pipeline operation in advance of the project.

Having defined the scope of what will be assessed, the proposed methodology then sets out a two part assessment:

1. a quantitative estimation of the GHG emissions released as a result of upstream production associated with the project, and

2. a discussion of the project’s potential impact on Canadian and global GHG emissions.

The first component, quantitative estimation, will take into account emissions from the upstream activities “exclusively linked to the project,” such as emissions from combustion or from fugitive, venting and flaring gas emissions. An example of a quantitative estimate that Environment and Climate Change Canada developed for the proposed Pacific Northwest LNG project can be found here.

The second component is intended to assess the conditions under which the Canadian upstream emissions estimated in the first component could be expected to occur even if the project were not built. The baseline for any such assessment under the proposal would require an examination of current production levels and the expected growth of resource production in Canada, as well as the potential global markets for future resource production growth with and without the proposed project.

Project proponents, opponents, and regulators that have been through the EA process in the past will be familiar with the second component of the methodology in particular, as uncertainty with respect to whether upstream impacts will actually occur with or without any particular project has frequently been relied on by regulators in the past as a basis to deny consideration of upstream effects.  It remains to be seen whether this newly proposed methodology, focussing not only on Canadian but also on global market conditions for resource growth within which to benchmark a project’s emissions, will allow regulators to make the assessments they have previously said they are unwilling or unable to make.