Order Declaring that the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan, 2025: SOR/2024-270

Canada Gazette, Part II, Volume 159, Number 1

Registration
SOR/2024-270 December 16, 2024

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

P.C. 2024-1326 December 16, 2024

Whereas, under subsection 332(1)footnote a of the Canadian Environmental Protection Act, 1999 footnote b, the Minister of the Environment published in the Canada Gazette, Part I, on July 6, 2024, a copy of the proposed Order Declaring that the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan, 2025 and persons were given an opportunity to file comments with respect to the proposed Order or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Whereas, on December 3, 2024 the Minister of the Environment and the Government of Saskatchewan entered into a written agreement referred to in subsection 10(3) of that Act to the effect that there are in force by or under the laws of Saskatchewan

Whereas, under subsections 10(4) and (5) of that Act, the Minister gave notice of the availability of that agreement in the Canada Gazette, Part I, on July 6, 2024, and persons were given an opportunity to file with the Minister comments or a notice of objection;

And whereas, under subsection 10(6) of that Act, the Minister published in the Canada Gazette, Part I, on November 16, 2024, a notice of availability of a report that summarizes how any comments or notices of objection were dealt with;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, makes the annexed Order Declaring that the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan, 2025 under subsection 10(3) of the Canadian Environmental Protection Act, 1999 footnote b.

Order Declaring that the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan, 2025

Declaration

Non-application

1 Except with respect to a federal work or undertaking, the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) do not apply in Saskatchewan.

Cessation of Effect

Termination of agreement

2 This Order ceases to have effect on the day on which the agreement between the Minister of the Environment and the Government of Saskatchewan entitled “Agreement on the Esouquivalency of Federal and Saskatchewan Regulations Respecting the Release of Methane from the Oil and Gas Sector in Saskatchewan, 2025” terminates or is terminated under subsection 10(8) of the Canadian Environmental Protection Act, 1999.

Repeal

3 The Order Declaring that the Provisions of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Do Not Apply in Saskatchewan footnote 1 is repealed.

Coming into Force

Registration

4 This Order comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

The current Equivalency Agreement between the Minister of the Environment and the Province of Saskatchewan, which forms the basis for the non-application of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) [the Federal Regulations]footnote 2 in the Province of Saskatchewan, is set to expire on December 31, 2024.

A new equivalency agreement has been negotiated since the Government of Saskatchewan has introduced additional regulatory measures to manage methane emissions from the upstream oil and gas sector in a manner that will achieve equivalent methane emissions reductions to the Federal Regulations, over the 2025–2029 period. An updated Order in Council (the Order) is required to avoid regulatory overlap and reporting burden.

Background

In April 2018, the Government of Canada published the Federal Regulations. The Federal Regulations introduced control measures (facility and equipment standards) to reduce fugitive and venting emissions of hydrocarbons, including methane, from the upstream oil and gas sector. The Federal Regulations came into force on January 1, 2020. The Government of Saskatchewan published the Oil and Gas Emissions Management Regulations footnote 3 (the Saskatchewan Regulations) on January 1, 2019, and the Directive PNG036: Venting and Flaring Requirements footnote 4 (the Directive) came into effect on December 27, 2019.

On October 23, 2020, the Minister of Environment entered into an equivalency agreementfootnote 5 with Saskatchewan and an associated equivalency Order was made to declare that the Federal Regulations do not apply to the province over the period of the equivalency agreement. This approach reduces regulatory overlap and administrative burden, Saskatchewan will continue to apply its own methane emission regulations, and facilities will only face one set of requirements. This equivalency agreement recognized that Saskatchewan’s regulations would achieve equivalent outcomes in reducing methane emissions compared to the Federal Regulations. The current equivalency agreement is in force from October 26, 2020, to December 31, 2024.

Equivalency agreements under the Canadian Environmental Protection Act, 1999 (CEPA)

Protection of the environment is a shared jurisdiction between the Government of Canada and provincial governments. Section 10 of CEPA authorizes the Governor in Council, on the recommendation of the Minister of Environment, to make an order declaring that the provisions of a regulation made under certain subsections of CEPA do not apply in a province or territory. For this to occur, the province or territory must first enter into an equivalency agreement with the Minister of Environment. An equivalency agreement is a written agreement entered into by the Minister of the Environment and the province or territory declaring that there are in force in the province or territory, laws containing provisions that are equivalent to the Federal Regulations, and laws containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences under environmental legislation of the province or territory. Under subsection 10(8) of CEPA, an equivalency agreement has a maximum term of five years after the date on which it comes into force. An equivalency agreement may be terminated before this time subject to a three-month notice by either party.

The Department of the Environment has indicated that it is willing to consider developing equivalency agreements for greenhouse gas (GHG) emission regulations with interested provinces and territories, in order to reduce regulatory overlap and provide greater flexibility for regulated sectors. In the case of GHG regulations, provincial or territorial laws are considered to be equivalent if they result in equivalent GHG emission outcomes, calculated in terms of carbon dioxide equivalent (CO2e). In particular, GHG emissions under provincial or territorial regulations must be no greater than they would have been if the corresponding federal regulations had applied instead. Therefore, a province or territory is expected to attain the GHG outcome that would have occurred under the Federal Regulations in a way that best suits its particular circumstances.

Saskatchewan equivalency agreement (2025 to 2029)

In August 2022, Saskatchewan implemented the Directive PNG017: Measurement Requirements for Oil and Gas Operations in Saskatchewan.footnote 6 In March 2024, Saskatchewan strengthened its regulatory regimes by amending the Saskatchewan Regulations and the Directive.footnote 7footnote 8footnote 4 The amended Saskatchewan Regulations, in conjunction with Directive PNG017 and Directive PNG036 (the updated Directives), enable the Government of Saskatchewan to achieve equivalent emissions reductions compared to the Federal Regulations over the period from January 1, 2025, and ending on December 31, 2029.

The Government of Canada published a draft equivalency agreement in the CEPA Registry and a notice of its availability was published in the Canada Gazette, Part I, on July 6, 2024, initiating a 60-day period for public comment.footnote 9footnote 5 This agreement is based on expected equivalent methane emission reductions (in CO2e), under provisions of the provincial laws in force in Saskatchewan, and on the fact that these provincial laws contain similar provisions to sections 17 to 20 of CEPA for the right to require an investigation of alleged offences. These provisions are set out under the Saskatchewan Regulations and Directives and the Oil and Gas Conservation Act. This agreement comes into force on the date of registration of the Order declaring that the Federal Regulations do not apply in Saskatchewan except with respect to federal works or undertakings. The agreement would be reviewed on an annual basis. The agreement institutes information sharing requirements for Saskatchewan that includes facility level emissions data, verification activities, and enforcement measures.

This agreement would terminate on December 31, 2029, unless terminated early by either party with at least three months’ notice. Specifically, the agreement acknowledges the Regulations Amending the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) [the proposed Amendments] that were published in the Canada Gazette, Part I, on December 16, 2023. If these regulations are finalized in the Canada Gazette, Part II, it will trigger an equivalency review process. Should the review show ongoing equivalent outcomes, this could form the basis of a renewed agreement and associated order. Should the review not show an equivalent outcome, the Government of Canada will provide three months’ notice of termination, and the agreement will terminate on December 31, 2026. This date reflects a key coming-into-force date set out in the proposed Amendments, as published in December 2023.

Equivalent environmental outcomes

For the purposes of determining equivalent outcomes between the amended Saskatchewan Regulations and updated Directives and the Federal Regulations, the Department estimated the methane reduction outcomes (in CO2e) from the Federal Regulations and the amended Saskatchewan Regulations and updated Directives using the departmental reference case as published in Canada’s Greenhouse Gas and Air Pollutant Projections: 2022.

The analysis was conducted by first developing detailed, bottom-up engineering emissions estimates for the baseline and regulatory scenarios for each emissions source, which are aligned with the departmental reference case. The departmental reference case for the oil and gas sector was determined using historical emissions from the departmental National Inventory Report (NIR) and the forecast of oil and gas prices and production from the Canada Energy Regulator.

Based on these estimates, the amended Saskatchewan Regulations and updated Directives result in cumulative emission reductions of 40.8 megatonnes (Mt) of methane (in CO2e) for the period starting on January 1, 2025, and ending on December 31, 2029, compared to reductions of 41.0 Mt for the Federal Regulations, as summarized in Table 1 below. These estimates differ by less than 1% and are considered equivalent given the sensitivity range of modelled results. The amended Saskatchewan Regulations and updated Directives are expected to achieve higher emission reductions from pneumatic devices and surface casing vent flows, while the Federal Regulations would be expected to achieve higher reductions from the other emissions sources, ensuring that emissions reductions are achieved in a manner that best suits the province’s particular circumstances.

Table 1: Five-year comparison of cumulative methane emission reductions (Mt CO2e) from January 1, 2025, to December 31, 2029
Numbers may not add up due to rounding.
Emissions source Amended Saskatchewan Regulations and updated Directives Federal Regulations Difference
Compressors <0.1 0.1 -0.1
Fugitives 8.6 9.5 -0.9
General venting 27.3 29.6 -2.3
Pneumatic devices 4.8 1.9 2.9
Surface casing vent flows 0.2 <0.1 0.2
Total 40.9 41.1 -0.2

As illustrated in Table 2, Saskatchewan is estimated to achieve cumulative emissions reductions outcomes equivalent to the Federal Regulations over the five-year period. The amended Saskatchewan Regulations and updated Directives are estimated to achieve lower emission reductions compared to the Federal Regulations in 2025–2026 and achieve higher annual emission reductions from 2027 to 2029.

Table 2: Five-year comparison of methane emission reductions (Mt CO2e) from January 1, 2025, to December 31, 2029
Numbers may not add up due to rounding.
Year Amended Saskatchewan Regulations and updated Directives Federal Regulations Difference
2025 6.8 8.4 -1.6
2026 7.1 8.3 -1.2
2027 8.9 8.2 0.7
2028 9.1 8.1 1.0
2029 9.0 8.0 1.0
Total 40.9 41.0 -0.1

Objective

The objective of the Order is to reduce regulatory overlap and reporting burden, having established that Saskatchewan’s laws are expected to achieve equivalent GHG emission reductions in the oil and gas sector in a manner that best suits its particular circumstances.

Description

The Order, made pursuant to subsection 10(3) of CEPA, will suspend the application of the Federal Regulations in Saskatchewan with the exception of federal works or undertakings as defined in subsection 3(1) of CEPA. The Order will cease to have effect upon the termination of the equivalency agreement on December 31, 2029, but may be terminated earlier by either party with at least three months’ notice.

Regulatory development

Consultation prior to the publication of the proposed Order in the Canada Gazette, Part I

Officials from the Government of Saskatchewan and the Government of Canada were actively engaged in bilateral discussions on the renewal of the proposed equivalency agreement. These discussions focused on key policy and technical parameters used in support of the determination of equivalent outcomes and to ensure Saskatchewan has in place laws containing provisions that are similar to sections 17 to 20 of CEPA for the investigation of alleged offences under environmental legislation of the province or territory, as well as information-sharing arrangements agreed to with Saskatchewan representatives allowing for the conduct of annual reviews of the agreement.

Consultation received during the 60-day public comment period following publication of the proposed equivalency agreement and the proposed Order in the Canada Gazette, Part I

A notice of the availability of the proposed equivalency agreement and the proposed Order were published in the Canada Gazette, Part I, on July 6, 2024. They were also posted to the Department’s CEPA Registry website to raise awareness that they were available to the public for comment. The Department also informed a targeted group of key stakeholders of the applicable comment period. The Department received three submissions in total from various stakeholders, including the oil and gas industry and industry associations, and environmental non-governmental organizations (ENGOs).

Overview of feedback received and responses to specific stakeholder feedback

The Department’s responses to all comments related to the draft agreement have been published on the CEPA Registry. Stakeholder comments and responses are summarized below.

Support for equivalency agreement

Industry stakeholders were supportive of the proposed equivalency agreement and proposed Order and expressed support for provincially led regulations in the upstream oil and gas sector. Concerns were raised regarding the possibility of duplicative regulations in the absence of an equivalency agreement. The Order has been published ahead of the expiry of the existing equivalency agreement, to ensure no duplication of regulatory requirements. While ENGOs recognize the importance of the proposed equivalency agreement in helping Canada meet its methane reduction targets, they have advocated for stronger regulatory measures, greater use of direct measurement techniques, and more public oversight to ensure these agreements are effective and transparent.

Enhanced public engagement and information sharing

ENGOs have asked that the Department to encourage the provincial government to share the most recent and relevant information publicly in particular, information related to measurement-based data to improve the accuracy of estimates of methane emissions and enable the public to accurately assess the efficacy of the provincial regime in reducing methane from the oil and gas sector. ENGOs have requested enhanced public involvement in federal and provincial policy making. ENGOs would like the Department to provide greater transparency around the negotiation of a renewed agreement and any revisions to the equivalency agreement as well as allowing the public to provide input during the Department’s annual review of the information provided by Saskatchewan under the agreement and to consider measurement data and compliance rates when conducting its annual review.

The equivalency agreement already goes beyond the previous equivalency agreement in this regard, and the Department seeks opportunities to work with ENGOs, through informal engagements related to the ongoing improvement of methane data, and through ongoing consultations on the proposed amendments, to make data available outside of the scope of these Agreements. The Province of Saskatchewan publishes information related to methane emissions reduction publicly, including reported and modelled methane emissions for oil facilities. The equivalency agreement also mandates detailed, annual data submissions on the number of facilities, methane reduction outcomes, and enforcement activities. It emphasizes transparency and ongoing evaluation of the effectiveness of both the federal and provincial regulations. This information is used to assess the implementation and effectiveness of the province’s regulations and directives to reduce methane emissions. Stakeholders are invited to share their observations on the annual reports with the Department.

Department’s methane emissions modelling and assumptions

Industry stakeholders have noted that the oil and gas industry has reported significant methane reductions in Saskatchewan. They also stated that the Department has likely underestimated the total provincial methane reductions, both from 2020 to 2025 and from 2025 to 2030.

ENGOs have requested more detail and transparency regarding Department’s modelling and whether it reflects the results of direct measurements of the oil and gas sector’s methane emissions that were recently integrated into the NIR 2024.

ENGOs have also requested more details regarding how the Department scales estimated emissions with the NIR as well as the assumptions it relies on when calculating emissions reductions from the relevant requirements of the provincial regulations.

The Department determines equivalent emissions outcomes by conducting an assessment using the same modelling methodology for both the existing federal and provincial regulations. This approach involves developing detailed bottom-up emissions estimates for both sets of regulations and comparing them with Canada’s emissions baseline NIR 2022. The NIR includes detailed information related to estimated emissions projections and assumptions that the Department relies on to calculate emissions reductions.

As part of the development of the proposed Amendments, the Department has ongoing consultations on modelling methods. These consultations aim to refine and improve the modelling approaches, ensuring they reflect the latest data and methodologies, including provincial input and recent advancements in direct measurement techniques. The outcome of these consultations will further inform the Department’s approach to assessing methane emissions reductions and regulatory equivalency.

Modern treaty obligations and Indigenous engagement and consultation

In Saskatchewan, facilities subject to the Federal Regulations were identified on the reserve lands of 11 First Nations. The Order will continue to suspend the Federal Regulations in Saskatchewan, including for those facilities on reserve lands. Equivalent environmental outcomes are expected to be achieved under the amended Saskatchewan Regulations and updated Directives. No modern treaty obligations are expected to be impacted by the Order.

Instrument choice

An order is the only regulatory instrument under CEPA for the Governor in Council to declare that the Federal Regulations do not apply in Saskatchewan. Non-regulatory options such as a voluntary option or code of practice are therefore not suitable tools for achieving the objective.

Regulatory analysis

Benefits and costs

The amended Saskatchewan Regulations and updated Directives will regulate methane emissions in a manner that results in equivalent outcomes to the Federal Regulations in a manner designed with the specific characteristics of the Saskatchewan oil and gas industry in mind. Furthermore, the Order reduces regulatory overlap and reporting burden by suspending the requirements of the Federal Regulations in Saskatchewan. As a result, the Order is expected to result in incremental compliance and administrative cost savings to industry.

The federal government is expected to realize incremental cost savings from suspended administrative activities related to enforcement, compliance promotion, and administration of the Federal Regulations in Saskatchewan. These cost savings are estimated to total about $474,188 over a five-year period (2023 Canadian dollars).footnote 10

Small business lens

Given that the Order is not expected to result in incremental costs to industry, it is not expected to result in incremental cost impacts to small business.

One-for-one rule

The one-for-one rule would apply to the Order, constituting an “OUT” as per the Policy on Limiting Regulatory Burden on Business. However, those cost reductions have already been accounted for in the Regulatory Impact Analysis Statement for the previous order, which covered the 2020–2029 analytical period. Accordingly, no additional impact was assessed for the Order.

Regulatory cooperation and alignment

Protection of the environment is a shared responsibility in Canada. The use of equivalency agreements, together with an Order in Council suspending the application of a federal regulation in a jurisdiction, is included in section 10 of CEPA as a tool for avoiding regulatory duplication.

Effects on the environment

The Federal Regulations were developed under the Pan-Canadian Framework on Clean Growth and Climate Change. A strategic environmental assessment (SEA) was completed for this framework in 2016. The SEA concluded that proposals under the framework will reduce GHG emissions and are in line with the 2016–2019 Federal Sustainable Development Strategy (FSDS) (PDF) goal of effective action on climate change. A preliminary scan concluded that an SEA is not required for the Order, since they continue to align with the updated 2022–2026 FSDS to reduce emissions of methane from the oil and gas sector.

Gender-based analysis plus

No impacts based on gender and other identity factors have been identified for this proposal.

Implementation, compliance and enforcement, and service standards

Implementation

The Order declares that the Federal Regulations do not apply in Saskatchewan effective on January 1, 2025, except for federal works and undertakings, which includes interprovincial pipelines.

Contacts

Magda Little
Director
Oil, Gas and Alternative Energy Division
Energy and Transportation Directorate
Environmental Protection Branch
Environment and Climate Change Canada
351 Saint-Joseph Boulevard
Gatineau, Quebec
J8Y 3Z5
Email: methane-methane@ec.gc.ca

Matthew Watkinson
Executive Director
Regulatory Analysis and Valuation Division
Economic Analysis Directorate
Strategic Policy Branch
Environment and Climate Change Canada
351 Saint-Joseph Boulevard
Gatineau, Québec
J8Y 3Z5
Email: darv-ravd@ec.gc.ca