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David Yager

David Yager

Based in Calgary, David Yager is a former oilfield services executive and the principal of Yager Management Ltd., an oilfield services management consultancy. He has…

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Methane Reduction Plan Could Seriously Harm Canadian Oil & Gas


The old saying goes, “The road to hell is paved with good intentions”. And so it goes for the myriad of new regulations, taxes and restrictions forced upon the oil industry to attempt to make it something it is not, which is a zero-carbon and environmentally benign source of hydrocarbon fuel. Carbon taxes. Corporate taxes. Emission caps. The premise is the upstream oil and gas industry is so shamelessly profitable that governments and regulators can pile on more rules and costs that somehow this industry can accommodate, absorb and survive. And still provide fuel, taxes and jobs.

The newest elephant in the room the industry has not yet had to deal with is the commitment made by the governments of Canada, Alberta and U.S. to reduce methane emissions by 40 to 45 percent by 2025 with the major culprit being the usual suspect; the oil and gas industry. The new science of climate change has determined that methane – CH4 or one carbon atom combined with four hydrogen atoms – is a greenhouse warming contributor that over a hundred-year period is 25 times worse than carbon dioxide.

If you don’t know what that means it’s okay because neither does your writer.

Methane is the main component in natural gas. You know, the stuff that powers your furnace all winter, the hot water heater in the basement, and perhaps your stove top and oven. Natural gas is what built Alberta’s oil and gas industry. First discovered in commercial quantities at Langevin near Medicine Hat in 1883 (as Rudyard Kipling opined “all hell for a basement”), natural gas has been a massive contributor to the improvement of life in this large cold country. Methane was first plumbed into Calgary from Bow Island in 1912. It really helped because if all the trees for firewood had not yet been cut down for they would be shortly.

And Alberta’s modern oil and gas industry was born. It gets better. In the mid-1950s serial entrepreneur Frank McMahon (think McMahon Stadium and the Calgary Stampeder’s home field) of Pacific Petroleums pushed through the Westcoast Transmission “big inch” pipeline that carried natural gas from northeast B.C. to the lower mainland and then further south to the northwest U.S. and California. One of the benefits of bringing this deadly methane into Vancouver was a massive improvement in air quality as coal and wood were replaced with clean-burning natural gas. The record states air quality improved materially.

There were major political debates to get western Canada’s natural gas into obvious Canadian markets. It was a more difficult struggle every step of the way than it should have been.

With an astonishingly short memory, Vancouver recently passed a new law making it illegal for new buildings to use natural gas. That methane which was a major contributor to B.C.’s lower mainland having clean air is long forgotten. We are bombarded with the life-threatening implications of hydrocarbon fuel. It would be helpful if somebody acknowledged even occasionally a few of the historic improvements oil and gas have provided.

Then there’s U.S. coal and the shale-gas revolution. The greatest progress in reducing U.S. carbon emissions in its history has been shale gas fracking resulting in cheap methane and a low-cost replacement of coal with natural gas for power generation. Washington’s Energy Information Administration (EIA) reported that in 2015 (the last full year for which data is available) U.S. coal production dropped 10.3 percent from the prior year to the lowest level since 1986.

Methane. Think methane.

It is against this historical backdrop of methane/natural gas being an amazing exploitation of resources that we visit the joint determination of multiple governments to clamp down on methane emissions. There are many sources of methane, including the existence of mammals.

Related: OPEC Cuts Send Russia’s Oil Heartland Into Decline

The target of the methane reduction plan has been, as usual, the oil and gas industry. The primary sources are leakage caused by fugitive emissions, equipment leakage, and flaring. But what is interesting, from the chart below, is that according to independent sources two-thirds of methane emissions come from other sources than the industry that produces this fuel directly for money and the advancement of mankind.

(Click to enlarge)

Source: Bousquet, P. et al. (2006). Contribution of anthropogenic and natural sources to atmospheric methane variability.

(Click to enlarge)

Source: Energy Information Administration March 2011

According to the foregoing, the second largest source of methane is apparently agriculture particularly livestock farming, more commonly called “cow farts”. Homo sapiens also fall into this category but climate scientists don’t think the fact that all of us pass wind from time to time – and emit CO2 as we breath – is material to the future of the world. Another major contributor, which adds up to 24 percent of the total, is biomass (wood etc.), growing rice and other sources of non-animal food, and biofuels, allegedly a solution to the global carbon problem.

What is notable is that to protect the environment none of the advocates of oilpatch methane reduction have suggested mankind quit eating meat or rice. If you think this is, once again, biased against the oilpatch, you are absolutely right. Agriculture gets a hall pass. No mention of food as a large source of methane.

So last year a major reduction of methane emissions by the oil and gas industry was determined to be important and the details began to emerge. As written above, this meant that non-combusted (not burned to create water and CO2) methane emissions must be reduced by 40 to 45 percent by 2025.

The problem is this business is all methane. It is the primary product when producing natural gas and is a major by-product in the production of oil and natural gas liquids. It leaks out of the ground all on its own through existing wellbores, a phenomenon more commonly called surface casing vent flows. Methane found its way to surface at Turner Valley decades ago. It has been the marker for oil and gas all over the world for decades. This is how early oil early explorers found commercial quantities of oil and gas.

In a presentation last year CAPP figured the new rules as presented by governments would cost $4.1 billion over the next eight years, a period running to 2024. According to ARC Energy Research Institute macro-economic update for June 5, this is 10 percent of all the available upstream cash flow from the entire industry in 2017.

And CAPP also states the obvious. What the heck is this about for an industry on its knees? CAPP figured last fall that is this were done on a more strategic level with operators exploiting all the micro-opportunities, the cost could be reduced to $1.3 billion. It is not that the producers are trying to neglect their social and financial obligations. But what can an industry selling its product under half of its value three years ago – combined with the other increased levies – be expected to accomplish without shutting down?


The Petroleum Services Association of Canada – the folks with the guys on the ground with the valves, wrenches and infrared methane leak detection technologies – was very forthright. CEO Mark Salkeld noted that while there is no question this would create more work for the oilfield services industry, his main concern is that any policy changes that negatively affect upstream cash flow are ultimately not positive for the oilfield services industry.

Related: Can Canadian Crude Compete In Asia?

What’s worse for Canada is that in March U.S. President Donald Trump issued a presidential order indicating Obama-era methane reduction initiatives would be reviewed and possibly rolled back. Should this unfold as advertised and Canada continues down its current path the competitive economic advantages of investing in the U.S. will continue to grow. When two countries like Canada and the U.S. have an upstream oil and gas industry to intrinsically linked in every way – capital, pipelines, operators, service providers, equipment, technology – it is essential that Canada makes some attempt to remain competitive as policy changes take place south of the border.

So here we go again. There are an enormous number of sources of methane, one of which is the oil and gas industry. This is an industry that powers much of the world through the production and marketing of natural gas. Natural gas through LNG exports is expected to be a great contributor to global carbon reduction as it displaces coal. After the Fukushima nuclear disaster in Japan in 2011 it was methane imports that replaced this essential source of energy.

But government and climate policy advocates have once again focused on the oilpatch as the world’s primary bad guy.

All we can hope is that when it sorts itself out we can remain in business. Because when we live in a large cold country like Canada, the continued production and consumption of methane is essential to life as we know it. And in the process the odd valve and fitting will leak. But so will the farm animals.

By David Yager for Oilprice.com

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Leave a comment
  • M Shannon on June 19 2017 said:
    The socialist governments they keep electing will bankrupt Canada in their hubristic efforts to 'save the world' ;. Canavuela lol.
  • jim on June 19 2017 said:
    I was so worried, I looked it up. Now I'm terrified. The atmosphere is 1800 parts per billion cow farts. Think about it. The concentration is so low, it has to be measured in parts per billion. 1800 parts per billion is 1.8 parts per million and 0 parts per 100,000. Can someone explain how something so scarce in the atmosphere can be of any consequence?
  • Evan Bedford on June 19 2017 said:
    "What is notable is that to protect the environment none of the advocates of oilpatch methane reduction have suggested mankind quit eating meat or rice."

    Not quite true. A lot of us environmentalists advocate a significant reduction in meat intake (I probably eat 1/10 the amount of beef that my wife does, and I'm always the one that has to do the heavy lifting around the house). Decent article otherwise.
  • Lee James on June 20 2017 said:
    If methane were to be fully visible in our atmosphere -- say. as blue splotches -- we would want to do something about it. Controlling methane releases and leaks would be something we would want to do. Controlling methane emissions would be considered part of the cost of doing business. This same idea would (and will?) hold true for agriculture as well.

    But we do not see methane and we will want to ignore it. Blame it on the cows. Require cows to be fitted with gathering pipes and see how that goes over....

    Unfortunately, much of the methane pipe tightening and gathering piping is not economic in terms of what the market gives you for recovered methane. That leaves the climate argument for possible justification of methane regulation -- except maybe for the government regulators who kick about lost tax revenue, when methane from their jurisdiction does not make it to market.

    Regarding climate::

    "The leveling off we've seen in the last three years for carbon dioxide emissions is strikingly different from the recent rapid increase in methane," says Robert Jackson, a co-author of the paper and a Professor in Earth System Science at Stanford University. The results for methane "are worrisome but provide an immediate opportunity for mitigation that complements efforts for carbon dioxide."

    Read more at: https://phys.org/news/2016-12-surge-methane-emissions-threatens-efforts.html#jCp

    My conclusion is that the petroleum industry needs to join other industries in considering what happens when what goes in must come out.
  • Lee James on June 20 2017 said:
    More to the immediate concern of the author, I'd like to add to my earlier comment that I think North American-sourced petroleum will probably need to slow production. I think I'm seeing that a lot of the cost for bringing in increasingly "tough" oil are not factored in. Investors do not adequately consider the higher cost of going after oil and gas in extra challenging geologic formations and where petroleum transport is difficult.

    While I think oil and gas are as important to our way of life as the next person, I also think that we need to acknowledge the physical and political context and how that translates into cost of business. Look carefully and I think we see a fossil fuel industry that is transitioning to less usage and more deferral to alternatives.

    Burning fossil fuel on planet Earth has been a great ride. We're taking a resource that took millions of years to create and burning it up in something like 300 years.
  • Mitch Carlson on June 20 2017 said:
    David, a couple comments

    1) since you mentioned that you don't understand what it means when they say methane is 25x more harmful than CO2 - methane release vs combusted natural gas (flared, or ideally combusted for useful purposes) does have a significantly higher greenhouse gas contributions than straight CO2. So do most fossil fuels being burned. It is translated into a carbon dioxide equivalency for camparitive purposes. Non combusted methane is approximately 8x more harmful than combusted methane, and therefore, in the fight against climate change, methane releases, leakages, etc are seen as a priority because the carbon equivalency impact.

    2) there certainly are many forms of methane releases, including agriculture, landfill, and other biological material. And there are many projects being put in place in order to capture this methane release for useful purposes. Landfill caps, wastewater treatment and agriculture waste (manure) digestion, even collecting dog poop, for the purposes of power generation are projects happening all over the world included Canada. I haven't heard of anything going quite as far as capturing cow farts but many other industries and sectors are also being asked to do their part.
    It isn't just the oil and gas industry being unfairly targeted. I believe this sector is being targeted because there are significant opportunities for conservation

    3) some reasons why the oil and gas industry is targeted. In SK alone in 2016, over one billion cubic meters of natural gas was either vented or flared at the wellhead. contributing to nearly 9 million tonnes of carbon emissions. At $3/GJ, thats $128 million in unrealized commodity revenues. To put another perspective on this, that is the energy (BTU) equivalency to over one billion litres of diesel.
    And this is only as the wellhead. Consider additional leakages through pneumatic controllers, compressors, valves, meter sets etc throughout the supply chain.
    So while you may say that this is unfairly targeting oil and gas, I look at it as an opportunity to improve efficiencies, reduce unnecessary waste, and capture a valuable energy source.

    I actually have a lot of faith in the oil and gas industry to adapt and develop creative solutions to this issue.
  • Clint mason on June 20 2017 said:
    Mr Yager;
    the comment methane is 26 times more harmful than CO2 is simple to understand. for every ton of Methane vented it is equal to 26 tons of CO2 which is based on it effect on trapping heat and it is also a result of the time it takes to break that methane down. in northern climates it takes 8-12 year to break down Methane in our atmosphere. Of all the things we should be doing is looking for simple solutions to minimize our venting of GHG, now I am not a big believer in the effects of CO2 but Methane is a product that has no usable benefit to the plant life or planet. CO@ has less than a 1 year life cycle in our environment before it is absorbed back in to something, water soil plants etc. It is also likely the easiest thing we could do to make a real change to our pollution of the air we breath.
    Methane should be burned heating our homes and not vented through poorly operated control systems. It is by far the most effective and lowest impact on our environment when we do this. when we vent it in Instrumentation and use it for chemical pump and other devices and vent that raw methane in to the environment it is simple a disgrace. in the western provinces we have enough methane venting from our oil and gas vents that by focusing on reducing and stopping just these vents from chemical pumps we could have the same effect as if we removed every mode of transportation off the streets, rivers, tracks and air in Alberta. Why because for every 1 ton of methane we remove it equals 26 tons of CO2. there is also new, simple and cost effective methods to achieve this.
    I am and have always been a huge supporter of the Canadian oil and gas make my living from this but I also don't intend to lie to myself and others and not say we have things we can make better very easily. As much as I dislike the Current governments there is ways to achieve these goals using the offsets that will minimize the overall impact on the corporations. We need more conversation about the things we can actually change and less about Cap and Trade and the out gassing of muskeg or cow farts. if for no better reason than we should be using it to heat our homes and not breathing it. I would suggest you spend some time researching the actual opportunities that we have to make major changes in our industry (smart and ones that will not put us out of business) we need to get rid of stupid government policies, agreed 100%, but but we also need to change. the world is changing and if we want to become the Leaders we like to think we are we need to do it through smart plans and policies, not through punitive taxes like the Liberals are proposing, and not trying to pretending there is not a real issue here. we need to respond and we can change the world and still prosper IF we are all working to wards achievable goals (renewable energy is not a solution either, the GHG foot print of putting up 1 wind mill (cement by itself) would likely negate any real short or long term benefit) that is what we need to focus on real changes not these make believe solutions that have no actual positive outcome. Natural gas is the cleanest, most cost effective method to power the world. all we need to do is clean up the dirty little secrets we have in the back ground to make it the only real choice for the future over all these other ineffective lies we keep trying to tell our selves. Kindest Regards Sir
  • Bill Simpson on November 22 2017 said:
    The Western provinces wanted to succeed a few decades ago. They got tired of the East kicking them around. It could happen again. A combined USA and the west of Canada would match the future power of China, and could prevent them from dominating the world as they spread totalitarianism across the globe.
    I see 3 future military and commercial global power centers, North America, Eurorussia, and China. (Cold War relic, Putin, won't live forever.)
    South America will never amount to much. India might, but they will need to learn to speak the same language before they become a real player in the world economy.

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