Global Flaring and Venting Regulations: 28 Case Studies from Around the World MAY 2022 A companion to A Comparative Review of Policies 2 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 3 Contents © 2022 International Bank for Reconstruction Note to Readers 4 and Development / The World Bank 1818 H Street NW Acknowledgments 5 Washington DC 20433 Abbreviations and Acronyms 6 Telephone: 202-473-1000 Internet: www.worldbank.org Units of Measure 8 This work is a product of the staff of The World Section Guide 10 Bank with external contributions. The findings, Algeria 12 interpretations, and conclusions expressed in this work do not necessarily reflect the views of The Angola 18 World Bank, its Board of Executive Directors, or the governments they represent. Argentina 24 The World Bank does not guarantee the accuracy, Brazil 32 completeness, or currency of the data included in Canada: Federal 40 this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, Canada: Alberta 48 or liability with respect to the use of or failure to use the information, methods, processes, or conclusions Canada: British Columbia 55 set forth. The boundaries, colors, denominations, and Canada: Saskatchewan 61 other information shown on any map in this work do not imply any judgment on the part of The World Colombia 68 Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Ecuador 76 Egypt, Arab Republic of 82 Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the Gabon 88 privileges and immunities of The World Bank, all of which are specifically reserved. Indonesia 94 Kazakhstan 100 Rights and Permissions Libya 108 The material in this work is subject to copyright. Because The World Bank encourages dissemination Malaysia 114 of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long Mexico 120 as full attribution to this work is given. Nigeria 128 Any queries on rights and licenses, including Norway 136 subsidiary rights, should be addressed to Oman 142 World Bank Publications, Russian Federation 150 The World Bank Group, 1818 H Street NW, United Kingdom 156 Washington, DC 20433, USA United States: Federal Offshore 166 United States: Federal Onshore 175 Fax: 202-522-2625; e-mail: pubrights@worldbank.org. United States: Colorado 181 Cover Photo: © Ed Kashi / World Bank. United States: North Dakota 186 Used with the permission of Ed Kashi. United States: Texas 192 Venezuela, República Bolivariana de 198 Glossary 204 References 206 4 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 5 Notes to readers Acknowledgments This report is a product of the staff of the World Bank. The The study was carried out by a World Bank team led by Martin findings, interpretations, and conclusions expressed in this Oswald and Masami Kojima. The team included Paulo De Sa, report do not necessarily reflect the views of the World Bank, the Gurcan Salih Gulen, and Adam Pollard. Executive Directors of the World Bank, or the governments they This report benefited from the contributions of Huw Martyn represent. The World Bank does not guarantee the accuracy of the Howells and Alexander Johannes Huurdeman, and helpful data included in this work. comments provided by Zubin Bamji, Carlos Lopez, Susana Moreira, Flare data graphs shown in this report are based on global flaring and David John Santley, all of the World Bank. data estimates of the Global Gas Flaring Reduction Partnership The study team is also grateful to Harshit Agrawal, Oliver Braedt, (GGFR) using satellite data from the Colorado School of Mines. Moez Cherif, Jane Olga Ebinger, Julia Komagaeva, Boris Nekrasov, This approach is applied globally in a consistent manner. and Yulia Rybakova, all of the World Bank, for providing assistance Deviations from other sources, based on reported gas flaring or points of contact for information related to gas flaring and volumes, are possible. venting in their respective countries of responsibility or areas of No investment, policy, or other type of decision should therefore expertise. be based on this material, without verifying the findings The report was prepared under the overall supervision of independently. Demetrios Papathanasiou, Global Director for the Energy and When referring to legislation, regulations, or presidential decrees, Extractives Global Practice. this report cites the first year of enactment in the first and all The financing provided by the Global Gas Flaring Reduction subsequent references. For example, if a law was initially enacted Partnership (GGFR) is gratefully acknowledged. The study team in 1996 but has been revised several times over the intervening would also like to express our sincere gratitude to our GGFR years, it will be referred to as “Petroleum Law, 1996.” partners that have supported this effort from its inception: bp, In jurisdictions where laws and regulation numbers end in the year Equinor, and Shell. of enactment, spelled out in full (for instance, 12345/1996), the Lastly, the study team is also grateful to the Colorado Oil and year is not repeated as part of the reference. Gas Conservation Commission, Petroleum Advisory Forum, and Numada for their support. This document was edited by Steven B. Kennedy and designed by Mark Lindop. 6 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 7 Abbreviations and Acronyms AEP Alberta Environment and Parks, Canada CO2 carbon dioxide MER Ministry of Energy and Resources, Saskatchewan, OPRED Offshore Petroleum Regulator for Environment and Canada AER Alberta Energy Regulator, Canada COGCC Colorado Oil and Gas Conservation Commission, Decommissioning, United Kingdom United States MER UK Maximizing Economic Recovery of UK Petroleum ALNAFT Agence Nationale pour la Valorisation des PAP Programa Anual de Produção (Annual Production Ressources en Hydrocarbures (National Agency for DAQ Division of Air Quality, United States MERNNR Ministerio de Energía y Recursos Naturales no Program), Brazil Valuation of Hydrocarbon Resources), Algeria Renovables (Ministry of Energy and Non-Renewable DGH Direction Generale des Hydrocarbures (General PDO Petroleum Development Oman Natural Resources), Ecuador ALNG Angola Liquefied Natural Gas Project, Angola Directorate of Hydrocarbons), Gabon PDVSA Petróleos de Venezuela, S.A. MINEC Ministerio del Poder Popular para el Ecosocialismo ANH Agencia National de Hidrocarburos (National DG Migas Directorate General of Oil and Gas, Indonesia (Ministry of Popular Power for Ecosocialism), Pemex Petróleos Mexicanos (Mexican Petroleum) Hydrocarbon Agency), Colombia DPR Department of Petroleum Resources, Nigeria República Bolivariana de Venezuela Petronas Petroliam Nasional Berhad (National Petroleum ANP Agência Nacional do Petróleo, Gás Natural e DSCHS Department of State Control in the Sphere of MME Ministerio de Minas y Energía (Ministry of Mines Limited), Malaysia Biocombustíveis (National Agency for Petroleum, Hydrocarbons and Subsoil Use, Kazakhstan and Energy), Colombia and Brazil Natural Gas and Biofuels), Brazil PPGUA Petronas Procedures and Guidelines for Upstream ECCC Environment and Climate Change Canada MMRPG Ministério dos Recursos Minerais, Petróleo e Gás Activities, Malaysia ANPG Agência Nacional de Petróleo, Gás e Biocombustíveis EEAA Egyptian Environmental Affairs Agency (Ministry for Mineral Resources, Petroleum, PSC production sharing contract (National Oil, Gas, and Biofuel Agency), Angola and Gas), Angola EGAS Egyptian Gas Holding Company RRC Railroad Commission, United States AQCC Air Quality and Control Commission, United States MPE Ministry of Petroleum and Energy, Norway EGPC Egypt General Petroleum Company SEMARNAT Secretaría de Medio Ambiente y Recursos Naturales ARC Agencia de Regulación y Control de Energía y MPGHM Ministère du Pétrole, du Gaz, des Hydrocarbures (Ministry of Environment and Natural Resources), Recursos Naturales no Renovables (Agency for EIA environmental impact assessment et des Mines (Ministry of Petroleum, Gas, Mexico the Regulation and Control of Energy and Non- EPA Environmental Protection Agency, United States Hydrocarbons, and Mines), Gabon Renewable Natural Resource), Ecuador SENER Secretaría de Energía (Secretariat of Energy), ESDM Kementerian Energi Dan Sumber Daya Mineral MPM Malaysia Petroleum Management ARH Autorité de Régulation de Hydrocarbures Mexico (Ministry of Energy and Mineral Resources), NDAC North Dakota Administrative Code (Hydrocarbon Regulation Authority), Algeria Indonesia SIP State Implementation Plan, United States NDC Nationally Determined Contribution ASEA Agencia de Seguridad, Energía y Ambiente (Agency ETS emissions trading system SKK Migas Satuan Kerja Khusus Pelaksana Kegiatan Usaha for Safety, Energy and Environment), Mexico NDIC North Dakota Industrial Commission, United States Hulu Minyak Dan Gas Bumi (Special Task Force for EU European Union BCOGC British Columbia Oil and Gas Commission, Canada NEITI Nigeria Extractives Industries Transparency Upstream Oil and Gas Business Activities), EU ETS EU Emissions Trading System Initiative Indonesia BLM Bureau of Land Management, United States GAO Government Accountability Office, United States NGFCP Nigeria Gas Flare Commercialization Program Sonangol Sociedade Nacional de Combustíveis de Angola BOEM Bureau of Ocean Energy Management, GDP gross domestic product (Angola National Fuel Company) United States NNPC Nigerian National Petroleum Corporation GGFR Global Gas Flaring Reduction Partnership TCEQ Texas Commission on Environmental Quality, BSEE Bureau of Safety and Environmental Enforcement, NNPC Ltd Nigerian National Petroleum Company Limited United States United States GHG greenhouse gas NOCORP National Oil Corporation, Libya UKCS United Kingdom Continental Shelf CASA Clean Air Strategic Alliance IUGA Índice de Utilização de Gás Associado (Associated NPD Norwegian Petroleum Directorate Gas Utilization Index), Brazil UNFCCC United Nations Framework Convention on CDM Clean Development Mechanism NSPS New Source Performance Standards, United States Climate Change CER Canadian Energy Regulator LNG liquefied natural gas NTL Notice to Lessees, United States YPF Yacimientos Petrolíferos Fiscales (Fiscal Oil Fields), CFR Code of Federal Regulations, United States LPG liquefied petroleum gas OCS (Federal) Outer Continental Shelf, United States Argentina CNG compressed natural gas MEGNR Ministry of Ecology, Geology and Natural Resources, Kazakhstan OGA Oil and Gas Authority, United Kingdom CNH Comisión Nacional de Hidrocarburos (National MEM Ministry of Energy and Minerals, Oman OGOR Oil and Gas Operations Report, United States Hydrocarbons Commission), Mexico ONRR Office of Natural Resources Revenue, United States 8 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 9 Units of Measure bcf billion cubic feet bcm billion cubic meters cf cubic feet m³ cubic meter(s) mcf thousand cubic feet mmBtu million British thermal unit(s) mmcf million cubic feet mmscf million standard cubic feet mscf thousand standard cubic feet MW megawatt(s) tCO2e tonnes of carbon dioxide equivalent Photo credit: © ano Lan / Shutterstock. 10 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 11 Section Guide Each section in this guide seeks to answer the questions indicated Regulatory Mandates and Responsibilities methods (including acceptable levels of accuracy) and what is Enabling Framework below. The questions are presented here for easy reference and Are the responsibilities for regulating flaring and venting to be measured (gas composition) specified? What has been not repeated in each country-specific case study. clearly defined? Are there overlapping or conflicting mandates the experience with measurement and reporting of flaring and Performance Requirements (for example, both the Ministry of Petroleum and the Ministry venting? Are there performance requirements (such as standards or emission limits) for gas flaring and venting? Policy and Targets of Environment are given overlapping oversight roles)? Engineering Estimates Role of Reductions in Meeting Environmental Monitoring and Enforcement Are engineering estimates accepted where metering is not Fiscal and Emission Reduction Incentives and Economic Objectives Does the regulator have adequate monitoring and practical, or measurement requirements cannot be met? Does the fiscal regime include incentives to reduce emissions, Is there a government policy, strategy, plan, or commitment that enforcement powers? such as a carbon tax on emissions? Is there a preferential specifies the role of flaring and venting reductions in achieving the Record Keeping treatment in the fiscal framework for associated gas utilization? country’s environmental and economic objectives? This section Do regulations require operators to keep a log of the measured What has been the experience with the fiscal incentives? starts with a presentation of recent data on gas flaring. Licensing/Process Approval volume and analyzed composition of associated gas produced and Flaring or Venting without Prior Approval associated gas flared? If so, at what frequency and for how long Use of Market-Based Principles Targets and Limits are the records required to be kept? Does the regulatory framework provide for the use of Are there circumstances in which operators can flare or vent Are there targets, limits, or both on flaring and venting in market-based or other principles to reduce flaring and associated gas without prior regulatory approval? Are such Data Compilation and Publishing venting? What has been the experience with nonfiscal either primary or secondary legislation at the national or cases clearly defined in the legislation? subnational level? Does the regulator or any other government agency compile incentives for reducing flaring and venting? Authorized Flaring or Venting flaring and venting data submitted by operators and produce reports for public disclosure? How are the reports disclosed? Negotiated Agreements between the Public Legal/Regulatory Framework Aside from the circumstances in which operators can flare or vent associated gas without prior approval, what authorization What is the frequency of such report disclosure? What is the time and the Private Sector and Contractual Rights is required to flare or vent? lag between the end of the reporting period and public disclosure? Are there public-private partnerships and negotiated How many such reports have been issued to date? agreements between the industry and the regulator for Primary and Secondary Legislation and Regulation reducing flaring and venting? Development Plans What are the relevant provisions within the legal and regulatory framework that establish the relevant key principles and bring Is a development plan for associated gas required as part of the Fines, Penalties, and Sanctions Interplay with Midstream and Downstream overall field development approval for greenfield projects? them into effect, so that regulators can deal effectively with gas Monetary Penalties Regulatory Framework flaring and venting? Are there deficiencies in the legal and regulatory framework Economic Evaluation Are monetary penalties or fees established in the primary or secondary legislation for flaring or venting? Under what of the midstream and downstream gas sectors that adversely Legislative Jurisdictions Do regulations require companies to evaluate opportunities, circumstances are they charged? Are there exceptions? What is affect flare and vent reduction? including economic evaluation, to minimize gas flaring Is gas flaring and venting a matter of national or subnational and venting? the procedure for the payment? What has been the experience (provincial or state) jurisdiction? with the payment of these fees? How much has gone unpaid, and are there consequences for late or no payment? Associated Gas Ownership Measurement and Reporting Who owns associated gas? Is there a separate entity that owns Nonmonetary Penalties Measurement and Reporting Requirements associated gas that is flared or vented? Are nonmonetary penalties established in the primary or Do regulations require measurement and reporting of gas secondary legislation, such as license revocation or other types flaring and venting? Are measurement and reporting procedures Regulatory Governance established in the regulations on monitoring and enforcing of administrative sanctions? What is the procedure for imposing such penalties? Is there an appeal process, and if so, how does and Organization compliance? it work? What has been the experience with the imposition of Measurement Frequency and Methods nonmonetary penalties? Regulatory Authority Who regulates gas flaring and venting? Is the frequency of volume measurement of associated gas production, flaring, and venting specified? Are the measurement 12 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 13 Algeria 8.16 billion cubic meters of gas flared in 2021 A. Policy and Targets approximately 80 percent of oil and gas, mostly from older oil fields. (total oil production 1,132 thousand barrels per day) 1. Background and the Role of Reductions in Meeting Environmental and Economic 2. Targets and Limits Objectives Law No. 19-13, 2019, prohibits flaring and venting except under The volume of gas flared in Algeria increased from 7.6 billion cubic certain conditions but does not specify any targets or limits. Change in Flare Gas Volumes* Change in Flare Gas Intensity** meters (bcm) in 2012 to 8.2 bcm in 2021, and the flaring intensity Implementing regulations for the law had not been published at in 2021 remained high after peaking in 2020 (figure 1) . Over 1 the time of writing. Algeria’s NDC and Sonatrach have adopted a the same period oil production dropped by a quarter. Among the target of less than 1 percent of total associated gas to be flared by 2015-2021 2015-2020 2015-2021 2015-2020 countries covered in this review, Algeria’s flaring intensity in 2021 2030. -11% 2% 13% 30% was the third highest. There were 177 flare sites in the last flare count, conducted in 2019. B. Legal/Regulatory Framework In September 2015, Algeria submitted its first Nationally and Contractual Rights Determined Contribution (NDC) to the United Nations Framework * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced Convention on Climate Change (UNFCCC).2 The NDC has an 3. Primary and Secondary Legislation unconditional target of reducing greenhouse gas (GHG) emissions and Regulation by 7 percent by 2030 from a business-as-usual scenario and a Law No. 19-13, 2019 (see footnote 6) empowers two national Figure 1 Gas flaring volume and intensity in Algeria, 2012–21 conditional reduction target of 22 percent. Among the planned regulators to deal with flaring and venting: the Hydrocarbon Fl rin Int nsit Fl rin Volum actions is the reduction by 2030 of flared gas volumes to less than Regulation Authority (Autorité de Régulation de Hydrocarbures 1 percent, presumably of the total associated gas volume (and not 10 25 [ARH]) and the National Agency for Valuation of Hydrocarbon of total natural gas) produced. In 2018, the national oil company, Resources (Agence Nationale pour la Valorisation des Ressources Sonatrach, endorsed the World Bank’s Zero Routine Flaring by 9 en Hydrocarbures [ALNAFT]). 2030 initiative.3 8 20 Executive Decree No. 08-312, 2008,8 details the conditions of Algeria first prohibited gas flaring in 1966.4 Law No. 05-07, 2005,5 Cubic m t rs (m³) of environmental impact assessments (EIAs) in the hydrocarbons formalized the prohibition and empowered two new regulators to 7 sector and the ARH’s role in monitoring and enforcing compliance implement flaring and venting restrictions. Law No. 19-13, 2019,6 with EIAs. EIAs must include measures to eliminate, reduce, or r 6 15 prohibits routine flaring and venting of natural gas, sets taxes s fl r d/ compensate environmental impacts from flaring or venting. s fl r d/b rr l of oil produc d on flared or vented volumes, and outlines the responsibilities of 5 Algeria’s regulatory agencies. 4. No Legislative Jurisdictions billion m³ of 4 10 In its 2017 annual report, Sonatrach stated its goal of reducing The prohibition on flaring and venting is a national policy governed flaring to less than 1 percent of associated gas by 2021.7 3 by national regulators. According to Article 44 of Law No. 19- Sonatrach is responsible for most of the flaring. It produces 13, 2019, the ARH consults with other ministries and provincial 2 5 1 Gas flaring volumes for all case studies in this volume are taken from https://www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (accessed April 9, 2022). 1 2 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Algeria%20First/Alg%C3%A9rie%20-INDC-%2003%20septembre%202015.pdf (accessed August 13, 2021). 3 Launched in 2015, the World Bank’s Zero Routine Flaring by 2030 Initiative commits governments and oil companies, to end routine flaring no later than 2030. By declaring support and officially endorsing the Initiative, governments, companies, and development institutions are sending a message that eliminating the routine flaring of gas is a significant and necessary step toward 0 0 mitigating climate change and ensuring valuable natural resources are not wasted (World Bank n.d.). The initiative is managed by the Global Gas Reduction Partnership. https://www.worldbank.org/ en/programs/zero-routine-flaring-by-2030 (accessed December 30, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 4 Nevertheless, flaring continued (ESCWA 2019), https://www.unescwa.org/sites/www.unescwa.org/files/publications/files/reducing-gas-flaring-arab-countries-english.pdf (accessed August 13, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 5 http://extwprlegs1.fao.org/docs/pdf/alg53264.pdf (accessed December 29, 2021). This approach is applied to all countries covered in this report in a consistent manner. 6 https://www.joradp.dz/FTP/JO-FRANCAIS/2019/F2019079.pdf (accessed August 13, 2021). 7 https://sonatrach.com/wp-content/uploads/2019/03/Rapport-Annuel_2017.pdf (accessed August 13, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 8 https://onedd.org/storage/app/media/uploaded-files/decret-executif-n0-08-312.pdf (accessed December 29, 2021). 14 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 15 Algeria Algeria governments9 before approving EIAs conducted at oil and gas flared. The ARH develops technical regulations for oil and gas The ARH conducts audits, inspections, and investigations to optimization throughout the life of the asset. facilities, following the procedures outlined in Article 157. Executive activities; ALNAFT is primarily responsible for efficient oil and gas ensure the integrity of oil and gas facilities10 and compliance Decree No. 08-312, 2008, details how the ARH will consult with project development. According to Article 22, both regulators are with health, safety, and environmental regulations through 12. Economic Evaluation other ministries and provinces during the approval of EIAs. legally independent and financially autonomous. Before 2005, the operating life of upstream, midstream, and downstream No evidence regarding economic evaluations could be found in the Sonatrach was the regulator despite also being the national oil hydrocarbon facilities. It has had these responsibilities since its sources consulted. 5. Associated Gas Ownership company. creation by Law No. 05-07, 2005 (see footnote 5). Law No. 13-01, 2013,11 expanded the ARH’s responsibilities in health, safety, and All hydrocarbons are the property of the state until extracted. The Ministry of Energy and Mines (Ministère de l’Énergie et des Mines) 7. Regulatory Mandates and Responsibilities environmental matters. C. Measurement and Reporting allocates resource titles to ALNAFT so that the regulator can hold According to Article 42 of Law No. 19-13, 2019, ALNAFT is primarily 13. Measurement and Reporting Requirements bidding rounds and award titles. responsible for the efficient development of hydrocarbon resources B. Licensing/Process Approval via the assessment of resource and reserve potential, the design Flare volumes must be reported, because they are used to Article 76 of Law No. 19-13, 2019, provides for three types of and management of bidding rounds, and the administration of 9. Flaring or Venting without Prior Approval calculate flare taxes (see section 21 of this chapter). Taxes upstream contracts between Sonatrach and one or more create an incentive for operators to measure or estimate their various types of upstream contracts with Sonatrach and other According to Article 159 of Law No. 19-13, 2019 (see footnote 6) contractors: participation agreements, production-sharing flare volumes as accurately as possible. Under Article 43 of Law operators. It is also responsible for issuing authorizations for flaring for safety does not require prior authorization. However, contracts (PSCs), and risk service contracts: No. 19-13, 2019 (see footnote 6), the ARH is required to develop flaring in upstream operations. operators must provide a detailed report of the flare to the • According to Article 79, all extracted hydrocarbons become technical standards and regulations. Article 6 contains a general relevant regulatory agency within 10 days. The law does not According to Articles 43 and 44, the ARH develops technical requirement that producers apply international best practices the property of partners at the point of measurement in define technical reasons for flaring for safety. However, Article 43 regulations for the entire oil and gas value chain (upstream, and techniques in hydrocarbon activities to “prevent, reduce and participation agreements, under which the share of Sonatrach is charges the ARH with developing regulations concerning industrial midstream, and downstream); develops, in coordination with manage risks” associated with these activities. At the time of at least 51 percent (Article 92). safety, well integrity, and prevention of risks to the health and Sonatrach, plans for oil and gas infrastructure such as pipelines writing, the ARH had not published any relevant regulations for • According to Article 83, all extracted hydrocarbons become the safety of employees. At the time of writing, the ARH had not and storage terminals; sets environmental regulations (including Law No. 19-13, 2019. property of Sonatrach at the point of measurement in PSCs. published relevant regulations for Law No. 19-13, 2019. atmospheric emissions); oversees GHG reporting; approves EIAs Sonatrach transfers its share to partners at an agreed-upon conducted by specialized companies pre-approved by the ARH; point of delivery. The partners’ share of production—which is the 10. Authorized Flaring or Venting 14. Measurement Frequency and Methods regulates pipeline tariffs and open access; and determines the sum of cost oil and profit oil calculated based on the fiscal terms prices of natural gas and petroleum products in the domestic No evidence regarding specified measurement frequency and Article 158 of Law No. 19-13, 2019, prohibits flaring and venting. of each PSC—cannot exceed 49 percent of the total value of oil market and tariffs for gas pipelines and processing. The ARH is methods could be found in the sources consulted. However, there Flaring is allowed under certain conditions, such as during well and gas so extracted and sold (Article 93). also responsible for issuing authorizations for flaring in midstream is a tax on flaring (see section 21 of this chapter). Flaring taxes are testing or in the absence of sufficient takeaway pipeline or • According to Article 86, all extracted hydrocarbons become the and downstream operations. Before Law No. 19-13, 2019, only collected annually; this requires that annual flaring volumes be processing capacity. Upstream flares require authorization from property of Sonatrach in risk service contracts. The contractors ALNAFT issued authorizations for flaring. reported, which in turn requires their measurement or estimation. ALNAFT; midstream or downstream flares require authorization are paid up to 49 percent of the total value of production. from the ARH. In exceptional situations, venting during pipeline • Article 74 allows Sonatrach to acquire an exclusive concession 8. Monitoring and Enforcement activities may be allowed, but authorization from the ARH is 15. Engineering Estimates from ALNAFT, in which case Sonatrach owns all hydrocarbons required. According to Article 42 of Law No. 19-13, 2019, ALNAFT is charged Law No. 19-13, 2019 (see footnote 6) does not mention the produced. with monitoring compliance with contracts, issuing authorizations estimation of flaring and venting volumes, but the ARH is covered under the law, and approving field development plans. 11. Development Plans responsible for developing technical regulations following A. Regulatory Governance According to Article 43, the ARH is charged with sanctioning A development plan needs to be approved by ALNAFT, according international best practices. At the time of writing, the ARH had and Organization violations of technical regulations, pipeline tariffs, and open to Law No. 19-13, 2019. There is no explicit requirement for this plan not published any relevant regulations for Law No. 19-13, 2019. No access rulings and regulating health, safety, and the environment. evidence of regulators having approved estimation methods could to include associated gas disposal, but the plan must cover all 6. Regulatory Authority The ARH certifies specialized companies to conduct inspections on commercially exploitable hydrocarbons (Article 106). According to be found. Article 160 of Law No. 19-13, 2019 (see footnote 6) states that its behalf and to ensure compliance with its regulations. Article 107, the plan must also include measurement and delivery ALNAFT and the ARH regulate flaring operations and volumes points for all extracted hydrocarbons and allow for production 10 https://www.energy.gov.dz/Media/galerie/missions_de_l_arh_5fe1d08347ff6.pdf (accessed January 26, 2022). 9 https://journals.openedition.org/anneemaghreb/6727 (accessed December 29, 2021). 11 https://www.energy.gov.dz/Media/galerie/loi_13-01_modifiant_loi_hydro_05-07-2013_(2)_5dc02856d3f64.pdf (accessed December 29, 2021). 16 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 17 Algeria Algeria 16. Record Keeping chapter). However, implementing regulations had not been published 23. Negotiated Agreements between the Public It must cover costs and fiscal and other charges and provide a at the time of writing. and the Private Sector reasonable rate of return (Article 147). No evidence regarding record-keeping requirements could be found in the sources consulted. However, the existence of an annual flare The El Merk Central Processing Facility14 can be considered a de Gas prices in the domestic market are heavily subsidized.15 tax suggests that operators must keep a record of flare volumes 21. Fiscal and Emission Reduction Incentives facto public-private partnership. It was developed and is operated Domestic gas demand increased from about 25 bcm in 2010 to throughout the year. According to Article 210 of Law No. 19-13, 2019, there is a tax by Groupement Berkine, a joint venture between Sonatrach and about 45 bcm in 2019, driven largely by subsidized pricing. The on flared volumes. This tax is nondeductible for the purposes of several private companies. Sharing this central facility reduces government has been pursuing a gasification strategy. There are 17. Data Compilation and Publishing calculating other payments under the upstream fiscal regime. the infrastructure footprint of all operators and the unit cost programs to convert light-duty vehicles to liquefied petroleum gas The tax is 12,000 Algerian dinars (about US$90 as of September of processing associated gas for each participating operator. (LPG) and buses and trucks to compressed natural gas (CNG) to No evidence regarding data compilation and publishing could be 2021) per 1,000 cubic meters (m³). ALNAFT can adjust this tax at ALNAFT and the ARH were created in 2005, but the phase-out of reduce the consumption of oil products. Still, most of the demand found in the sources consulted. However, Sonatrach reports flaring the beginning of every year based on the national inflation index. Sonatrach’s regulatory powers took several years to complete. The growth reflects increased power generation and distribution in data from its operations in its annual reports.12 The tax increases by 50 percent if an operator flares without El Merk Central Processing Facility was conceptualized during the cities. Phasing out energy subsidies is seen as necessary to avoid a authorization (except for flares for safety reasons as stated in 2000s and the contract awarded in early 2009. demand-supply imbalance and encourage further development of D. Fines, Penalties, and Sanctions Article 159) or flares greater than the volumes allowed in the Several other projects processing hydrocarbons from oil fields, nonassociated gas fields. authorization (Article 213). including associated gas, were developed or expanded in the All pipelines are developed and operated by Sonatrach under 18. Monetary Penalties According to Article 215, the tax is not due under the following 2010s; others are still under consideration. By law, ALNAFT is concessions granted by the Ministry of Energy and Mines (Article Article 227 allows the ARH to assess a daily penalty of 100,000 conditions: responsible for the efficient development of hydrocarbon resources 127). Sonatrach delivers gas to liquefied natural gas (LNG), Algerian dinars (about US$750 as of September 2021) for and the approval of field development plans. ALNAFT issues the petrochemical and fertilizer plants, and refineries. A state-owned • during exploration activities or well testing noncompliance with Law No. 19-13, 2019 (see footnote 6) or its necessary licenses, but guidance from the Ministry of Energy and company, Sonelgaz, builds and operates distribution networks implementing regulations. The penalty starts at least a month • during the start-up period, the duration of which is set by and serves other gas consumers. This dependence on state-owned Mines and Sonatrach helps determine the list of projects pursued. after the offending party is notified of the violation. This delay is ALNAFT or ARH entities for transmission and distribution networks can handicap to allow for remediation or elimination of the violation. No evidence • in the absence of capacity for gas recovery or takeaway the timely development of new pipeline capacity during periods of 24. Interplay with Midstream and Downstream of penalties specific to violating flaring and venting regulations (pipeline) infrastructure budget constraints, especially with subsidized end-user prices. Regulatory Framework could be found in the sources consulted. • at facilities built before 2005. Article 67 of Law No. 19-13, 2019, requires both participation Article 29 of Executive Decree 21-330, 2021,13 requires that annual contracts and PSCs to include a joint marketing clause for natural 19. Nonmonetary Penalties declaration to the fiscal authority on flare taxes must include all gas to be exported. Sonatrach may market the gas on behalf of Article 226 allows ALNAFT to suspend or cancel authorizations information necessary for calculation of the tax. According to the partners if all parties agree. Article 121 states that serving the for upstream prospecting or concessions if a licensee violates Article 30, ALNAFT and the ARH are required to provide the fiscal national market is a priority. Partners’ share of gas, or a portion any provision of Law No. 19-13, 2019. No evidence of nonmonetary authority a report on each flaring operation. The report must of it, is transferred to Sonatrach if ALNAFT—in consultation with penalties for violating flaring and venting regulations could be include actual flared volumes. Sonatrach and the Electricity and Gas Regulatory Commission found in the sources consulted. (Commission de Régulation de l’Electricité et du Gaz), which is 22. Use of Market-Based Principles responsible for forecasting demand—decides that these volumes E. Enabling Framework No evidence regarding the use of market-based principles to are necessary to serve the national market (Article 123). reduce flaring, venting, or associated emissions could be found in Article 131 grants open access to the gas transmission pipeline 20. Performance Requirements the sources consulted. infrastructure. The ARH sets the tariff. Article 146 allows gas No evidence regarding specific performance requirements could be prices to be negotiated by the sellers (Sonatrach or its upstream found in the sources consulted. However, the ARH is empowered partners) and the buyers for volumes above the national needs, to develop environmental regulations (including emissions from oil as determined by the Ministry of Energy and Mines. The ARH sets and gas operations) under Law No. 19-13, 2019 (see section 7 of this the price of gas sold to power plants and distribution companies. 14 https://www.petrofac.com/en-gb/our-services/case-studies/el-merk-central-processing-facility/ (accessed August 13, 2021). 12 https://sonatrach.com/wp-content/uploads/2020/12/Rapport-Annuel-2019.pdf (accessed August 13, 2021). 15 https://www.igu.org/resources/wholesale-price-survey-2020-edition/ (accessed August 13, 2021); https://www.oxfordenergy.org/wpcms/wp-content/uploads/2019/10/Algerian-Gas-in-Transition- 13 https://www.joradp.dz/FTP/jo-francais/2021/F2021066.pdf (accessed October 19, 2021). NG-151.pdf (accessed August 13, 2021). 18 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 19 Angola 1.80 billion cubic meters of gas flared in 2021 A. Policy and Targets increased nearly 10-fold by 2020. (total oil production 1,123 thousand barrels per day) 1. Background and the Role of Reductions 2. Targets and Limits in Meeting Environmental and Economic No evidence regarding targets and limits could be found in the Objectives sources consulted. However, there is a de facto zero-flare policy for all new fields. Change in Flare Gas Volumes* Change in Flare Gas Intensity** The volume of gas flared in Angola increased from 3.2 bcm in 2012 to 4.5 bcm in 2016 before falling to 1.8 bcm in 2021 (figure 2). Oil production increased slightly in 2015 and has been falling steadily B. Legal, Regulatory Framework, 2015-2021 2015-2020 2015-2021 2015-2020 every year since. The flaring intensity was 12 percent lower in and Contractual rights 2021 than in 2012. There were 48 individual flare sites in the last -57% -55% -31% -36% flare count, conducted in 2019. 3. Primary and Secondary Legislation In 2016, Angola endorsed the World Bank’s Zero Routine Flaring and Regulation by 2030 initiative (see footnote 3). In mid-2021, it submitted an In 2018, as a result of a 2017 Presidential Task Force, the updated NDC to the UNFCCC and committed to an unconditional government of Angola responded to lower oil prices with legal * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced reduction in GHG emissions from the business-as-usual scenario reforms. Law 10/2004, Petroleum Law (Petroleum Law, 2004 of up to 14 percent by 2025.16 Emissions under the business-as- hereafter),17 as amended by Law 5/2019, repealed Law 13/1978, usual scenario are projected to be 108.5 million tons of carbon General Law on Petroleum Activities. This law sets forth the general Figure 2 Gas flaring volume and intensity in Angola, 2012–21 dioxide equivalent (tCO2e) in 2025. The conditional commitment is framework applicable to oil operations in Angola. It governs Fl rin Int nsit Fl rin Volum another 10 percent reduction by 2025. Base year (2015) emissions activities related to prospection, concession, search, assessment, were 100 million tCO2e. Flare reductions account for two-fifths development, and decommissioning. Law 13/2004, the Taxation of 5 8 of unconditional and one-third of conditional commitments. Petroleum Activities Law,18 as amended by Law 6/2019, defines the However, the target reductions in gas flaring are seemingly based fiscal regime applicable to oil and gas activities. Law 26/2012, the 7 on old data, from a period in which Angola’s oil production was Law on the Transportation and Storage of Crude Oil and Natural Gas, 4 much higher. The flare gas reduction targets stipulated in the establishes the legal framework for downstream operations— Cubic m t rs (m³) of 6 NDCs (3 bcm year in the unconditional contribution) far exceed namely, the transportation and storage activities of crude oil and the actual volumes of gas being flared (1.9 bcm in 2020). These natural gas. r 5 targets therefore need to be interpreted with caution. 3 Decree 1/2009, Regulation on Petroleum Operations,19 defines and s fl r d/ s fl r d/b rr l of oil produc d Most of Angola’s natural gas production is associated with oil establishes the conditions and procedures to be observed in 4 produced in the offshore fields off the coast of Cabinda and the upstream oil and gas operations. Decree 7/2018 and Law 8/2018 billion m³ of deep-water fields in the Lower Congo Basin. Historically, the are the first pieces of legislation enacted to regulate natural 2 3 majority of natural gas extracted has been re-injected in oil fields gas operations and provides more attractive tax rates for small to enhance oil recovery or flared. In 2011, re-injection and flaring producers. Operators of associated gas fields can re-inject gas to 2 still accounted for 91 percent of all the natural gas produced maximize oil recovery, commercialize the surplus, or transfer it to 1 in the country. The gas utilization policy focused on developing the Angolan LNG plant. 1 the country’s first LNG facility, in Soyo. Although the first LNG Law 5/1998, the General Environment Law,20 provides the framework cargo was exported in 2013, exports remained low until 2017 but for environmental legislation and regulation. Executive Decree 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 16 Angola’s Nationally Determined Contributions are set forth in Governo de Angola (2021), https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Angola%20First/NDC%20Angola.pdf (accessed January 3, 2022). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 17 https://www.ecolex.org/details/legislation/law-no-1004-regulating-petroleum-activities-lex-faoc081903 (accessed August 25, 2021). This approach is applied to all countries covered in this report in a consistent manner. 18 https://www.sonangol.co.ao/Style%20Library/pt-pt/Pdf/licitacoes/law_petroleumTaxation_en.pdf (accessed December 29, 2021). 19 http://extwprlegs1.fao.org/docs/pdf/ang116927.pdf (accessed August 25, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 20 http://extwprlegs1.fao.org/docs/pdf/ang18069.pdf (accessed August 25, 2021). 20 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 21 Angola Angola 97/2014 21 enacts the Regulations on Management of Operational C. Regulatory Governance 8. Monitoring and Enforcement evaluation conducted by Sonangol that demonstrates that it is Discharges. Decree 39/2000 concerns environmental protection in not feasible to exploit or preserve the natural gas. the oil industry and enacts environmental protection regulations and Organization Article 41 of the Regulation on Petroleum Operations, 2009 (see footnote 19) describes the regulator’s inspection functions. Article for oil and gas activities. Contractors must prepare and submit an EIA to the Ministry for Mineral Resources, Petroleum, and Gas 6. Regulatory Authority 42 describes the inspector’s rights. Article 49 on competence E. Measurement and Reporting states that the MMRPG is responsible for monitoring compliance (Ministério dos Recursos Minerais, Petróleo e Gás [MMRPG]) for The MMRPG, created in 1978, oversees petroleum activities. with the regulations. 13. Measurement and Reporting Requirements approval before starting any petroleum activities. The assessment It focuses mainly on coordination and cooperation with other needs to identify predictable environmental damages caused Metering and recording practices have to follow methods and entities. Its statute is provided under Presidential Decree 12/2018 by the proposed petroleum activities and outline the necessary 25 as amended by Presidential Decree 159/2020.26 Other ministries, D. Licensing/Process Approval use instruments certified under the legal standards in force and measures to decrease said damages. in compliance with good technical standards. Article 34 of the such as the Ministry of Environment and the Ministry of Finance, also have some degree of oversight and regulatory powers. 9. Flaring or Venting without Prior Approval Regulation on Petroleum Operations, 2009 (see footnote 19) states that operators must propose to the MMRPG the measurement 4. Legislative Jurisdictions Article 73 of the Petroleum Law, 2004, expressly forbids natural Law 5/2019 created a new regulator, the National Oil, Gas system, equipment, and procedures for measuring oil and gas gas flaring except for short periods for testing or other operating Gas flaring and venting are matters of national jurisdiction. and Biofuel Agency (Agência Nacional de Petróleo, Gás e production and sales. Article 39 lists the gas measurement reasons, which require special permission from the MMRPG. Biocombustíveis). Presidential Decree 49/2019 provides the organic system components; Article 40 describes the requirements 5. Associated Gas Ownership statute of this regulator, which took over from Sonangol as the for measurement facilities. Article 24 requires operators to exclusive holder of mineral rights for oil and gas exploration 10. Authorized Flaring or Venting submit a report providing information on all activities related to Angola’s 2010 Constitution22 vests all resources in the soil and production.27 Law 5/2019 granted Sonangol preferential Article 73 of the Petroleum Law, 2004, states that when gas flaring natural gas by December 30 of each year. Article 44 requires the and subsoil, territorial waters, exclusive economic zone, and acquisition and operational rights in oil and gas concessions and is authorized, the supervising authority may determine that a quarterly submission to the MMRPG of a report on the systems continental shelf in the Angolan state. The Petroleum Law, 2004, operations.28 relevant fee be charged in accordance with the quantity and for measuring, testing, and calibrating the equipment. The prescribes that all petroleum deposits are an integral part of quality of the gas flared and its location. No evidence could be reports must include information related to daily production and the state’s public domain, including all onshore and offshore 7. Regulatory Mandates and Responsibilities found in the sources consulted on enforcement of such a fee. In the respective shipments. petroleum reserves. case of marginal or small deposits, the MMRPG may authorize the The primary role of the National Oil, Gas and Biofuels Agency’s, For PSCs, contractors are required to record the monthly The most common type of association agreement with the flaring of associated gas to make its exploitation viable. Flaring subject to the ministry’s supervision, is to regulate, supervise, quantities of crude oil, natural gas, and water produced from each national oil company, the Angola National Fuel Company authorizations may be granted only upon submission of an EIA. and promote the execution of petroleum activities—namely, development area. These data must be sent to Sonangol within 30 (Sociedade Nacional de Combustíveis de Angola, [Sonangol]),23 the exploration, exploitation, development, and production of days of the end of the month reported on. is the PSC. According to Angola’s model PSC,24 companies minerals, crude oil and gas; refining and petrochemicals and the 11. Development Plans have the right to use any associated gas produced in their oil activities, process it, and separate any liquids from it. However, storage, distribution, and marketing of mineral and oil products. Article 73 of the Petroleum Law, 2004, states that the development 14. Measurement Frequency and Methods Article 7 of the Petroleum Law, 2004, stipulates that oil and plans for petroleum deposits should always be formulated in any surplus gas must be given to Sonangol free of charge. If All petroleum extracted and recovered shall be metered and gas operations shall be conducted prudently and consider the such a way as to allow for the use, preservation, or commercial nonassociated natural gas is discovered within the contract recorded daily. Article 34 on oil and gas measurement in the safety of persons and facilities as well as the protection of the exploitation of associated gas. Article 22 of the Regulation on area, Sonangol is free to develop it on its own account or in Regulation on Petroleum Operations, 2009, states that the operator environment and the conservation of nature. Article 24 requires Petroleum Operations, 2009 (see footnote 19) states that the association with third parties. must propose to the MMRPG the laboratory analysis methods licensees to take the precautions necessary to protect the general development and production plan must include a plan for required to determine all physical and chemical parameters. environment in carrying out their activities. The applicable laws utilizing the associated natural gas. Article 23 states that annual Article 45, on allowable tolerances, states that the maximum require environmental plans, including environmental impact production plans must include a provision for flaring and venting permissible error for gas meters must not exceed 0.1 percent studies and management and environmental auditing plans. of natural gas and estimated volumes of special fluids to be of the measured volume. Sonangol and its partners do not injected for enhanced recovery. 21 https://www.ecolex.org/details/legislation/executive-decree-no-9714-approving-the-regulation-on-operational-waste-discharge-management-lex-faoc132871/ (accessed August 25, 2021). systematically measure and report gas flaring figures. 22 https://www.constituteproject.org/constitution/Angola_2010.pdf?lang=en (accessed August 25, 2021). 23 https://www.sonangol.co.ao/English/Pages/Home.aspx (accessed August 25, 2021). 24 https://www.sonangol.co.ao/English/AreasOfActivity/Concessionary/Documents/Licitacoes/modeloCPPonshore_en.pdf (accessed August 25, 2021). 12. Economic Evaluation 15. Engineering Estimates 25 https://www.ecolex.org/details/legislation/presidential-decree-no-1218-approving-the-statute-of-the-ministry-of-mineral-resources-and-petroleum-mirempet-lex-faoc173951/ (accessed August 25, 2021). Flaring authorizations may be granted only upon submission of 26 http://www.fao.org/faolex/results/details/en/c/LEX-FAOC195803/ (accessed August 25, 2021. No evidence of engineering estimates could be found in the sources 27 For purposes of petroleum concession, the ANPG has the right to associate with any entity to execute oil operations jointly in a given area and hold more than half of the association’s shares. a substantiated technical, economic, and environmental impact Alternatively, the ANPG may execute such operations independently by means of a concession granted by MMRPG.  consulted. 28 Sonangol has been granted a number of alternative rights, including the benefit of carry-over financing in research operations and specific preemption rights in certain cases. 22 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 23 Angola 16. Record Keeping tax regime under which sponsor entities hold a tax credit of 144 months starting from the date of initial commercial production, For PSCs, contractors must make available for examination deductible against the Profit Income Tax. The ALNG is subject to a daily or weekly statistics and reports regarding a contract area’s quarterly gas tax from the first LNG export shipment date. Decree production at a time convenient to authorized representatives 7/2018 provides more attractive tax rates to gas operations. The of Sonangol. Contractors must prepare and, at all times while a gas production tax is 5 percent (compared with 10 percent for oil). contract is in force, maintain accurate and current records of all activities and operations and keep all information of a technical, PSCs state that any surplus gas produced by oil companies that economic, accounting, or any other nature related to the conduct is not used for field use must be given free of charge to Sonangol of petroleum operations. (see section 5 of this chapter).The capital expenditures borne by companies for the storage and delivery of associated gas to 17. Data Compilation and Publishing Sonangol are cost recoverable. Sonangol will manage the gas infrastructure once commissioned and will also bear the cost No evidence regarding data compilation and publishing could be of operating it. Should funding the gas infrastructure have a found in the sources consulted. significant negative impact on the economic conditions agreed to in the PSCs for the contractor, Sonangol is required to modify F. Fines, Penalties, and Sanctions the economic terms of the contract to restore the contractor’s economic position before the gas infrastructure project. 18. Monetary Penalties Article 51 on fines in the Regulation on Petroleum Operations, 2009 22. Use of Market-Based Principles (see footnote 19) includes provisions on applicable monetary fines. No evidence regarding the use of market-based principles to If a monetary correction is needed, the penalty must be assessed reduce flaring, venting, or associated emissions could be found in under the terms of the Tax Correction Unit in force. the sources consulted. 19. Nonmonetary Penalties 23. Negotiated Agreements between the Public No evidence regarding nonmonetary penalties could be found in and the Private Sector the sources consulted. No evidence regarding negotiated agreements between the public and the private sector could be found in the sources consulted. G. Enabling Framework 24. Interplay with Midstream and Downstream 20. Performance Requirements Regulatory Framework No evidence regarding performance requirements could be found The fact that midstream licenses do not provide open access rights in the sources consulted. to third parties in privately constructed infrastructure could be a Photo credit: © Serge Prakhov / Shutterstock barrier to the commercialization of associated gas. These licenses 21. Fiscal and Emission Reduction Incentives are typically granted to companies affiliated with Sonangol. Third parties do not have access to such infrastructure if the right-of- The Angola Liquefied Natural Gas Project (ALNG) is the first LNG way has already been granted for the midstream license. project in Angola. It uses associated natural gas, helping to reduce gas flaring and associated GHG emissions. Daily capacity is 1.1 billion cubic feet (bcf). Decree 10/2007 created a special legal regime for the ALNG that includes specific maritime, tax, customs, and foreign exchange regimes. The ALNG is subject to a specific 24 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 25 Argentina 1.24 billion cubic meters of gas flared in 2021 A. Policy and Targets eight gas distribution companies. In 2012, through Law 26.741, 2012, the government expropriated a 51 percent controlling stake (total oil production 507 thousand barrels per day) 1. Background and the Role of Reductions in YPF. Subsequently, the government promoted public-private partnerships with the renationalized YPF, with the primary goal of in Meeting Environmental and Economic addressing Argentina’s energy shortages. Objectives The volume of gas flared in Argentina doubled from 0.6 bcm YPF committed itself to reducing its CO2 emissions intensity by Change in Flare Gas Volumes* Change in Flare Gas Intensity** 10 percent by 2023.32 It will achieve this reduction through more in 2012 to 1.2 bcm in 2021 (figure 3). During this period, oil production varied by about 10 percent. After broadly stabilizing efficient energy management, reductions in flared and vented gas, in the first half of the 2010s, the flaring intensity increased electrification and digitization of its operations, and adoption of 2015-2021 2015-2020 2015-2021 2015-2020 steadily after 2017, reaching the highest level in 2021 since low-carbon energy sources. 91% 63 % 100% 81% 2012. There were 110 individual flare sites in the last flare count, conducted in 2019. 2. Targets and Limits Argentina participates in the Global Methane Initiative (n.d.)29 and Section 3 of Annex 1 of Resolution No 143/1998,33 sets out limits on the Climate and Clean Air Coalition.30 It submitted its first NDC and requirements for gas venting at the federal level. Gas venting * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced in 2016 and its second31 in 2020. In its second NDC, Argentina from production wells is allowed if the gas-to-oil ratio at the committed not to exceed net emissions of 359 million tCO2e by venting point does not exceed the maximum limit of 1 m³ of gas 2030. This new goal is 26 percent lower than the target in the per m³ of oil as of January 1, 2000. Section 3 prohibits venting in Figure 3 Gas flaring volume and intensity in Argentina, 2012–21 2016 NDC. It represents an emissions reduction of 19 percent by all wells in which the gas-to-oil ratio exceeds 1,500 m³ of gas per Fl rin Int nsit Fl rin Volum 2030 from the 2007 peak emissions level. m³ of oil, regardless of the composition of the gas produced. These wells should remain shut if the conditions for the capture and use 2 8 Most of Argentina’s oil and gas production is in Patagonia. The of the gas have not been resolved with the authorities. province of Chubut produces most of the oil. About half of the 7 country’s natural gas comes from the Neuquén Basin, which is home to unconventional reserves, including the Vaca Muerta B. Legal, Regulatory Framework, and Contractual rights Cubic m t rs (m³) of 6 formation, which stretches across four provinces: Neuquén, La Pampa, Mendoza, and Rio Negro. 3. Primary and Secondary Legislation r 5 Yacimientos Petrolíferos Fiscales (YPF) is the country’s largest and Regulation s fl r d/ producer of oil and gas. In the 1990s, 80 percent of YPF s fl r d/b rr l of oil produc d 1 4 was privatized. YPF relinquished some upstream areas and Section 7 of Annex 2, on model contracts, of Decree No. billion m³ of entered into joint ventures with private operators for its most 1.443/1985,34 issued by the Federal Executive Power (Poder 3 productive blocks. The state subsequently sold its remaining 20 Ejecutivo Nacional), prohibits flaring or venting of gas except as percent stake to the Spanish oil company Repsol. However, the authorized by the application authority. Resolution No. 105/199235 2 government retained veto power over crucial decisions. regulates flaring and venting standards and procedures to protect the environment during hydrocarbon exploration and production. In the gas sector, another state-owned company, Gas del Estado, The resolution states that associated gas with carbon monoxide, 1 was also privatized and unbundled into two transportation and sulfur dioxide, or hydrogen sulfide can be flared. Noncombustible 29 The Global Methane Initiative is an international public-private partnership focused on reducing barriers to the recovery and use of methane as a valuable energy source. https://www. 0 0 globalmethane.org/ (accessed January 3, 2022) 30 The Climate and Clean Air Coalition (n.d.) is a voluntary partnership of governments, intergovernmental organizations, businesses, scientific institutions and civil society organizations committed to 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 improving air quality and protecting the climate through actions to reduce short-lived climate pollutants. https://www.ccacoalition.org/en (accessed January 3, 2022). 31 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Argentina%20Second/Argentina_Segunda%20Contribuci%C3%B3n%20Nacional.pdf (accessed August 25, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 32 https://sustentabilidad.ypf.com/en/ (accessed August 13, 2021). This approach is applied to all countries covered in this report in a consistent manner. 33 https://www.argentina.gob.ar/normativa/nacional/resoluci%C3%B3n-143-1998-50476/texto (accessed August 25, 2021). 34 https://www.argentina.gob.ar/normativa/nacional/decreto-1443-1985-228204/texto (accessed August 25, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 35 https://www.argentina.gob.ar/normativa/nacional/resoluci%C3%B3n-105-1992-25949/texto (accessed August 25, 2021). 26 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 27 Argentina Argentina gas produced (CO2) can be vented. Resolution No. 143/1998 (see the authorizing and enforcement authority for oil and gas they do not overstep the established principle of federal no royalties will be imposed on hydrocarbons used by the licensee. footnote 33), replacing Resolution No. 236/1993, requires that activities. The Neuquén province—which issued Hydrocarbons law primacy. Several provincial regulations for controlling The royalty rate was 12 percent in 2019.52 With the approval of the unused gas be burned, allows venting only when burning is Law No. 2.453, 2004,41 and the associated regulation, Provincial gaseous emissions have been passed in connection with Undersecretariat of Hydrocarbons,53 the licensee may determine technically infeasible, and sets venting limits and requirements. Decree Nº 3.124/2004,42—established the framework for the environmental matters. For example, Law No. 2.175/1997,50 the destination and conditions for the use of the gas. Certain provinces have issued specific rules governing flaring and exploration, production, industrialization, transportation, and its associated regulation Neuquén Provincial Decree In the case of the Neuquén province,54 Article 6 of Hydrocarbons venting; others apply the Energy Secretariat’s standards in the and marketing of hydrocarbons and their by-products. No. 29/200151 regulate environmental protection and health Law No. 2.453, 2004 (see footnote 41) states that the license above resolutions. issues associated with natural resources development in Hydrocarbons Law XVII-102, 1973, reaffirms that Chubut has 43 holders will obtain the rights to the hydrocarbons they extract. the Neuquén province. The federal Hydrocarbon Law No. 17.319, 1967 (Hydrocarbon complete administrative control over the hydrocarbon As a result, they have the right to process, transport, and Law, 1967 hereafter) —as amended by Law No. 26.197, 36 deposits located in the province. Hydrocarbons Law No. commercialize extracted hydrocarbons and their derivatives, 4. Legislative Jurisdictions 2006,37 and Law No. 27.007, 2014, among others—regulate 2.727, 2004,44 reaffirms that Santa Cruz has complete subject to compliance with the regulations issued by the provincial oil and gas exploration, development, and production. 38 administrative control over the hydrocarbon deposits Argentina has a highly decentralized federal system of executive power. The 2007 transfer of the domain of oil and gas areas to located in the province. Provincial Law No. 4.29645 reaffirms government in which provinces play a significant role. Law No. provinces limited the federal government’s power in the hydrocarbon industry’s design and management. Law that Rio Negro has complete administrative control 26.197, 2006, which amended the Hydrocarbons Law, provides that the oil and gas fields belong to the federal government or the C. Regulatory Governance over the hydrocarbon deposits located in the province, No. 27.007, 2014, reinstated to the federal government including near coastal areas. These provincial laws are provinces in which the fields are located. Provincial governments and Organization some of its prerogatives by restricting provincial rights. within the framework of federal Law N° 17.319, 1967, and Law N° are responsible for granting exploration permits and production 6. Regulatory Authority The main aims of the 2014 amendments were to reverse 26.197,2006. concessions, enforcing laws and regulations, and administering declines in production, increase imports of hydrocarbons, the oil and gas fields. Law No. 27.007, 2014, prescribes that Gas flaring and venting are regulated at the federal and provincial Article 41 of the 1983 National Constitution46 transfers levels. The federal regulatory authority is the Undersecretariat and boost exploration and production, especially of provincial governments are responsible for offshore oil and natural legislative powers with respect to general environmental of Hydrocarbons (Subsecretaría de Hidrocarburos), part of the unconventional resources. The law distinguishes between gas resources up to 12 nautical miles. Hydrocarbon deposits found matters from the provinces to the federal government. At Federal Energy Secretariat (Secretaría de Gobierno de Energía). exploration permits for conventional and unconventional within 12 nautical miles of the continental shelf’s outer limit are the federal level, general legislation containing minimum The federal regulatory authority for natural gas is the Energy hydrocarbons and between exploration in the territorial the federal government’s responsibility. environmental protection standards, such as Law No. Secretariat. Decree No. 7/2019 created the Ministry of Productive sea and continental shelf. Law No. 26.659, 2011,39 as amended 25.675 General Environmental Law, 2002, govern the oil and However, the provincial administrative powers must be by Law No. 26.915, 2013, regulates offshore exploration and Development and placed the Energy Secretariat under its gas sector.47 Resolution No. 25/200448 defines the technical employed within the framework of the Hydrocarbons Law and its production activities. authority. characteristics, structure, and scope of environmental regulations. This requirement means that the power to define the Some provinces have issued specific legislation for the oil studies and annual environmental monitoring reports oil and gas policy and pass legislation remains with the federal Each oil- and gas-producing province has its own regulator, and gas sector; others have adopted the federal standards to be submitted by oil and gas companies pursuing government and Congress. The primary laws and regulations governed by the Hydrocarbons Law, 1967, and by provincial in their respective laws. In the Neuquén province, Law Nº exploration and exploitation activities. In 2019, the National governing flaring and venting are federal. legislation and regulations. The regulatory authority is the 1.926, 1991,40 and its associated regulation Provincial Decree Nº Congress passed Law No. 27.520, 2019,49 which set minimum Undersecretariat of Energy, Mining and Hydrocarbons, under the 2.247/1996, establish and define the responsibilities of the standards for climate change adaptation and mitigation. 5. Associated Gas Ownership Ministry of Energy and Natural Resources in Neuquén, the Ministry Provincial Secretariat of Energy and Mining (currently the The provinces are empowered to supplement the federal of Hydrocarbons in Chubut, the Energy Institute55 in Santa Cruz, Hydrocarbons are exploited primarily via concessions. At the Undersecretariat of Energy, Mining, and Hydrocarbons) as environmental regulations with local regulations, provided and the Energy Secretariat56 in Rio Negro. federal level, Article 6 of the Hydrocarbon Law, 1967, states that licensees obtain the rights to extracted hydrocarbons and 36 https://www.argentina.gob.ar/normativa/nacional/ley-17319-16078/actualizacion (accessed August 25, 2021). 7. Regulatory Mandates and Responsibilities 37 http://servicios.infoleg.gob.ar/infolegInternet/anexos/120000-124999/123780/norma.htm (accessed August 25, 2021). can transport and commercialize them, complying with the 38 https://www.argentina.gob.ar/normativa/nacional/ley-27007-237401/texto (accessed August 25, 2021). regulations issued by the executive power. Article 63 states that At the federal level, authorization and enforcement for flaring 39 https://www.global-regulation.com/translation/argentina/3065500/law-no.-26.659.-modification.html (accessed August 25, 2021) 40 http://hidrocarburos.energianeuquen.gov.ar/MARCOLEGAL/LEYESPROVINCIALES/Ley 1.926.pdf (accessed August 25, 2021). 41 http://hidrocarburos.energianeuquen.gov.ar/MARCOLEGAL/LEYESPROVINCIALES/Ley 2.453.pdf (accessed August 25, 2021). 50 https://www.magyp.gob.ar/sitio/areas/producciones_sostenibles/legislacion/provincial/_archivos/000002-Aves y Porcinos/000015-Neuqu%C3%A9n/000001-neuquen/002175-ley_2175 x emision 42 http://sil1.com.ar/soft/IMPOSITI/provinci/Neuquen/d312404.htm (accessed August 25, 2021). gases pozos petroliferos gasiferos hidrocarburiferos.pdf (accessed August 25, 2021) 43 http://www.legischubut.gov.ar/hl/digesto/lxl/XVII-102.html (accessed August 25, 2021). 51 http://www.energia.gob.ar/contenidos/archivos/Reorganizacion/mesa_vaca_muerta/submesas/sub_mesa_1/3/SE-Normativa-Neuquen-res-29_reglamentacion-ley-venteos_NQN.pdf (accessed 44 https://www.iesc.gov.ar/iesc/Include/documents/legales/H_ley_prov_2727.pdf (accessed August 25, 2021). August 25, 2021). 45 https://rionegro.gov.ar/download/archivos/00011422.pdf (accessed August 25, 2021). 52 EY (2019), https://www.ey.com/en_gl/tax-guides/global-oil-and-gas-tax-guide-2019 (accessed January 5, 2022). 46 https://bibliotecadigital.csjn.gov.ar/constitucion-traduccion-ingles.pdf (accessed August 25, 2021). 53 https://www.argentina.gob.ar/produccion/energia (accessed August 25, 2021) 47 http://servicios.infoleg.gob.ar/infolegInternet/anexos/75000-79999/79980/norma.htm (accessed August 25, 2021). 54 http://hidrocarburos.energianeuquen.gov.ar/?page_id=465 (accessed August 25, 2021). 48 https://www.argentina.gob.ar/normativa/nacional/resoluci%C3%B3n-25-2004-91789/texto (accessed August 25, 2021). 55 https://www.iesc.gov.ar/iesc/index.php (accessed August 25, 2021). 49 http://servicios.infoleg.gob.ar/infolegInternet/anexos/330000-334999/333515/norma.htm (accessed August 25, 2021). 56 https://energia.rionegro.gov.ar/?catID=289 (accessed August 25, 2021). 28 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 29 Argentina Argentina and venting are the responsibilities of the Energy Secretariat. At • Section 3.1 permits flaring or venting when the gas-to-oil ratio Resolution No. 105 should be followed in all cases. The Neuquén all cases. Article 14 of the Neuquén province’s Decree No. 29/2001 the provincial level, the regulators listed in the previous section at the vent point does not exceed 1 m³ of gas per 1 m³ of crude oil province’s Decree No. 29/2001 (see footnote 51) outlines the same includes similar requirements (see footnote 51). authorize flaring or venting and enforce related regulations. produced. criteria as Resolution No. 143/1998. The Ministry of Environment and Sustainable Development57 • Section 4.4 permits periodic venting of gas when there are no 14. Measurement Frequency and Methods is responsible for establishing the minimum environmental conduction lines to capture the gas at the wellhead. 11. Development Plans Per Resolution No. 143/1998, flaring and venting of gases should protection standards for the sustainable management of the • Section 5.1 permits venting when it occurs during well testing. No information specific to requiring a development plan for be reported monthly to the authorities, including the location environment, preserving and protecting biological diversity, and associated gas as part of the field development approval for of the installation, flow rate, composition, causes of flaring or implementing sustainable development. Decree N° 2.656/199958 The authorities should be notified in writing of all flaring and greenfield projects was identified. However, Federal Resolution Nº venting, measurement points, and points of emission. Article 7 clarifies that the “permitting authority” supervises and inspects venting for all causes (maintenance, operations, or emergencies) 105/1992 (see footnote 35) requires the operator to prepare an EIA of the Neuquén province’s Decree No. 29/2001 requires monthly the operational aspects of the oil and gas activities. By contrast, within 24 hours. The reasons for the contingency, flow rates and for the development phase. The EIA must specify the installations submission of an affidavit (sworn declaration) documenting all gas the environmental authority, the Undersecretariat of Environment, damages, and the immediate measures and corrective measures to manage associated gas or dispose of it after a technical- emissions from oil wells. The original documentation of the sworn enforces the environmental aspects. implemented must be detailed. economic study confirms that its use is not viable. Article 20 declaration should be submitted to the Provincial Directorate of The Neuquen Province Law 2.175/1997 (see footnote 50) of the Neuquén province’s Decree N° 2.656/1999 (see footnote Hydrocarbons and Fuels within 10 calendar days of the end of the 8. Monitoring and Enforcement prohibits gaseous emissions from oil and gas wells. Emissions month being reported. 58) outlines norms and procedures regulating environmental Law No. 26.197, 2006, grants the following powers to the provinces: from flares can be authorized for oil wells if the emissions are protection during oil exploration and production similar to those in not characterized as a hazardous waste. Article 2 of Decree No. Resolution No. 105/1992. 15. Engineering Estimates • complete control over all activities related to the supervision 29/2001 (see footnote 51) requires the operator to submit a report Subsection 6 of Annex 1 (on norms and procedures for venting and control of the exploration permits and production documenting a justification for venting if the unused gas cannot 12. Economic Evaluation gas) of Resolution No. 143/1998, which applies nationally, allows concessions be flared for technical reasons and to follow the same criteria for estimation of flow rates based on the last determination of the • enforcement of all applicable legal and contractual obligations Resolution No. 143/1998, subsection 5 of Annex 1 (“Norms and venting as stipulated in Resolution No. 143/1998. gas-to-oil ratio and the gas composition in the well when the gas regarding investments, production, provision of information, and Procedures for Venting Gas, Section 5, Reasons for Exception–Gas is released to unblock a pump. Venting”) requires a technical and economic feasibility study in surface fee and royalty payment 10. Authorized Flaring or Venting cases in which gas at the venting point has a high content of inert • extension of legal and contractual terms 16. Record Keeping Article 4 of Resolution No. 143/1998 requires the operator to submit or toxic gases and the gas-to-oil ratio in each well is less than the • issuance of sanctions detailed in the Hydrocarbons Law, 1967. 1,500 m³ of gas per m³ of oil, the limit stipulated in Section 3.2. Section 6 of Resolution No. 143/98, 1998, states the records should a request for exemption to the undersecretary for breaching the permitted limits. Annex 1 of the resolution describes the procedure The study should include analysis of the effects of the flow rate be kept on an annual basis. Article 14 of the Neuquén province’s Federal Resolution No. 143/1998 (see footnote 33), Provincial Law for submitting such a request. The regulator has 90 days from the and total volume of vented gas. This analysis should demonstrate Decree No. 29/2001 requires flaring and venting records to be No. 2.175/1997 (see footnote 50), and Neuquén Provincial Decree No. date of receipt of the request to issue the approval or rejection of that neither the flow rates nor the volumes to be vented will reduce retained for five years, not the one year required nationally. 29/2001 (see footnote 51) fully empower the regulators to monitor the request. Every request for an exemption must demonstrate the exploitation of the gas. The study should include the flow rates and audit the oil and gas industry. for each reservoir the technical reasons for exceeding the limits and composition of the vented gas and the disposal method for 17. Data Compilation and Publishing and the maximum flow rate of gas to be flared or vented. The each type of toxic gas produced. The Neuquén province’s Decree Data on oil and gas production and disposition, including vented D. Licensing/Process Approval documentation and data should be updated every six months by No. 29/2001 sets the same criteria as Resolution No. 143/1998. volumes of gas, are compiled at the national level and posted 9. Flaring or Venting without Prior Approval May 31 and November 30 of each year in which exemptions are on a governmental website.59 The information can be filtered by Resolution No. 143/1998 (see footnote 33) prescribes that gas be requested. E. Measurement and Reporting province, year, concession area, and month. Information on vented gas volumes, which can be found in the “Gas Balances” file, has Section 3 of Annex 1 of Resolution No. 143/1998 states that flared, not vented, through appropriate procedures. If, for technical 13. Measurement and Reporting Requirements been compiled since 2009. reasons, the gas cannot be flared, the operator is required to the Energy Secretariat may judge whether venting should be reduced, either temporarily or permanently, on a case-by-case Section 6 of Annex 1, on norms and procedures for venting gas, submit a report to justify venting. basis. Section 3 requires allowed venting to follow appropriate of Resolution No. 143/1998 (see footnote 33) covers flow rate F. Fines, Penalties, and Sanctions Annex 1 (“Norms and Procedures for Venting Gas”) lists the procedures and minimize the emissions of harmful gases into the measurement and registering. It requires the establishment and circumstances under which gas venting is allowed: environment. Section 3 also states that Sections 3, 4, and 5 of implementation at each venting point of a system to measure 18. Monetary Penalties and record the flow of flared or vented gas and its composition in Aside from penalties for general violations of the laws, 57 https://www.argentina.gob.ar/ambiente (accessed August 25, 2021). 58 https://ambiente.neuquen.gov.ar/frmwrk/pdfs/ley_1875/1875(TO2267).pdf (accessed August 25, 2021). 59 https://www.argentina.gob.ar/produccion/energia/hidrocarburos/produccion-de-petroleo-y-gas (accessed August 25, 2021). 30 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 31 Argentina Argentina regulations, and technical provisions, no specific monetary 19. Nonmonetary Penalties in 1998, these efforts are estimated to have sequestered 760,000 the program will end, at which point prices are expected to match penalties for flaring or venting were identified. Article 87 of the tCO2e over the course of 30 years.63 import-parity values. Section 9 of Resolution No. 143/1998 (see footnote 33) on Hydrocarbon Law, 1967 (see footnote 36) sets fines for failure to inspections and sanctions, cites noncompliance with it as a Law No. 26.197, 2006, vests the federal government with the comply with any of the obligations arising from authorizations 23. Negotiated Agreements between the Public sufficient reason for revoking the corresponding authorizations, authority to grant concessions for interprovincial and export and concessions that do not constitute causes for revocation. and the Private Sector except where the Energy Secretariat deems the noncompliance transportation. Transportation concessions located within Decree No. 488/202060 introduces a new formula for calculating justified. Section 9 sets out the appeal process. Any transgression YPF has committed to minimizing gas flared and vented, the territory of only one province and not connected to export the fines in its Article 10. The fines vary with the severity and of the resolution will make the concessionaire or permit holder in compliance with the requirements established in Federal facilities were transferred to the provinces. Operators of pipelines incidence of the breach, ranging from a minimum equivalent to liable to the sanctions imposed in Law Nº 17.319, 1967,62 under the Resolutions No. 236/1993 and No. 143/1998. Through its innovation and other transport and distribution infrastructure are required the value of 22 m³ of national crude oil in the domestic market to law’s Titles VI and VII. The Energy Secretariat may request the department, YPF is developing two pilot projects that seek to to provide open access to third parties if they have available a maximum of 2,200 m³ of the national crude oil in the domestic revocation of the concession or exploration permit granted in the eliminate gas flaring and venting. One project, implemented in capacity. Third parties have the right to access this transport market for each violation. event of the assumptions outlined in Article 80 of the law. the Bajada de Añelo area, compresses captured associated gas to infrastructure if they comply with the relevant procedures. Article 6 of the Neuquén province’s Law No. 2.175, 1997 (see make CNG. The second project, carried out in a partnership with The growth of natural gas production will require substantial footnote 50) subjects emissions of unauthorized associated gas above the limits established in Article 5 to monthly payments. G. Enabling Framework Galileo, involves an on-site mini-plant that liquefies the gas, which new investment in infrastructure and export routes in the near is transported in cryogenic tanker trucks. After ten liquefaction and medium term as well as cost-effective production and Article 2 in Decree 29/2001 (see footnote 51) takes only the 20. Performance Requirements plants were installed in 2017 to capture gas at seven wells in transportation systems. The federal government launched a public volume of gases released into account to calculate the Neuquén and Mendoza, 150,000 m³ of gas were supplied daily for No evidence regarding performance requirements could be found tender for constructing and operating a new gas pipeline from the rate to be charged for gas venting. Since December 31, power generation. in the sources consulted. Vaca Muerta area in Neuquén to Saliqueló south of Buenos Aires. 2001, these volumes have been set per cubic meter of gas Construction is underway. flared or vented, beginning at 500 percent of the weighted 24. Interplay with Midstream and Downstream 21. Fiscal and Emission Reduction Incentives average sales price of natural gas at the custody transfer Regulatory Framework point. Article 8 states that noncompliance with the limits Section 8 of Annex 1 of Resolution 143/1998 (see footnote 33) imposed on associated gas from oil wells is subject to fines, states that as a condition for granting the exception to gas Natural gas provides more than 60 percent of power generation based on the gravity of the offense, determined by the quality venting, the licensees must provide a guarantee of investments in and more than half of the total energy consumed. Law No. 24.076, and quantity of the gas. The frequency of payments is monthly. emission abatement within 15 calendar days from the notification 1992,64 known as the Natural Gas Law, established the basis of the approval to the company. The amount of the guarantee for deregulation of natural gas transportation and distribution A newspaper article61 dated September 21, 2018, indicates that depends on the emission flows during the exception period and industries. The Federal Gas Regulatory Authority, created in a provincial regulator, the Secretaria de Energía de Rio Negro, the abatement investments to be made. Guarantees are set for 1992 by Decree No. 2255/92, oversees the transportation and imposed a penalty on the national oil company, YPF for venting each project by semester or as a fraction of the exception period distribution of natural gas . rather than flaring. The fine was Arg$134,000 (about US$1,350 and of the investment to be made. The guarantee will be called if as of September 2021), following the formula introduced in Natural gas prices are a mix of regulated and market prices. the company does not execute the agreed investments for each Decree No. 488/2020. YPF tried to reverse the fine by appealing Before the 2015 energy reform, domestic oil and gas prices were project at the expiration of each term. to the Civil Chamber of Cipolletti. The ministry stated that YPF significantly lower than those at trade parity, and public services had committed 11 infractions since the renegotiation of its oil tariffs did not cover operational costs. The domestic supply of oil 22. Use of Market-Based Principles contracts, when it had agreed to make sizable investments in its and gas was insufficient to meet demand. After 2015, domestic oil facilities to avoid venting gas. No evidence could be found in the YPF has two projects registered under the CDM, intended to and gas prices started to align with international levels. Resolution sources consulted as to whether the provincial government had reduce emissions in the La Plata and Luján de Cuyo industrial No. 46-E/2017,65 as amended by Resolutions No. 419/2017 and collected any of the fines. complexes. In 2019, the two projects combined avoided about 12/2018, introduced producer subsidies to attract investments 168,687 tCO2 emissions. YPF also engages in carbon offset in unconventional natural gas reservoirs in the Neuquén Basin. programs, such as reforestation in the Neuquén province. Started A minimum price of US$7.50 per million British thermal units (mmBtu) was guaranteed during 2018, decreasing by US$0.50/ mmBtu a year to US$6/mmBtu by 2021. On December 31, 2021, 60 https://www.argentina.gob.ar/normativa/nacional/decreto-488-2020-337678/texto (accessed August 25, 2021). 63 https://www.ypf.com/english/TheCompany/Documents/YPF-Sustainability-report-2019.pdf (accessed August 25, 2021). 61 https://www.runrunenergetico.com/multan-a-ypf-por-ventear-gas-sin-quemar/ (accessed August 25, 2021). 64 http://servicios.infoleg.gob.ar/infolegInternet/anexos/0-4999/475/texact.htm (accessed August 25, 2021). 62 http://mepriv.mecon.gov.ar/Normas/17319.htm (accessed September 24, 2021). 65 http://servicios.infoleg.gob.ar/infolegInternet/anexos/270000-274999/272266/norma.htm (accessed September 24, 2021). 32 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 33 Brazil 0.91 billion cubic meters of gas flared in 2021 A. Policy and Targets 2. Targets and Limits There are limits on the volume of gas that can be flared or vented (total oil production 2,906 thousand barrels per day) 1. Background and the Role of Reductions by each concession area. According to Ordinance 123/200069 issued in Meeting Environmental and Economic by the National Agency for Petroleum, Natural Gas, and Biofuels Objectives (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis The volume of gas flared in Brazil decreased from 1.6 bcm in 2012 [ANP]), the Annual Production Program (Programa Anual de Change in Flare Gas Volumes* Change in Flare Gas Intensity** to 0.9 bcm in 2021. During this period, oil production rose by more Produção [PAP]) approved by the regulator should include a than two-fifths, but associated emissions were more than offset schedule with monthly estimates of flared or vented gas. Article 3 by the 56 percent decline in flaring intensity (figure 4). The last of Resolution 806/202070 sets the maximum allowable limit for the 2015-2021 2015-2020 2015-2021 2015-2020 flare count, conducted in 2019, found 63 individual flare sites monthly volume of flaring or venting at a level that is 15 percent -32% -25% -43% -38% above the forecast gas-to-oil ratio based on the most recent In 2018, the national oil company, Petrobras,66 endorsed the World approved PAP. Bank’s Zero Routine Flaring by 2030 initiative (World Bank, n.d.; see footnote 3). Brazil also participates in the Global Methane Initiative (n.d.; see footnote 29). In 2020, Brazil submitted an B. Legal, Regulatory Framework, * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced updated NDC to the UNFCCC and committed to reducing its GHG 67 and Contractual rights emissions from 2005 levels by 37 percent by 2025 and 43 percent by 2030. However, the NDC does not specifically mention gas 3. Primary and Secondary Legislation Figure 4 Gas flaring volume and intensity in Brazil, 2012–21 flaring and venting. and Regulation Fl rin Int nsit Fl rin Volum As a result of flaring reduction and other initiatives, upstream Law 9478/1997, Petroleum Law (Petroleum Law, 1997, hereafter),71 2 2.5 carbon intensity declined by 25 percent between 2009 and governs oil and gas upstream activities in Brazil. Article 7 2015. Between 2008 and 2018, almost 10 million tCO2 from establishes the ANP72 as the lead oil and gas agency. Article associated gas was re-injected. Petrobras estimates that the 25 states that only companies that meet the ANP’s technical, total accumulated re-injection will amount to the equivalent of legal, and economic requirements can be awarded an oil and 2.0 more than 40 million tCO2 by 2025. Petrobras reports no routine gas exploration and production concession. Article 26 states Cubic m t rs (m³) of flaring of gas in existing operations, because all assets under its that operators should submit their development and production operational control are already exporting or re-injecting gas. The projects and plans for the ANP’s approval. r 1.5 company’s average gas use in 2018 was 97 percent. Law 11.909/2009, Natural Gas Law,73 covers the transportation of s fl r d/ s fl r d/b rr l of oil produc d natural gas, previously covered by Article 177 of the Constitution, 1 Resolution 17/2017,68 issued by Brazil’s National Council of Energy as well as treatment, processing, storage, liquefaction, billion m³ of Policy’s (Conselho Nacional de Política Energética), outlines the 1.0 regasification, and commercialization of natural gas. policy on oil and gas exploration and production. It establishes a guideline to increase, on an economic basis, the share of natural Resolution 806/2020 replaces ANP Ordinance (“Portaria”) gas production for the domestic market, including by reducing the 249/2000 and details the criteria and procedures for controlling 0.5 flaring of natural gas in upstream activities. and reducing gas flaring and venting in upstream activities. Article 4 states that the flaring or venting of nonassociated natural gas 66 https://petrobras.com.br/en/ (accessed on August 25, 2021). 67 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Brazil%20First/Brazil%20First%20NDC%20(Updated%20submission).pdf (accessed on August 25, 2021). 0 0 68 https://atosoficiais.com.br/anp/?path=legislacao-federal/resolucoes/resol-cnpe/2017&item=rcnpe-17--2017 (accessed on August 25, 2021). 69 https://atosoficiais.com.br/anp/portaria-tecnica-n-123-2000-estabelece-o-regulamento-tecnico-do-programa-anual-de-trabalho-e-orcamento-para-os-campos-de-petroleo-e-gas-natural-que- 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 dispoe-sobre-as-questoes-relacionadas-com-o-acompanhamento-e-fiscalizacao-das-atividades-de-producao-de-acordo-com-o-estabelecido-na-secao-v-art-43-inciso-iii-da-lei-n-9478-de-06- de-agosto-de-1997-definindo-o-conteudo-e-estabelecendo-procedimentos-quanto-a-forma-de-sua-apresentacao (accessed on August 25, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 70 https://www.in.gov.br/en/web/dou/-/resolucao-n-806-de-17-de-janeiro-de-2020-238839783 (accessed December 29, 2021). This approach is applied to all countries covered in this report in a consistent manner. 71 http://www.planalto.gov.br/ccivil_03/leis/l9478.htm (accessed on August 25, 2021). 72 https://www.gov.br/anp/pt-br (accessed on August 25, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 73 https://www.fao.org/faolex/results/details/en/c/LEX-FAOC088764 (accessed on December 29, 2021). 34 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 35 Brazil Brazil is prohibited unless authorized for reasons of safety, emergency, the applicable taxes and the corresponding legal or contractual According to Chapter 4 of Ordinance 422/2011,82 the Brazilian b. 1.5 percent (IUGA of 98.5 percent or greater) of the monthly testing, or the cleaning of wells. Other articles of the resolution obligations. There is no difference in the treatment of oil and gas. Institute of Environment and Renewable Natural Resources is associated gas handled by a marine production unit for detail conditions and requirements for flaring and venting with responsible for environmental licensing of oil and gas activities. lifting oil or received from other units in volumes equal to or Gas flared and vented is subject to royalties. The Concession and without prior authorization (see sections 9 and 10 of this The institute can also impose environmental permit conditions greater than 50 percent of the volume of gas handled Agreement for Exploration and Production of Oil and Gas77 states chapter). ANP Ordinance 123/2000 (see footnote 69) establishes related to flaring and venting, with a focus on the prevention and c. 3 percent (IUGA of 97 percent or greater) of the monthly that natural gas that is flared or vented should be included in the technical rules for the oil and gas PAP. mitigation of GHG emissions. onshore production of associated gas. the total production volume calculated for the purpose of paying Article 177 of the Federal Constitution, 1988,74 as modified by royalties to the government. 2. When the volumes of associated gas flared are greater than 8. Monitoring and Enforcement Constitutional Amendments 9/95, 33/11, and 49/06, establishes those approved, but the new (or revised) IUGA is equal to or the federal government’s monopoly over the exploration and C. Regulatory Governance Chapter 4 of the Petroleum Law, 1997 (see footnote 71) empowers greater than the one considered in the most recent approved the ANP to undertake all measures necessary to regulate, monitor, exploitation of Brazil’s oil and natural gas deposits. Brazil and Organization and control activities related to the oil and gas industry. PAP. currently has three legal regimes applicable to upstream oil and 3. Flaring of petroleum or flaring or venting of natural gas during gas activities: 6. Regulatory Authority well testing with a flow period of 72 hours or less per interval • concession, regulated by Petroleum Law, 1997 According to Article 7 of the Petroleum Law, 1997 (see footnote D. Licensing/Process Approval tested. production sharing, regulated by Law 12351/201075 71), the ANP under the Ministry of Mines and Energy (Ministerio 4. Flaring or venting of associated gas in fields that produce a 9. Flaring or Venting without Prior Approval de Minas y Energía [MME]) is responsible for regulating all 78 total monthly volume equal to or less than that corresponding • transfer of acreage in the pre-salt zone to Petrobras, regulated petroleum industry activities. It is responsible for formulating Article 2 of Resolution 806/2020 (see footnote 70) defines to an average flow rate of 5,000 m³/day as long as the field by Law 12276/10, 2010.76 Brazil’s policies in the energy sector. The council comprises “ordinary flares” as flaring or venting of gas that does not does not have wells with an average flow rate above 1,500 Article 225 of the Federal Constitution, 1998, provides the main government representatives (including seven ministers), outside require prior authorization. Article 3 states that the volume of m³/day, for which a project using associated gas should be framework and provisions for environmental protection in Brazil. energy experts, and nongovernmental organizations. The Energy ordinary flaring or venting of natural gas carried out each month proposed. The most important piece of legislation is Law 6.938, the National Research Office (Empresa de Pesquisa Energética [EPE]) was 79 cannot be higher than that corresponding to the Associated Gas 5. Flaring or venting of associated gas produced in onshore fields Environmental Policy Act, 1981. established by Law 10847/2004. It supports the MME’s energy Utilization Index (Índice de Utilização de Gás Associado [IUGA])83 or marine production units with a gas-to-oil ratio of 20 m³ of policies with studies and research on energy planning, including for for the same month in the approved PAP with a permitted gas per m³ of crude oil or less. 4. Legislative Jurisdictions electricity, oil, natural gas, and biofuels. Law 7735/1989 80 created exceedance of 15 percent. Sanctions are applied to each monthly 6. Flaring for safety reasons. For onshore production units, a limit the Brazilian Institute of Environment and Renewable Natural infraction. Article 14 states that authorization is not needed in Articles 3 and 21 of the Petroleum Law, 1997, place all oil and gas on a maximum monthly volume of 1,000 m³/day for each pilot/ Resources (Instituto Brasileiro do Meio Ambiente e dos Recursos case of emergency flaring or venting. Operators should provide activities under national jurisdiction. flare. The offshore limit is 2,000 m³/day for each pilot, provided Naturais),81 the administrative arm of the Brazilian Ministry of the ANP validation of the volume of gas flared or vented during that such pilots are operational. Environment. emergencies. 5. Associated Gas Ownership Articles 7–16 define the criteria and procedures for authorization Article 6 states that flaring or venting associated gas does not Articles 20 (items V and IX) and 176 of the Federal 7. Regulatory Mandates and Responsibilities and validation of extraordinary flares and circumstances under require the ANP’s prior approval in the following cases: Constitution,1988, and Article 3 of the Petroleum Law, 1997, vest which extraordinary flaring and venting of associated gas are The oil and gas sector is under federal jurisdiction; the ANP the oil and gas deposits in the territory, the continental shelf, and 1. Flaring or venting of associated gas in volumes equal to or less allowed without prior approval. regulates all activities related to the industry. According to Article the exclusive economic zone in the federal government. Article 26 than 8 of the Petroleum Law, 1997, the purpose of the ANP is to oversee of the Petroleum Law, 1997, states that the concessionaire owns a. 3 percent (IUGA greater than or equal to 97 percent) of 10. Authorized Flaring or Venting the regulation, engagement, and inspection of economic activities measured volumes of extracted oil and gas at the production in the oil, gas, and biofuel industries. Resolution 806/2020 (see monthly offshore production of associated gas in fields Article 2 of Resolution 806/2020 defines “extraordinary flaring” measurement point, with charges related to the payment of footnote 70) regulates the flaring and venting of associated gas. in operation five years before the date of the publication as associated gas flaring and venting subject to the ANP’s prior of the resolution (before January 17, 2025) and 2 authorization or subsequent validation. Article 3 requires the 74 https://www.constituteproject.org/constitution/Brazil_2014.pdf (accessed on August 25, 2021). percent (IUGA of 98 percent or greater) in fields that ANP’s approval of the PAP, which must include forecasts of 75 https://presrepublica.jusbrasil.com.br/legislacao/1026276/lei-12351-10 (accessed on August 25, 2021). start production five years or later after the date of the routine gas flaring and venting and volumes flared or vented 76 http://www.planalto.gov.br/ccivil_03/_ato2007-2010/2010/lei/l12276.htm (accessed on August 25, 2021). 77 https://www.gov.br/anp/pt-br/canais_atendimento/imprensa/kits-de-imprensa-1/como-funciona-o-processo-de-exploracao-e-producao-de-petroleo-e-gas-natural-no-brasil (accessed on publication of this resolution (after January 17, 2025) that would not be subject to royalties. Article 7 states that the December 29, 2021). 78 https://www.gov.br/mme/pt-br (accessed on August 25, 2021). ANP’s authorization of extraordinary flaring should be requested 79 https://www.epe.gov.br/en (accessed on August 25, 2021). 80 http://www.planalto.gov.br/ccivil_03/leis/l7735.htm (accessed on August 25, 2021). 82 http://www.ibama.gov.br/sophia/cnia/legislacao/MMA/PT0422-261011.PDF (accessed on August 25, 2021). 81 https://www.gov.br/ibama/pt-br (accessed on August 25, 2021). 83 The IUGA is the volume of associated gas used as a percent of the total volume of associated gas produced. 36 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 37 Brazil Brazil with notice of a minimum of 30 days. Articles 8–16 establish the E. Measurement and Reporting tools established in the development plan and in the applicable applying penalties for infractions committed in activities related procedures and criteria for authorization or subsequent validation laws and regulations. The specifics of the frequency of volume to the oil industry and the national supply of fuels. Administrative of “extraordinary flaring.” 13. Measurement and Reporting Requirements measurements or measurement methodology could not be sanctions may take the form of fines and nonmonetary sanctions identified in the sources consulted. (see the next section). According to Article 26, the fine should be The annual production programs approved by the ANP may ANP/Inmetro Joint Resolution No. 1/2013 contains the technical paid within 30 days of the date of acknowledging the infraction. contain specific conditions, including those related to flaring or regulation for the measurement of oil and natural gas. According 15. Engineering Estimates Failure to pay the fine within the specified period will subject the venting, in addition to those imposed by Resolution 806/2020. ANP to Article 9 of Resolution 806/2020 (see footnote 70), operators offender to a default interest rate of 1 percent and a late payment Ordinance 123/2000 (see footnote 69) provides the procedures should provide the ANP with monthly production reports No evidence regarding engineering estimates could be found in the penalty of 2 percent a month or a fraction thereof. to be followed for approval. Resolution 806/2020 provides the that include gas flaring and venting data. The report must be sources consulted. technical criteria. Chapter 4 of Ordinance 422/2011 (see footnote submitted by the 15th day of each month. Operators should Section 3 of Resolution 806/2020 (see footnote 70) states that 82) authorizes the Brazilian Institute of Environment and report estimates of flared or vented associated gas for each of the 16. Record Keeping the operator is subject to a sanction each month the volume of Renewable Natural Resources to set conditions for environmental following categories: gas flared or vented exceeds the level authorized in the most No evidence regarding record-keeping requirements could be found licenses, including controlling emissions discharged to the recently approved PAP. Articles 1 and 2 of Resolution 774/201991 • safety in the sources consulted. atmosphere. allow operators to make the penalty payment in up to 60 monthly • scheduled maintenance installments, in accordance with the conditions to be negotiated • works in progress, such as facilities under construction 17. Data Compilation and Publishing 11. Development Plans with the ANP. • low gas production (insufficient volume of gas to be used) The ANP’s Development and Production Superintendence produces Article 44 of the Petroleum Law, 1997 (see footnote 71) requires Data on fines imposed by the ANP during 2011–15 are available for • economics (associated gas whose use or re-injection would a monthly report entitled “Oil and Natural Gas Production the inclusion of associated gas use in the field development download on the ANP website;92 information on fines for flaring make the field uneconomic) Bulletin,” which provides information on Brazilian oil and gas plan submitted to the ANP for approval after the declaration of and venting after 2015 has not been posted. During 2011–15, 177 production, including flaring data. The most recent data are commercial viability for a given project. The plan should consist of • venting in tanks (associated natural gas vented). fines were imposed, of which 94 were for flaring gas in volumes from March 2020.86 Reports are published on the government’s a schedule and investment estimate. Resolution 17/201584 provides higher than authorized. These fines totaled R$121,700,000 (about The Model Contract-Concession Agreement for Exploration and website.87 guidelines for field development plans. Article 16(3) requires the US$23 million). The fines applied from 2016 to 2018 have been submission of volumes expected for gas lift, internal consumption, Production of Oil and Gas85 explicitly mentions the requirement published,93 but there is no specific information on flaring and re-injection, and flaring and venting, as well as mitigation plans for reporting the volumes of gas flared or vented in Section 12. F. Fines, Penalties, and Sanctions venting during that period. for reducing gas flaring. According to Subsection 12, licensees should submit to the ANP a monthly report on the production of each development area or 18. Monetary Penalties In October 2014, the ANP fined Petrobras a total of R$6 million field according to the applicable laws and regulations. Gas flaring (about US$1.1 million as of September 2021) for flaring violations 12. Economic Evaluation According to the ANP’s interpretation of Article 2 of Law and venting of natural gas with a variation above 15 percent of committed in the production of the onshore field of Fazenda Santa 9847/199988 and subsequent decisions, infractions involving Section 8.1.6 of ANP Ordinance 123/2000 (see footnote 69) the volumes authorized in the PAP must be accompanied by due Luzia in the north of the Espirito Santo state. According to the flaring or venting are subject to fines or nonmonetary sanctions. stipulates that the PAP should include the volume of associated justifications. According to Subsection 12, the licensee’s flaring ANP, Petrobras flared associated gas in April, May, September, Article 3 states that the monetary penalty ranges from R$5,000 gas that would not be used or re-injected. The PAP must also and venting of gas should be included in the total production October, and November 2010 in an amount higher than provided to R$2,000,000 (about US$960–US$3,800 as of September demonstrate, based on economic evaluation, that the oil or gas volume to be calculated for the purpose of paying royalties to for in the Annual Production Plan. The company asked for the 2021). The ANP determines the monetary penalty for flaring or production of the field would not be economically feasible if the the government. In this case, the flared volumes are monitored suspension of fines. On October 15, 2020, the courts upheld the venting according to the seriousness of the infringement and gas so identified cannot be flared. daily through the Production Inspection System (Sistema de fine imposed by the ANP. In another action, Petrobras requested the operator’s previous infraction history under ANP Ordinance Fiscalizacao da Producao). the suspension of the collection of fines, totaling about R$16 To reduce flaring, the production of oil and gas may be started 397/2018.89 Article 13 provides for the right to appeal. million, for irregularities found in the measurement system of the only after the installation of a system that utilizes or re-injects 14. Measurement Frequency and Methods Decree 2953/1999 sets forth the administrative procedure for 90 Zephir I Platform in the Santos Basin.94 The irregularities were any natural gas, unless the ANP grants an exception upon consideration of the economic evaluation. Resolution 806/2020 (see footnote 70) requires the concessionaire 86 http://www.anp.gov.br/arquivos/publicacoes/boletins-anp/producao/2020-03-boletim.pdf (accessed on August 25, 2021). to regularly measure the volume and quality of the oil or gas 87 http://www.anp.gov.br/publicacoes/boletins-anp/2395-boletim-mensal-da-producao-de-petroleo-e-gas-natural (accessed on August 25, 2021). 88 https://www2.camara.leg.br/legin/fed/lei/1999/lei-9847-26-outubro-1999-369365-normaatualizada-pl.html (accessed on August 25, 2021). produced in each development area or field from the production 89 https://atosoficiais.com.br/anp/portaria-anp-n-397-2018?origin=instituicao&q=397 (accessed on August 25, 2021). 90 https://www2.camara.leg.br/legin/fed/decret/1999/decreto-2953-28-janeiro-1999-369311-norma-pe.html (accessed on August 25, 2021). start date, using the measurement methods, equipment, and 91 http://www.anp.gov.br/arquivos/multas/parcelamento/Resolucao-774-2019.pdf (accessed on August 25, 2021). 92 http://www.anp.gov.br/images/multas/agentes-autuados-processos.xlsx (accessed on August 25, 2021). 84 https://atosoficiais.com.br/anp/resolucao-n-17-2015-?origin=instituicao (accessed on August 25, 2021). 93 http://www.anp.gov.br/multas-e-regularizacoes/multas-aplicadas-com-vencimento-a-partir-de-2016 (accessed on August 25, 2021). 85 http://rodadas.anp.gov.br/arquivos/Oferta_Permanente/Edital/contrato_Blocos_OP_ingles.pdf (accessed on August 25, 2021). 94 See A Gazeta, 10/15/2020, https://www.agazeta.com.br/es/economia/justica-mantem-multa-a-petrobras-por-queima-de-gas-alem-do-previsto-no-es-1020 (accessed on August 25, 2021). 38 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 39 Brazil Brazil detected during an inspection by the ANP in March 2012. 23. Negotiated Agreements between the Public and promote competition in the natural gas market. The program and the Private Sector has reduced Petrobras’ market power and end-user prices. 19. Nonmonetary Penalties The main instruments for controlling gas flaring and venting Petrobras held a monopoly in Brazil’s oil and gas industry until According to the ANP’s interpretation of Article 2 of Law in Brazil are the field development plan, the PAP, the monthly 1995, when Constitutional Amendment No. 9 was approved, making 9847/1999, infractions involving flaring or venting may be production reports, and the Terms of Commitment. The Terms it possible to introduce competition. The Petroleum Law, 1997 subject to suspension of operation. Article 13 provides for the of Commitment are agreements for the reduction of volumes (see footnote 71) implements the constitutional amendment. In right to appeal. flared over the medium term that contain targets for the use the case of natural gas, however, it did not promote a significant of associated gas and action plans that guarantee compliance change in the market structure, with Petrobras remaining the Under Decree 2953/1999, nonmonetary sanctions can take the with them. Three such agreements have been signed, two with dominant player and a monopolist by default. Law 11.909/2009, form of suspension of product supply; temporary suspension, total Petrobras and one with Chevron. Gas Law (see footnote 73) was adopted to address issues specific or partial, of the facility or installation; cancellation of registration to the natural gas industry and attract new investments. It did of an installation; and revocation of authorization to carry out Important initiatives on flaring reduction in Brazil are Petrobras’ not achieve the desired objectives. the associated activity. Sections 1 and 2 of the decree provide 2009 Gas Optimization Program and the signing of the second administrative penalty procedures; Sections 3 and 5 describe the Term of Commitment between Petrobras and the regulator, as a Resolution 16/201997 established guidelines for an energy policy appeal procedures. The defendant has 15 days to present evidence direct consequence of the finding that the volume of gas flared aimed at promoting competition in the natural gas market and to contest the charges, and the ANP has 30 days to evaluate and exceeded the limits allowed by ANP’s Ordinance 249/2000. reducing the influence of Petrobras over the market. A Term of decide on the case. If the decision rules against the operator, a Under the Adjustment Program to Reduce Natural Gas Flaring Commitment of Assignment98 (Termo de Compromisso de Cessão) second appeal can be mounted within 10 days. The ANP director in the Campos Basin, Petrobras reduced emissions by more was signed between Brazil’s competition authority and Petrobras. will decide on the appeal within a maximum period of 30 days, than 40 percent between 2009 and 2019, despite increasing oil It ended the de facto monopoly of Petrobras. Tax amendments starting from the date of the submission of the appeal. production. Since then, the ANP has been restricting authorized were made providing incentives for gas pipeline transportation volumes of extraordinary flaring of natural gas. Petrobras has (Ajuste SINIEF nº 03/201899 and Ajuste SINIEF nº 17/2019).100 G. Enabling Framework committed to eliminating the absolute growth of its operational One of the objectives of Resolution 16/2019 was to improve the emissions by 2025 and eliminating routine flaring by 2030. recovery of associated gas in the pre-salt basin. Th discovery of 20. Performance Requirements pre-salt gas could double the potential of natural gas supply in The company has developed technologies to capture and re-inject No evidence regarding performance requirements could be found Brazil in the next 15 years. However, pre-salt gas fields are more CO2 into the oil fields, especially in the pre-salt area. The company in the sources consulted. than 1,500 meters below sea level and about 300 kilometers from has also invested in research through its association with the the coast. In addition, the pre-salt gas is rich in CO2, the release of Oil and Gas Climate Initiative.95 Petrobras has also released its 21. Fiscal and Emission Reduction Incentives which would increase GHG emissions substantially. The delivery of second climate supplement, outlining its climate commitments associated gas will require significant investments in capture and According to Law 9847/1999 (see footnote 88), the volume of and explicitly supporting the Task Force on Climate-Related gas treatment infrastructure and offshore pipelines. gas flared under the responsibility of the concessionaire will be Financial Disclosures.96 included in the total volume of production used for calculating royalties. The royalty rate is typically 10 percent but can be as low 24. Interplay with Midstream and Downstream as 5 or as high as 15 percent. Royalties on oil and gas production Regulatory Framework are fully tax-deductible. Petrobras was instrumental in creating Brazil’s gas sector, but the company’s control over the industry discouraged new investors 22. Use of Market-Based Principles from entering the sector and constrained its growth. The New Gas No evidence regarding the use of market-based principles to Market is a government program intended to create an open and reduce flaring, venting, or associated emissions could be found in competitive natural gas market in Brazil. It aims to make the most the sources consulted. efficient use of existing infrastructures, attract new investments, 97 http://antigo.mme.gov.br/web/guest/conselhos-e-comites/cnpe/resolucoes/resolucoes-2019 (accessed on August 25, 2021). 98 https://www.gov.br/mme/pt-br/assuntos/noticias/cade-e-petrobras-celebram-acordo-para-venda-de-ativos-no-mercado-de-gas-natur-1 (accessed on August 25, 2021). 95 https://oilandgasclimateinitiative.com/ (accessed on August 25, 2021). 99 https://www.confaz.fazenda.gov.br/legislacao/ajustes/2018/AJ_003_18 (accessed on August 25, 2021). 96 https://www.fsb-tcfd.org/ (accessed on August 25, 2021). 100 https://www.confaz.fazenda.gov.br/legislacao/ajustes/2019/ajuste-sinief-17-19 (accessed on August 25, 2021). 40 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 41 Canada Canada: Federal 1.08 billion cubic meters of gas flared in 2021 A. Policy and Targets The country’s GHG emissions from the oil and gas sector have been increasing for several decades. However, nationwide (total oil production 4,455 thousand barrels per day) 1. Background and the Role of Reductions emissions have stabilized since the mid-2000s, thanks to the in Meeting Environmental and Economic replacement of coal-fired power generation with gas-fired Objectives generation and renewable energy. With the Pan-Canadian Framework on Clean Growth and Climate Change, 2016,104 Canada The volume of gas flared in Canada increased from 1.3 bcm in Change in Flare Gas Volumes* Change in Flare Gas Intensity** committed to reducing methane emissions from the oil and gas 2012 to 2.1 bcm in 2014 before falling to 1.1 bcm in 2021 (figure industry by 40–45 percent by 2025. In 2018, Environment and 5). During this period, oil production rose by about a third, but Climate Change Canada (ECCC),105 a Canadian government associated emissions were more than offset by the decline in agency, published Regulations Respecting Reduction in the Release of 2015-2021 2015-2020 2015-2021 2015-2020 flaring intensity. There were 266 individual flare sites in the last Methane and Certain Volatile Organic Compounds (Upstream Oil and -41% -41% -51% -48% count, conducted in 2019. Gas Sector) SOR-2018-66.106 Canada has considerable onshore and offshore resources. It produced 6 percent of the world’s crude oil and 4 percent of 2. Targets and Limits natural gas in 2019. Alberta, Saskatchewan, and offshore east The ECCC’s Regulations Respecting Reduction in the Release of * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced coast sites accounted for about 50 percent, 30 percent, and Methane and Certain Volatile Organic Compounds (Upstream Oil 15 percent of Canada’s oil production, respectively. The growth and Gas Sector) S.O.R. 2018-66 contain standards for extraction, of crude oil production since 2010 can be attributed mainly primary processing, long-distance transport, and storage. The Figure 5 Gas flaring volume and intensity in Canada, 2012–21 to increased output from the oil sands in Alberta. Natural gas regulations apply to facilities producing or receiving more than Fl rin Int nsit Fl rin Volum production is concentrated in Alberta (nearly 70 percent) and 60,000 m³ annually of hydrocarbon gas, which includes methane British Columbia (nearly 30 percent). The great majority of oil and and certain volatile organic compounds. Upstream oil and gas 3 1.8 gas production occurs on state and private land, with the rest facilities are required to take the following actions, among others: coming from federal and tribal lands.101 1.6 • Limit vented volumes to 250 m³ a month, starting in 2023. In 2016, Canada endorsed the World Bank’s Zero Routine Flaring • Implement leak detection and repair, starting in 2020. Regular 1.4 by 2030 initiative (World Bank, n.d.; see footnote 3). It also Cubic m t rs (m³) of inspections will be required three times a year, and detected participates in the Global Methane Initiative (n.d.; see footnote leaks are to be repaired within 30 days unless the facility is 2 1.2 29) and the Climate and Clean Air Coalition (n.d.; see footnote required to be shut down, in which case an action plan must be r 30). In July 2021, Canada submitted an updated NDC under the prepared and implemented. s fl r d/ 1.0 UNFCCC102 that commits it to reducing GHG emissions by 40-45 • Conserve or flare gas instead of venting, starting in 2020. s fl r d/b rr l of oil produc d percent below 2005 levels by 2030, raising the level of ambition billion m³ of 0.8 substantially from the original NDC in 2016. There is an increased Register and keep records to demonstrate compliance.107 focus on reducing methane emissions from the oil and gas sector. 1 0.6 Provinces set their own flaring and venting rules and emissions The updated NDC is consistent with the federal government’s limits, which provincial regulators implement. Provincial emission pledge of Canada’s reaching net-zero emissions economy-wide 0.4 limits must meet or exceed federal targets. by 2050.103 0.2 0 0 101 Primary governance of flaring and venting for this majority of production is covered under provincial laws and regulations, as implemented by provincial regulators (see chapters on Alberta, Saskatchewan and British Columbia). Laws, regulations and implementation discussed in this chapter primarily covers remaining production in federal lands and offshore. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 102 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Canada%20First/Canada%27s%20Enhanced%20NDC%20Submission1_FINAL%20EN.pdf (accessed August 30, 2021). 103 https://www.canada.ca/en/services/environment/weather/climatechange/climate-plan/net-zero-emissions-2050.html (accessed August 23, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 104 https://www.canada.ca/en/services/environment/weather/climatechange/pan-canadian-framework.html (accessed August 23, 2021). This approach is applied to all countries covered in this report in a consistent manner. 105 https://www.canada.ca/en/environment-climate-change.html (accessed August 23, 2021). 106 https://laws-lois.justice.gc.ca/eng/regulations/SOR-2018-66/index.html (accessed August 23, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 107 https://environmentalsociety.ca/wp-content/uploads/2017/07/Final-for-website-Methane-FAQs.pdf (accessed August 23, 2021). 42 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 43 Canada: Federal Canada: Federal B. Legal/Regulatory Framework Canada-Newfoundland and Labrador Offshore Petroleum Board 115 5. Associated Gas Ownership Petroleum Board and the Canada–Nova Scotia Offshore Petroleum and the Canada-Nova Scotia Offshore Petroleum Board.116 Board jointly regulate oil production off the coast of the maritime and Contractual Rights The ownership of oil and gas resources is split between the provinces and set limits on the volumes of gas flared in offshore The agreements also formalized principles of shared management provincial government, the federal government, private freehold installations in their respective jurisdictions. 3. Primary and Secondary Legislation of offshore oil and gas resources and revenue sharing from owners, and First Nations. Since 1887, the usual practice has and Regulation previous agreements, such as The Atlantic Accord–Memorandum of been to reserve mineral rights in the granting of land. The Canada’s constitution grants exclusive authority to the provinces The Canada Oil and Gas Drilling and Production Regulations, Agreement between the government of Canada and the government Canada Petroleum Resources Act, 1985,123 governs the lease of to regulate mineral development within their boundaries. 2009,108 ban flaring and venting unless the federal energy of Newfoundland and Labrador on Offshore Oil and Gas Resource federally owned oil and gas rights on “frontier lands,” including The major producing provinces have independent oil and gas regulator permits it or it is necessary because of an emergency. Management and Revenue Sharing, 1985,117 and the Canada–Nova the “territorial sea” (12 nautical miles beyond the low water mark regulators. Federal and provincial (as well as territorial and The Canada Oil and Gas Operations Act, 1999,109 governs the Scotia Offshore Petroleum Resources Accord Implementation Act, of the outer coastline) and the “continental shelf” (beyond the indigenous) governments share authority over environmental exploration, production, processing, and transportation of oil 1986.118 territorial sea). Under the act, subsurface oil and gas rights in matters. Each province has its own environmental laws. and gas in marine areas controlled by the federal government. unexplored areas are issued during a public call for bids, and the Many of the federal regulations have been adopted by Provincial governments have specific legislation governing the successful oil and gas company must pay royalties to the federal 7. Regulatory Mandates and Responsibilities Newfoundland, Labrador, and Nova Scotia. Examples include the exploration and production of oil and natural gas as well as government. The rights to explore for, develop, and produce oil and following: The mandate, roles, and responsibilities of the CER include flaring and venting. gas, including associated gas, are then transferred to participants regulating exploration and production of oil and gas as well as • Canada–Newfoundland and Labrador Offshore Petroleum through licenses. designing and collecting royalties.127 The ECCC reports to the The Canadian Environmental Protection Act, 1999,110 regulates Administrative Monetary Penalties Regulations, 2016119 federal government’s minister of the environment and is the pollution prevention and waste management in matters of interprovincial or international application. Particularly relevant • Newfoundland Offshore Petroleum Drilling and Production C. Regulatory Governance lead environmental federal agency. The department delivers its Regulations, 2009120 for flaring and venting from oil and gas operations are the and Organization mandate through acts and regulations, such as the Canadian • Nova Scotia Offshore Petroleum Drilling and Production Environmental Protection Act, 1999 (see footnote 110). It sets the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Regulations, 2009 121 6. Regulatory Authority national ambient objectives for different air pollutants, including • Canada-Nova Scotia Offshore Petroleum Administrative those from flaring and venting. SOR/2018-66.111 Provinces can choose to adopt these regulations The Canada Energy Regulator (CER)124 was formed under the or draft their own to meet or exceed the federal targets. Canada’s Monetary Penalties Regulations, 1987. 122 Canadian Energy Regulator Act, 2019,125 replacing the National Depending on the jurisdictional and environmental nature of the three major oil and gas provinces—Alberta, Saskatchewan, and Energy Board. It regulates the Northwest Territories, Nunavut and oil and gas project, an environmental assessment may be required British Columbia—have written their own rules. 4. Legislative Jurisdictions Sable Island, submarine areas not within a province in the internal by the provincial government, the federal government, or both Canada’s federal and provincial governments share jurisdiction waters of Canada, and the territorial sea or continental shelf of per the Impact Assessment Act, 2019.128 Each province has its own The Offshore Waste Treatment Guidelines, 2010,112 help operators over energy and environmental policy and the legal and regulatory Canada, as defined in the Canada Oil and Gas Operations Act, 1999 environmental permit regime, with the provincial regulator issuing manage waste material associated with petroleum drilling and framework for upstream, midstream, and downstream operations. (see footnote 109). The act provides a clear separation between these permits. Generally, approvals are required if any substance production in offshore areas. Two agreements between the The provincial authorities enforce regulations and standard the operational and adjudicative functions of the regulator. is released that could harm the environment. federal and provincial governments—the Canada–Newfoundland operating procedures for managing flaring and venting activities and Labrador Atlantic Accord Implementation Act, 1987,113 and The Canada–Newfoundland and Labrador Offshore Petroleum as well as reporting emissions (see the chapters on Alberta, British 8. Monitoring and Enforcement the Canada–Nova Scotia Offshore Petroleum Resources Accord Board (see footnote 115) is an independent agency that regulates Columbia, and Saskatchewan). Implementation Act, 1986114—established two regulatory boards, the petroleum-related offshore activities. The Newfoundland and The CER has powers to enforce regulatory compliance.129 It can 108 https://laws-lois.justice.gc.ca/PDF/SOR-2009-315.pdf (accessed August 23, 2021). Labrador Department of Natural Resources126 part of the conduct audits and inspections and has various enforcement 109 https://laws-lois.justice.gc.ca/eng/acts/O-7/page-1.html (accessed August 23, 2021). provincial government, regulates onshore petroleum-related 110 https://laws-lois.justice.gc.ca/eng/acts/c-15.31/page-1.html (accessed August 23, 2021). powers, including the notification of noncompliance, the 111 https://www.canada.ca/en/environment-climate-change/services/canadian-environmental-protection-act-registry/proposed-methane-regulations-additional-information.html (accessed August activities. The Canada–Nova Scotia Offshore Petroleum Board issuance of inspection orders and warnings, the imposition of 23, 2021). 112 https://www.cer-rec.gc.ca/bts/ctrg/gnthr/2010ffshrwstgd/index-eng.html#s2 (accessed August 23, 2021). regulates oil and gas activities in the Canada–Nova Scotia administrative penalties, and prosecution. All of these measures 113 http://laws-lois.justice.gc.ca/eng/acts/C-7.5/index.html (accessed August 23, 2021). offshore area. The Canada–Newfoundland and Labrador Offshore are typically applied in relation to the severity of the violation 114 https://laws-lois.justice.gc.ca/eng/acts/c-7.8/index.html (accessed August 23, 2021). 115 https://www.cnlopb.ca/ (accessed August 23, 2021). 116 https://www.cnsopb.ns.ca/ (accessed August 23, 2021). 123 https://laws-lois.justice.gc.ca/eng/acts/C-8.5/page-1.html (accessed August 23, 2021). 117 https://www.cnlopb.ca/wp-content/uploads/guidelines/aa_mou.pdf (accessed August 23, 2021). 124 https://www.cer-rec.gc.ca/en/ (accessed August 23, 2021). 118 https://nslegislature.ca/sites/default/files/legc/statutes/canada-ns offshore petroleum.pdf (accessed August 23, 2021). 125 https://laws-lois.justice.gc.ca/eng/acts/C-15.1/ (accessed August 23, 2021). 119 http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/offshore-oil-gas/2279.pdf (accessed August 23, 2021). 126 https://www.gov.nl.ca/nr/ (accessed August 23, 2021). 120 https://laws-lois.justice.gc.ca/PDF/SOR-2009-316.pdf (accessed August 23, 2021). 127 https://www.cer-rec.gc.ca/bts/whwr/gvrnnc/mndtrlsrspnsblts/index-eng.html#s1 (accessed August 23, 2021). 121 https://novascotia.ca/just/regulations/regs/coprdrill.htm (accessed August 23, 2021). 128 https://laws.justice.gc.ca/eng/acts/I-2.75/page-1.html (accessed August 23, 2021). 122 https://novascotia.ca/just/regulations/regs/copradmonetary.htm (accessed August 23, 2021). 129 https://www.cer-rec.gc.ca/en/safety-environment/compliance-enforcement/ (accessed August 23, 2021). 44 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 45 Canada: Federal Canada: Federal and can be escalated if violators do not take correction actions Authorization and Well Approvals”; see footnote 108) requires that conservation as well as efforts to maximize recovery and reduce methodologies. The ECCC provides detailed instructions on how as ordered by the CER. Provincial regulators have monitoring and the application for authorization be accompanied by information costs. The report must also demonstrate how the operator to calculate GHG emissions, including from flares and vents, in its enforcement powers that are more directly applicable to oil and about any proposed flaring or venting of gas. This information manages or intends to manage the resource and avoid waste. periodically updated guidance.134 gas operations in their provinces. should include the rationale, rate, quantity, and duration of An annual environmental report must also be submitted. the flaring or venting. Provincial regulators have more specific 16. Record Keeping This report should include a summary of any incidents that D. Licensing/Process Approval guidelines on applying for and obtaining flaring and venting authorizations. may have had an environmental impact, discharges that had According to the Regulations Respecting Reduction in the Release occurred and the waste material produced, and a discussion of of Methane and Certain Volatile Organic Compounds (Upstream Oil 9. Flaring or Venting without Prior Approval the efforts undertaken to reduce pollution and waste material. and Gas Sector) SOR-2018-66 (see footnote 106), operators must 11. Development Plans maintain records that show that they have calibrated monitoring The definition of “waste” in the Canada Oil and Gas Drilling and The ECCC first developed the GHG reporting program in 2004. Production Regulations, 2009 (see footnote 108) includes gas Development plans are required and published on the Canada– It has updated reporting and GHG quantification requirements and leak detection devices. Provincial regulators provide detailed flared or vented when it could have been economically recovered Newfoundland and Labrador Offshore Petroleum Board website. several times.133 Compliance with the annual reporting of GHG is guidance on reporting and record-keeping requirements. and processed or injected into an underground reservoir. Section An example is the public review of the Hebron Development Plan mandatory. All facilities emitting more than 10,000 tCO2e in a Regulators may issue penalties for documents containing false or 67 states that no operator should flare or vent gas unless an Application.131 given year must submit a report on their GHG emissions by June misleading information. emergency requires it to do so. The CER must be notified in the 1 of the following year. Facilities emitting less than the threshold daily drilling report, daily production report, or any other written 12. Economic Evaluation can report voluntarily. 17. Data Compilation and Publishing or electronic form. The notification should include the volume The National Pollutant Release Inventory is Canada’s legislated, No evidence regarding economic evaluations by the federal The Regulations Respecting Reduction in the Release of Methane and of flared or vented gas. The same provisions can be found in the publicly accessible inventory of pollutant releases. Its reports government could be found in the sources consulted. However, Certain Volatile Organic Compounds (Upstream Oil and Gas Sector) Newfoundland Offshore Petroleum Drilling and Production Regulations, are published monthly and annually.135 Operators must prepare provincial regulators consider the economic assessment of options SOR-2018-66 (see footnote 106) include reporting requirements 2009 (see footnote 120) and the Nova Scotia Offshore Petroleum a complete inventory of pollutant release quantities and report to prevent or reduce flaring and venting. to improve emissions estimates. They include inventories of Drilling and Production Regulations, 2009 (see footnote 121). emission sources to the National Pollutant Release Inventory emitting components at upstream facilities; reports on volumes if they exceed thresholds. Reporting is mandatory for facilities Section 48 of the Processing Plant Regulations requires companies E. Measurement and Reporting of gas vented, flared, and delivered off-site; and results of leak- in the oil and gas sector that meet specified air contaminant to report to the CER within one week of any flaring of hydrocarbon detection-and-repair inspections and monitoring. threshold criteria. Reports for the previous year are due by June 1 gas occurrence or a by-product of the processing of hydrocarbon 13. Measurement and Reporting Requirements of each year. Provincial energy and environmental regulators often gas that occurs as a result of an emergency. Section 6 of the CER Part 7 of the Canada Oil and Gas Drilling and Production Regulations, 14. Measurement Frequency and Methods have more detailed reporting on flared volumes and emissions Event Reporting Guidelines, 2018,130 defines an emergency as any 2009 (“Measurements Flow and Volume”; see footnote 108) states Under Sections 67 and 79 of the Canada Oil and Gas Drilling and available (see the chapters on Alberta, British Columbia, and situation in which emergency or contingency procedures, such that unless otherwise included in the approval, the operator should Production Regulations, 2009 (see footnote 108), flows and volumes Saskatchewan). as process upsets because of automated or manual emergency ensure the rate of flow and volume of any produced fluid that are reported through daily drilling and production reports. In an shutdowns, were used. Also reportable are flaring events that may have a significant adverse effect on property, the environment, or enters, leaves, is used, or is flared, vented, burned (incinerated),132 emergency, the CER should be notified of the volume of gas flared F. Fines, Penalties, and Sanctions or otherwise disposed of are measured and recorded. This or vented in the daily drilling report, daily production report, or in safety. Companies are not required to report nonroutine flaring, requirement encompasses any oil storage tanks, treatment any other written or electronic form as soon as the circumstances 18. Monetary Penalties such as that resulting from regulator-required maintenance. facilities, or processing plants. The Newfoundland Offshore permit. Provincial regulators have their own reporting Provincial regulators have more specific guidelines on flaring and No monetary penalties or fees relate explicitly to gas flaring and Petroleum Drilling and Production Regulations, 2009 (see footnote requirements, which in many cases are more detailed. venting that do not require permits (see the chapters on Alberta, venting at the federal level (although provincial regulators can 120) and the Nova Scotia Offshore Petroleum Drilling and Production British Columbia, and Saskatchewan). impose such them). However, noncompliance with regulations and Regulations, 2009 (see footnote 121) have similar provisions. 15. Engineering Estimates rules issued by the CER, which include reporting requirements on 10. Authorized Flaring or Venting The CER Event Reporting Guidelines, 2018 (see footnote 130) No evidence regarding federal engineering estimates could be gas flaring and venting, can result in monetary penalties of up to require operators to submit an annual production report covering found in the sources consulted. However, provincial regulators Can$100,000 (about US$79,000 as of September 2021) a day per Section 5 of the Canada Oil and Gas Drilling and Production provide detailed guidance on metering and estimation the previous year no later than March 31 of each year. This violation. Regulations, 2009 (“Management System, Application for report must include details on the production forecast and gas 133 https://www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/facility-reporting/reporting/questions-answers.html#toc10 (accessed August 23, 130 https://www.cer-rec.gc.ca/en/about/acts-regulations/cer-act-regulations-guidance-notes-related-documents/canada-energy-regulator-event-reporting-guidelines/index.html (accessed August 2021). 23, 2021). 134 The instructions are set forth by Environment and Climate Change Canada in Government of Canada (2020), https://publications.gc.ca/collections/collection_2021/eccc/En81-28-2020-eng.pdf 131 https://www.cnlopb.ca/consultation/pchdp/ (accessed August 23, 2021). (accessed January 3, 2022). 132 Incineration, or burning, is controlled combustion of natural gas, mixed with air, in a closed chamber without visible flame. 135 https://www.canada.ca/en/environment-climate-change/services/national-pollutant-release-inventory/tools-resources-data.html (accessed August 23, 2021). 46 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 47 Canada: Federal Canada: Federal The violation of any specified provision of the Canada Oil and Gas G. Enabling Framework reduction of domestic GHG emissions or GHG removal projects Operations Act, 1999 (see footnote 109) or any of its regulations from activities not covered by carbon pricing.141 The government may result in a penalty. Such violations include failure to comply 20. Performance Requirements issues offset credits only to projects that produce real, quantified, with any term, condition, or requirement of an operating license verified, and unique reductions in GHG. This offset program could No evidence regarding federal performance requirements could or authorization or any approval, leave, or exemption granted provide incentives for upstream oil and gas producers to invest in be found in the sources consulted. However, provincial regulators under the act. Under paragraph (1)(b), the penalty for a violation offset projects. provide detailed guidance on the performance of oil and gas should not be more than Can$25,000 (about US$20,000 as operations, including flaring and venting. of September 2021) for an individual and Can$100,000 (about 23. Negotiated Agreements between the Public US$79,000 as of September 2021) for any other entity. and the Private Sector 21. Fiscal and Emission Reduction Incentives Canada Oil and Gas Operations Administrative Monetary Penalties No evidence regarding negotiated agreements between the public Resource owners in Canaa (the federal or provincial government, Regulations (Federal-SOR/2016-25)136 establish administrative and the private sector could be found in the sources consulted. private freehold owners, or First Nations) generate revenues monetary penalties to provide regulatory agencies with an primarily through royalties and taxes paid to them by developers enforcement tool to complement other types of sanctions, such as 24. Interplay with Midstream and Downstream from selling extracted oil and gas. Royalties can be up to 45 notices of noncompliance, orders, directions, and prosecution. The Regulatory Framework percent in federal onshore and offshore fields (see footnote 52). No process for imposing administrative monetary penalties is similar evidence regarding federal fiscal and emission reduction incentives Market diversity and access is a crucial consideration for the at both the federal and provincial levels. The CER website provides could be found in the sources consulted. However, provinces have Canadian oil industry. The Canadian natural gas market has been a record of the sanctions imposed via a downloadable spreadsheet fiscal incentive programs, such as royalty waivers to induce gas fully liberalized since gas prices were deregulated in 1985. Most and an interactive tool.137 Compliance measures reported include capture, thereby reducing flaring and venting (see the chapters on oil and gas producers rely on pipelines and require provincial and administrative monetary penalties and other measures. Alberta, British Columbia, and Saskatchewan). federal policies that allow infrastructure to be built to deliver The Environmental Enforcement Act, 2010,138 enhanced the natural gas to new markets. A license from the appropriate enforcement tools and penalty regime by adding ranges for fines 22. Use of Market-Based Principles provincial regulator must be obtained to construct and operate a tailored to different offenses. It also introduced minimum fines and pipeline. The CER, as the federal regulator, has jurisdiction if the In December 2016, Canada’s First Ministers adopted the Pan- increased maximum fines for serious offenses. The Environmental pipeline crosses provincial or international boundaries. Federally Canadian Framework on Clean Growth and Climate Change, Violations Administrative Monetary Penalties Act, 2009139 details regulated gas pipelines are generally considered to be contract setting a federal benchmark on carbon pricing for end-use fuels. environmental administrative monetary penalties. carriers. The CER sets tariffs and the terms and conditions of The framework requires all provinces and territories to implement access through regulation. The CER has the power to ensure that carbon pollution pricing systems by 2019. The federal legislation, 19. Nonmonetary Penalties pipeline tolls are just and reasonable. Access to gas transmission the Greenhouse Gas Pollution Pricing Act, 2018,140 introduced a is generally by agreement, but the CER has the power to direct a According to the Canada Oil and Gas Operations Act, 1999, the CER carbon price of Can$10 (about US$7.9 as of September 2021) gas pipeline to provide any available capacity to a third party. may suspend or revoke an operating license or an authorization per tCO2e on fuels, increasing to Can$30 (about US$24 as of for failure to comply with, contravention of, or default in respect September 2021) in 2021 and Can$50 (about US$39 as of of a fee or charge payable per the regulations made under Section September 2021) by 2022. This price applies in all provinces that 4 or a requirement undertaken in a declaration referred to in do not set their own prices. Subsection 5.11. The federal carbon pricing regime does not cover all industries. Methane emissions from the oil and gas value chain, for example, are not universally covered, and some provinces have not adopted the federal carbon pricing benchmark. In 2019, Canada began designing the GHG offset program to encourage the cost-effective 136 https://laws-lois.justice.gc.ca/eng/regulations/SOR-2016-25/index.html (accessed August 23, 2021). 137 https://www.cer-rec.gc.ca/en/safety-environment/compliance-enforcement/compliance-with-conditions/index.html (accessed August 23, 2021). 138 https://www.canada.ca/en/environment-climate-change/services/environmental-enforcement/acts-regulations/about-act.html (accessed August 23, 2021). 139 https://www.canada.ca/en/environment-climate-change/services/environmental-enforcement/acts-regulations/about-act/legislation-fines-offences.html (accessed August 23, 2021). 140 https://www.canlii.org/en/ca/laws/stat/sc-2018-c-12-s-186/latest/sc-2018-c-12-s-186.html (accessed August 23, 2021). 141 https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/federal-offset-system.html (accessed August 23, 2021). 48 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 49 Canada: Alberta A. Policy and Targets Directive 017: Measurement Requirements for Upstream Oil and Gas equipment-specific limits on venting. footnote 150) created the framework for regulators setting limits Operations, 2018 (Directive 017, 2018 hereafter)147 and Directive 060, and pursuing various strategies to reduce emissions. Emissions Facilities that emit more than 100,000 tonnes of GHG a year 1. Background and the Role of Reductions 2020. 148 Directive 060, 2020, applies to all operations approved are required to reduce their emissions intensity by 12 percent limits are regulated under the Technology Innovation and Emissions in Meeting Environmental and Economic under Section 10 of the Oil Sands Conservation Act, 2000,149 with under the Climate Change and Emissions Management Amendment Reduction Regulation, 2019,159 which superseded and replaced Objectives the exception of oil sands mining operations, which do not need to the Carbon Competitiveness Incentive Regulation, 2018,160 which Act, 2003. flare or vent during bitumen mining. replaced the Specified Gas Emitters Regulation, 2007.161 Companies Alberta is Canada’s largest oil and gas producer. The province have three ways to meet their reductions: make operating accounts for about half of liquid fuel and more than 60 percent The Ministry of Environment and Parks, known as the Alberta B. Legal/Regulatory Framework improvements, buy an Alberta-based credit (see section 22 of Environment and Parks (AEP), a governmental body, regulates of gas production in Canada. Three-quarters of the output comes air quality and is responsible for setting emissions and air quality and Contractual Rights this chapter), or contribute to the Climate Change and Emissions from the oil sands in northern Alberta. The oil and gas industry Management Fund. emits about half of Alberta’s GHG emissions. The AER Directive standards under the Climate Change and Emissions Management 3. Primary and Secondary Legislation Act, 2003.150 Flaring and venting are subject to gas emission limits 060: Upstream Petroleum Industry Flaring, Incinerating, and and Regulation 4. Legislative Jurisdictions Venting, 2020 (Directive 060, 2020 hereafter; see footnote 148) and emission offsets to achieve reductions. The Responsible Energy Development Act, 2012,152 created the AER Alberta has jurisdiction over flaring, venting, and incineration, incorporates recommendations to reduce flaring made by the Clean Air Strategic Alliance (n.d.)142 in 2002, 2004, and 2005. 2. Targets and Limits from the existing Energy Resources Conservation Board. Several for which the province has comprehensive regulations. Emissions laws governing oil and gas activities in the province, including their regulations are aligned with federal legislation and regulations. With the Pan-Canadian Framework on Clean Growth and Directive 060, 2020, follows CASA recommendations; it defines conservation, lay the foundation for the AER’s regulation of flaring Climate Change in 2016 (see footnote 104), Canada committed limits on the total annual volume of gas flared, incinerated, and and venting along with the following other acts: vented at all upstream wells and facilities. If flaring and venting 5. Associated Gas Ownership to reducing methane emissions from the oil and gas sector by of solution gas 151 exceed the limit in any year, the AER will impose • the Alberta Mines and Minerals Act, 2000153 40–45 percent from 2012 levels by 2025. Alberta committed to The ownership of oil and gas resources is split between the reducing methane emissions from the oil and gas industry by reduction limits for individual operating sites based on the • the Oil and Gas Conservation Act, 2000154 provincial government, the federal government, private freehold 45 percent from 2014 levels. 143 In 2018, the ECCC (see footnote analysis of the most recent annual data available. • the Gas Resources Preservation Act, 2000 155 and implementing owners, and First Nations. Alberta owns about 80 percent of the 105) published Regulations Respecting Reduction in the Release of Section 2.1 sets an annual solution gas flaring limit of 670 million regulations, Alberta Regulation 151/71: Oil and Gas Conservation mineral rights. The federal government owns 9 percent, including Methane and Certain Volatile Organic Compounds (Upstream Oil and m³. Acid gas volumes from gas sweetening (which are typically Rules, 1971 156 on most Indian reserves and national parks. The remainder is Gas Sector) SOR-2018-66 (see footnote 106). Provinces can choose continuously flared) are excluded. Gas plants must not exceed six • Oil Sands Conservation Act, 2000 (see footnote 149). held privately under freehold ownership. The rights to explore for, to adopt these regulations or draft their own to meet or exceed major nonroutine flaring events in any consecutive (rolling) six- develop, and produce oil and natural gas, including associated gas, the stated targets. Section 10 of the Canadian Environmental month period. AER Directive 060, 2020 (see footnote 148) provides comprehensive are transferred to participants through licenses. Protection Act, 1999, 144 authorizes the minister of the environment guidance on flaring and venting. The requirements set forth in Per Section 2.3, the combined flaring and venting volume is to defer to “equivalent” regulations promulgated by a provincial limited to no more than 900 m³ a day. Operators must follow the the directive are aligned with the Alberta Ambient Air Quality C. Regulatory Governance government. In 2020, the government of Alberta and the Objectives.157 Alberta Regulation 244/18: Methane Emission federal government agreed that there were provisions in Alberta decision tree approach recommended by CASA and demonstrate Reductions (see footnote 145) is an implementing regulation issued and Organization the economics of conservation options (see sections 12 and 21 of Regulation 244/2018, Methane Emission Reductions Regulation 145 under the Environmental Protection and Enhancement Act, 2000.158 this chapter). 6. Regulatory Authority equivalent to the federal methane regulations. It applies to all upstream oil and gas facilities except processing Section 8 sets an overall vented gas (routine and nonroutine) plants approved under Section 11 of the Oil Sands Conservation Act, The AER162 is the sole, independent regulator responsible for To align its directives with the agreement, the Alberta Energy Regulator limit at a site of 15,000 m³ or 9,000 kilograms (kg) of methane a 2000. upstream oil, gas, and oil sands activities in the province, including (AER) issued Bulletin 2020–12: Requirements Aimed at Reducing month. The limit on the volume of routinely vented gas at a site is flaring and venting. The AER’s governance structure is designed Methane Emissions Amended, 2020,146 and made changes to The Climate Change and Emissions Management Act, 2003 (see 3,000 m³ or 1,800 kg of methane a month. Section 8.6 prescribes to provide both strong corporate oversight and independent 142 The Clean Air Strategic Alliance (n.d.) is a partnership composed of representatives selected by industry, government and nongovernmental organizations committed to a comprehensive air quality 152 http://www.qp.alberta.ca/documents/Acts/r17p3.pdf (accessed August 23, 2021). management system for Alberta. https://www.casahome.org/ (accessed January 3, 2022). 153 https://www.qp.alberta.ca/documents/Acts/m17.pdf (accessed August 23, 2021). 143 https://www.aer.ca/protecting-what-matters/protecting-the-environment/methane-reduction (accessed August 23, 2021). 154 http://www.qp.alberta.ca/1266.cfm?page=O06.cfm&leg_type=Acts&isbncln=9780779797325 (accessed August 23, 2021). 144 https://www.canada.ca/en/environment-climate-change/services/canadian-environmental-protection-act-registry/related-documents.html (accessed August 23, 2021) 155 https://www.qp.alberta.ca/1266.cfm?page=G04.cfm&leg_type=Acts&isbncln=9780779772612 (accessed August 23, 2021). 145 https://www.canlii.org/en/ab/laws/regu/alta-reg-244-2018/latest/alta-reg-244-2018.html (accessed August 23, 2021). 156 https://www.qp.alberta.ca/documents/Regs/1971_151.pdf (accessed August 23, 2021). 146 https://www.aer.ca/regulating-development/rules-and-directives/bulletins/bulletin-2020-12.html (accessed August 23, 2021). 157 https://www.alberta.ca/ambient-air-quality-objectives.aspx (accessed August 23, 2021). 147 https://www.aer.ca/documents/directives/Directive017.pdf (accessed August 23, 2021). 158 https://www.qp.alberta.ca/1266.cfm?page=E12.cfm&leg_type=Acts&isbncln=9780779801657 (accessed August 23, 2021). 148 https://static.aer.ca/prd/documents/directives/Directive060.pdf (accessed August 23, 2021). 159 https://www.alberta.ca/technology-innovation-and-emissions-reduction-regulation.aspx (accessed August 23, 2021). 149 https://www.qp.alberta.ca/documents/Acts/O07.pdf (accessed August 23, 2021). 160 https://www.alberta.ca/carbon-competitiveness-incentive-regulation.aspx (accessed August 23, 2021). 150 https://www.canlii.org/en/ab/laws/astat/sa-2003-c-c-16.7/latest/sa-2003-c-c-16.7.html (accessed August 23, 2021). 161 http://extwprlegs1.fao.org/docs/pdf/al85479.pdf (accessed August 23, 2021). 151 Alberta’s regulations define solution gas as all gas that is separated from condensate, oil, or bitumen production. 162 https://www.aer.ca/ (accessed August 23, 2021). 50 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 51 Canada: Alberta Canada: Alberta adjudication. The AEP163 regulates the air quality and emissions percentage of hydrogen sulfide limits or with the Alberta Ambient and document a Methane Reduction Retrofit Compliance Plan the operator must include the following information in its annual generated during oil and gas activities. Air Quality Objectives), permits are not required. These conditions containing a schedule to replace and retrofit existing equipment methane emissions report: are confirmed by the decision-tree tool adopted from CASA and allocating funding to reduce venting. The plan must set an • the volume of fugitive emissions by facility 7. Regulatory Mandates and Responsibilities recommendations (Section 3 of AER Directive 060, 2020). overall limit on the volume of vented gas at all existing and future • the corresponding mass of methane emitted by facility oil and gas sites by 2023. At both the federal and provincial levels, the respective • the type and date of survey 10. Authorized Flaring or Venting energy regulators have clearly defined responsibilities, with 12. Economic Evaluation • the number of sources per site per facility. no overlapping or conflicting mandates. Agencies coordinate According to Section 3 of Directive 060, 2020, planned nonroutine through collaboration.164 The AER’s statutory powers, mandates, flaring and incineration events require a temporary flaring or The framework for managing flaring and venting prescribed The AER also requires a Fugitive Emissions Management Program and functions are governed by the Ministry of Energy, Ministry incineration permit from the AER, with advanced filing of proper by Directive 060, 2020, Section 2 (Economic Evaluation of Gas following the survey and equipment guidance from the AER.170 of Environment and Parks, and Ministry of Indigenous Relations. documentation. Section 3 lists the conditions that require a Conservation; see footnote 148) requires firms to conduct an The Fugitive Emissions Management Program should identify The AER is responsible for environmental assessments of energy temporary flaring permit and describes the requirements for economic analysis following the decision-tree framework. All new preventative maintenance practices; procedures for conducting projects; the AEP is responsible for environmental assessments obtaining the permit. All permit applications are published on and existing flares and vents must be evaluated, except for small surveys of fugitive methane emissions; screenings at a facility of non–energy resource activities. Environmental approvals are the Public Notice of Application webpage.168 The AER may issue a intermittent sources (less than 100 m³ a month). level (annually or three times a year depending on the type of required if any substance that could harm the environment is single “blanket” permit to cover several flaring events at different Alberta has more than 450,000 oil wells of mainly lower facility or equipment); training programs; and procedures to track, released. All oil and gas activities receive such approval from sites in an area if requested by the licensee. Companies may productivity and a small number of large oil sands projects. A manage, and verify the status of equipment repairs. Repairs to the AER. request a variance from the requirements if they have sufficient facility’s individual energy needs will determine the optimal equipment with fugitive emissions must be made within 24 hours justification. Licensees must provide specific engineering, utilization strategy, how much associated gas it produces, and the if the methane emissions cause an off-site odor, a pilot or ignitor 8. Monitoring and Enforcement economic, and operational information to justify flaring or well’s access to processing and pipeline infrastructure. The break- on a flare stack has failed, or the emissions pose a safety risk. incinerating gas volumes above the volume allowance threshold. The enforcement mechanism is outlined in the AER’s Manual 013: even economic criteria allow for the recovery of financing costs Otherwise, the equipment must be repaired within 30 days, unless The AER does not consider venting an acceptable alternative Compliance and Enforcement Program, 2020, 165 which ensures as well as capital and operating expenses. Conservation options a shutdown is required to complete the repair, the emissions to flaring or incineration (except for inert gases). It requires a risk-informed approach that balances three compliance include delivering gas to the market and using it on site as a fuel have a hydrocarbon concentration of 10,000 parts per million that gas be flared if gas volumes are sufficient to sustain stable components: education, prevention, and enforcement. 166 and for electricity generation and reservoir pressure maintenance. or less, or the source is a surface casing vent flow. The AER will combustion or conserved. Numerous tools are available to the AER, including notices, A conservation project is considered economic, and thus requires consider innovative and science-based alternatives to the Fugitive warnings, orders, administrative sanctions, penalties, and that the gas be conserved, if the net present value of the project Emissions Management Program. Alternative programs may 11. Development Plans before tax is greater than Can$50,000 (about US$39,500 as of incorporate the use of various technologies, such as unmanned prosecution. The AEP has similar compliance enforcement tools. It also regularly publishes orders related to noncompliance. 167 Directive 056: Energy Development Applications and Schedules, September 2021). Every 12 months, licensees should update the aerial vehicles, vehicle-mounted sensors, and continuous 2021, 169 presents the requirements and procedures for filing a conservation economics for any site that is flaring or venting a monitoring devices to detect, track, repair, and report fugitive combined volume of more than 900 m³ a day. The licensee should emissions (Section 8 of AER Directive 060, 2020). D. Licensing/Process Approval license application to build or operate any petroleum industry on-site installations and the volume that is disposed of by burning keep this information on file and provide it to the AER upon 9. Flaring or Venting without Prior Approval in a flare or incinerator. Applicants proposing to flare, incinerate, request within five working days. 14. Measurement Frequency and Methods or vent gas should comply with the requirements of Directive Most reporting is monthly. Section 2 of Directive 060, 2020 Section 3 of Directive 060, 2020 (“Temporary and Well Test Flaring and Incinerating”; see footnote 148) does not require a 060, 2020, and Section 8 of Alberta Regulation 151/71: Oil and Gas E. Measurement and Reporting requires flared and vented solution gas to be reported monthly Conservation Rules, 1971 (see footnote 156). through Petrinex (Canada’s Petroleum Information Network). permit for unplanned nonroutine flaring and incineration, such 13. Measurement and Reporting Requirements According to Section 8 of Directive 017, 2018 (see footnote as during process upsets and emergencies. In addition, the AER Since 2018, management of fugitive emissions has been based Companies must accurately measure and report volumes of 147), an annual methane emissions report must be submitted does not require permits for flaring at oil and bitumen batteries. on a systematic program of detecting and repairing leaks and associated gas at all oil facilities, in accordance with Directive 060, electronically to the AER by June 1 of the following calendar year. Under certain other conditions (for example, compliance with the malfunctioning equipment. The AER requires operators to develop 2020 (see footnote 148). Section 5 requires separate reporting The first reporting period was 2019. 163 https://www.alberta.ca/environment-and-parks.aspx (accessed August 23, 2021). of all monthly flared and vented volumes at gas plants. Flaring 164 https://www.aer.ca/documents/about-us/Secretariat_MandateRoles.pdf (accessed August 23, 2021). 165 https://www.aer.ca/documents/manuals/Manual013.pdf (accessed August 23, 2021). of sour gas must also be reported on the S-30 Monthly Gas 166 https://www.aer.ca/regulating-development/compliance/compliance-and-enforcement-tools.html (accessed August 23, 2021). Processing Plant Sulphur Balance Report. According to Section 8, 167 https://www.alberta.ca/environmental-compliance-enforcement-overview.aspx (accessed August 23, 2021). 168 https://webapps.aer.ca/pnoa (accessed August 23, 2021). 169 https://www.aer.ca/regulating-development/rules-and-directives/directives/directive-056 (accessed August 23, 2021). 170 https://static.aer.ca/prd/documents/manuals/Manual016.pdf (accessed August 23, 2021). 52 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 53 Canada: Alberta Canada: Alberta 15. Engineering Estimates historical data on crude oil and bitumen production from crude 19. Nonmonetary Penalties 21. Fiscal and Emission Reduction Incentives oil and bitumen batteries and flaring and venting at the batteries According to Directive 017, 2018, measurements of continuous or Alberta’s legislation includes rising levels of sanctions depending In 1998, the government of Alberta announced the Otherwise by location, type, and operator; they also indicate where the intermittent flare and vent sources must be undertaken at all on the seriousness of the violation, including production shut-in or Flared Solution Gas Royalty Waiver Program. Flaring gas that conservation of gas has been economically feasible.174 The AER oil and gas facilities where annual average volumes per facility suspension of application processing. Section 25 of the Oil and Gas could be economically conserved makes the gas ineligible for a also publishes monthly enforcement reports (ST108) and year-end exceed 500 m³ a day; otherwise flare volumes can be estimated. Conservation Act, 2000 (see footnote 154) authorizes the AER to royalty waiver. The waiver is independent of the end-use of the gas reports (ST60B: Upstream Petroleum Industry Flaring and Venting Single-point measurement uncertainty must be ±5.0 percent, and cancel or suspend a license or approval for a definite or indefinite and lasts for 10 years. Companies are also exempt from royalties Report).175 Reports include flared and vented volumes reported to monthly volume uncertainty must not exceed ±20.0 percent. period. In particular, the AER may suspend well flaring permits if gas is used for on-site power generation. The gas royalty rate is the AER. for noncompliance. The AER’s decisions may be appealed under 5 percent during the cost-recovery period, after which the royalty According to Section 5 of Directive 060, 2020 (see footnote 148), Section 36 of the Responsible Energy Development Act, 2012 (see rate is a function of the reference gas price and production level.179 when metering is not required and is not carried out, engineering F. Fines, Penalties, and Sanctions footnote 152). estimates must be used to report any flared gas that is not According to Directive 060, 2020, gas conservation economics measured. According to Section 8, methane emissions may 18. Monetary Penalties The AER Compliance Dashboard provides a compliance history of should account for royalties paid for incremental gas that would be quantified using continuous metering, periodic testing, or companies since 2014.177 The dashboard is searchable. Between otherwise be flared or vented. If the economic evaluation results in AER Manual 013: Compliance and Enforcement Program, 2020 estimates based on accepted engineering practices. 2015 and mid-2021, it recorded 51 flaring violations . The AER a net present value of less than Can$55,000 (about US$43,400 (see footnote 165) states that flaring, incinerating, and venting handled almost all of them via notices of noncompliance or as of September 2021), the operator should reevaluate the gas According to Manual 015: Estimating Methane Emissions, 2020,171 audits are required to ensure that flare systems are designed site inspections. Facilities are shut in if operators do not take conservation project on a before-royalty basis. If the evaluation emissions may be estimated using emission factors, the equations and operated appropriately and in accordance with approved corrective actions to comply with AER instructions within the time results in a net present value of Can$55,000 or more, the operator included within the manual, or engineering estimates as described conditions. The manual outlines the various tools available to the provided. should proceed with the conservation project and apply to the AER in the Guide for Reporting to the National Pollutant Release AER, including fees and monetary penalties. A schedule of fees for an “otherwise flared solution gas” royalty waiver. Inventory.172 Any updates in Directive 060, 2020 or Directive 017, can be found in Alberta Regulation 151/71: Oil and Gas Conservation 2018, supersedes the guidance in the manual. Rules, 1971 (see footnote 156). G. Enabling Framework 22. Use of Market-Based Principles According to 244/18: Alberta Methane Emission Reductions 20. Performance Requirements 16. Record Keeping Regulation, 2018 (see footnote 145), an operator that violates Alberta put a price on carbon emissions for large industrial Section 7 of Directive 060, 2020 (see footnote 148) details emitters in 2007. It put a carbon levy on fuel from 2017 until According to Section 10 of Directive 060, 2020, operators should venting limits, reporting requirements, or any other obligations performance requirements for flaring and venting. They apply its repeal in 2019.180 In December 2019, Alberta’s Technology maintain a log of flaring, incineration, and venting events and imposed by the AER (mainly via Directive 060) faces a maximum to flares and incinerators—including portable equipment used Innovation and Emissions Reduction Regulation, 2019 (see footnote respond to public complaints. Records should be kept for at least fine of Can$50,000 (about US$39,500 as of September 2021) for temporary operations—in all upstream oil and gas industry 159) set a price of Can$30 (about US$24 as of September 2021) 12 months. Section 8 requires operators to retain records of for an individual and Can$500,000 (about US$395,000 as of systems for combusting sweet, sour, and acid gas during activities per tCO2e on emissions from the oil and gas, electricity, cement, methane emissions for four years from the date they were created September 2021) for a corporation. that include well completion, servicing, and testing. agriculture, and other sectors. The benchmark price rises to unless otherwise noted and provide them to the AER upon request. The Alberta Administrative Penalty Regulation, 2003,176 is an Can$40 (about US$32 as of September 2021) per tCO2e in 2021 Section 5 requires gas plant operators to provide documentation The AER has adopted CASA’s objective hierarchy and decision- implementing regulation of the Environmental Protection and and Can$50 (about US$39 as of September 2021) per tCO2e in for metering or estimating flared and vented gas volumes upon tree framework for managing solution gas volumes and extended Enhancement Act, 2000 (see footnote 158). The maximum 2022. This regulation meets the federal criteria.181 request from the AER. its application of the hierarchy to include flaring, incineration, and administrative penalty that environmental regulators may venting.178 The goal is to eliminate routine flaring, incineration, The carbon price used to apply to facilities that had emitted impose is Can$5,000 (about US$3,950 as of September 2021) 17. Data Compilation and Publishing and venting. The objective hierarchy ranges from eliminating 100,000 tCO2e or more a year in 2016 or subsequent years. for each contravention or each day or part of a day on which the routine flaring, incineration, and venting of unburned gases to An amendment in July 2020182 allowed facilities that emit The AER regularly publishes comprehensive reports on industry contravention occurs and continues. reducing the volume of such gas and improving the efficiency of less to voluntarily comply with the regulation and reduce the activity at daily, weekly, monthly, annual, and any other relevant the related systems. administrative burden for regulated conventional oil and gas frequency.173 For example, the ST60: Crude Oil and Crude Bitumen Batteries Monthly Flaring, Venting, and Production Data show 177 http://www1.aer.ca/ComplianceDashboard/index.html (accessed August 23, 2021). 171 https://static.aer.ca/prd/documents/manuals/Manual015.pdf (accessed August 23, 2021). 178 https://www.casahome.org/past-projects/flaring-venting-implementation-18/ (accessed August 23, 2021). 172 https://www.canada.ca/content/dam/eccc/migration/main/inrp-npri/afc98b81-a734-4e91-bd16-c5998f0dde6b/2016-17-20guide-20for-20reporting-20-20en.pdf (accessed August 23, 2021). 179 https://open.alberta.ca/publications/alberta-modernized-royalty-framework-guidelines-principles-and-procedures (accessed August 23, 2021). 173 https://www.aer.ca/providing-information/data-and-reports/activity-and-data.html (accessed August 23, 2021). 180 https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/alberta.html (accessed August 23, 2021). 174 https://www.aer.ca/providing-information/data-and-reports/statistical-reports/st60.html (accessed August 23, 2021). 181 https://www.canada.ca/en/environment-climate-change/news/2019/12/albertas-new-approach-to-pricing-pollution-for-heavy-industry-meets-federal-benchmark.html (accessed August 23, 175 https://www.aer.ca/documents/sts/ST60B-2019.pdf (accessed August 23, 2021). 2021). 176 https://www.qp.alberta.ca/documents/Regs/2003_023.pdf (accessed August 23, 2021). 182 https://www.qp.alberta.ca/documents/Orders/Orders_in_Council/2020/2020_233.pdf (accessed August 23, 2021). 54 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 55 Canada: Alberta Canada: British Columbia facilities183 in exchange for an exemption from Canada’s federal A. Policy and Targets government. In April 2020, an equivalency agreement between carbon price (see section 22 in the previous chapter). Also, firms are federal and British Columbia regulations was published.187 offering a lease-to-own program for nonemitting facility equipment. 1. Background and the Role of Reductions Accordingly, the federal government exempted British Columbia This program allows companies to voluntarily reduce emissions and in Meeting Environmental and Economic from federal regulation via SOR/2020-60, entitled “An Order generate carbon credits to pay down equipment leases. Objectives Declaring that the Provisions of the Regulations Respecting Reduction in the Release of Methane and Certain Volatile Organic Compounds In 2016, British Columbia introduced regulations to eliminate 23. Negotiated Agreements between the Public (Upstream Oil and Gas Sector) Do Not Apply in British Columbia.”188 routine flaring at oil and gas production facilities, following the and the Private Sector province’s 2007 energy plan. British Columbia’s production of 2. Targets and Limits The AER allows flaring when conducted in accordance with Directive liquid fuels (including oil, condensate, and pentanes plus) accounts 060, 2020. However, an applicant for drilling and the landowner or for less than 2 percent of Canadian liquids production. Gas The cumulative volume of flaring authorized for well workover or land occupant may sign a zero-flaring agreement and file it along production in British Columbia accounts for nearly 30 percent maintenance operations cannot exceed 50,000 m³ in a year. There with the well application (Section 3.10). Once filed, the agreement of total gas production in Canada. Oil production declined to are also various limits on flared volumes that trigger different becomes a condition of the well license. Should the licensee, roughly one-fourth its level in the early 2000s, but production of reporting. British Columbia’s new methane regulations are operator, or approval holder fail to adhere to this agreement, condensate increased, along with natural gas production from designed to reduce methane emissions by 10.9 million tCO2e over a operations at the well may be suspended. This agreement, including the unconventional Montney play in the province’s northeast. 10-year period starting in 2020.189 the condition, expires when production begins. Gas production increased by a factor of 2.5 over 20 years; flaring volume decreased by approximately a third, accounting for 6 B. Legal/Regulatory Framework 24. Interplay with Midstream and Downstream percent of GHG emissions from British Columbia’s upstream oil Regulatory Framework and gas sector.184 and Contractual Rights AER regulations on flaring, venting, and emissions cover pipeline As part of the 2016 Pan-Canadian Framework on Clean Growth 3. Primary and Secondary Legislation and storage facilities. Most oil and gas produced in Alberta is and Climate Change (see footnote 104), the government of and Regulation exported to other provinces or the United States via pipelines. Canada committed to reducing methane emissions from the Together with the Ministry of Energy, Mines and Petroleum Occasionally, an imbalance between demand and supply, oil and gas sector by 40–45 percent by 2025 from 2012 levels. Resources and the Climate Action Secretariat of the Ministry bottlenecks in pipelines, or permitting delays can affect upstream British Columbia committed to reducing fugitive and vented of Environment and Climate Change Strategy, the BCOGC has operations. In 2018, for example, western Canadian oil supply methane emissions by 45 percent by 2025 from 2014 levels developed the Flaring and Venting Reduction Guideline, 2018 outgrew the export pipeline capacity, resulting in record crude (Clean BC Plan).185 (see footnote 186). This guideline covers flaring, incinerating, price differentials. Alberta’s government mandated a production and venting and includes guidance on flare approval requests; In 2018, the ECCC (see footnote 105) published SOR-2018-66, curtailment effective January 2019, later extended to December dispersion modeling; and the measuring and reporting of flared, entitled “Regulations Respecting Reduction in the Release of Methane 31, 2020. Such a curtailment would likely reduce emissions from incinerated, and vented gas. The guideline contains methane and Certain Volatile Organic Compounds (Upstream Oil and Gas associated gas flaring but only temporarily. emission regulations to address the following primary sources Sector; see footnote 106).” Provinces can adopt these regulations of methane from the upstream oil and gas industry: pneumatic or draft their own to meet or exceed the stated targets. In May devices, equipment leaks, compressor seals, glycol dehydrators, 2018, the British Columbia Oil and Gas Commission (BCOGC) storage tanks, and surface casing vents. The guideline aims to updated the Flaring and Venting Reduction Guideline, 2018.186 meet methane emission reduction targets and ensure that they are Section 10 of the Canadian Environmental Protection Act, 1999 equivalent to federal regulations and targets. British Columbia’s (see footnote 144) authorizes the minister of the environment carbon tax is applied to these emissions for the first time. to defer to “equivalent” regulations promulgated by a provincial 184 https://www.bcogc.ca/files/publications/Factsheets/flaring-and-air-quality-fact-sheet-january-2020.pdf (accessed January 4, 2022). 185 https://cleanbc.gov.bc.ca/app/uploads/sites/436/2018/12/CleanBC_Full_Report.pdf (accessed August 23, 2021). 186 https://www.bcogc.ca/node/5916/download (accessed August 23, 2021) 187 https://gazette.gc.ca/rp-pr/p1/2020/2020-04-04/pdf/g1-15414.pdf (December 29, 2021). 188 https://gazette.gc.ca/rp-pr/p2/2020/2020-04-15/html/sor-dors60-eng.html (accessed December 29, 2021). 183 https://www.alberta.ca/assets/documents/ep-fact-sheet-tier-regulation.pdf (accessed August 23, 2021). 189 https://www.bcogc.ca/news/new-methane-regulations-and-fugitive-emissions-guidelines/ (accessed August 23, 2021). 56 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 57 Canada: British Columbia Canada: British Columbia The following provincial laws govern the exploration for and C. Regulatory Governance D. Licensing/Process Approval reporting, requires a permit holder to notify the BCOGC at least production of oil and natural gas in British Columbia: 24 hours before a planned flaring event if the quantity of gas to and Organization 9. Flaring or Venting without Prior Approval be flared exceeds 10,000 m³. If an unplanned flaring event occurs • the Oil and Gas Activities Act, 2008190 and the amount of flared gas exceeds 10,000 m³, the permit holder • the Petroleum and Natural Gas Act, 1996191 6. Regulatory Authority British Columbia’s Flaring and Venting Reduction Guideline, 2018 (see should notify the BCOGC within 24 hours. • the Environmental Management Act, 2003192 The BCOGC200 is the sole provincial regulatory agency responsible footnote 186) does not allow routine venting. If gas volumes are sufficient to sustain stable combustion, the gas should be flared or • the Climate Change Accountability Act, 2007 (formerly for overseeing oil, gas, and geothermal operations as defined 11. Development Plans by the Oil and Gas Activities Act, 2008 (see footnote 190). It is conserved. If venting is the only feasible alternative, it should meet GGRTA) 193 the following requirements, set out in Section 7 of the guideline: No evidence regarding development plans could be found in the governed by a board of directors that sets the strategic direction • the Clean Energy Act, 2010.194 sources consulted. and establishes accountability and transparency, including • All continuous and temporary venting and their sources must be For large oil and gas operations, the BCOGC issues site-specific corporate risks, as part of the strategic planning process. The evaluated using the vent evaluation decision tree. air discharge permits under the Environmental Protection board has the power to create regulations concerning oil and 12. Economic Evaluation • Permit holders must burn all nonconserved volumes of gas and Management Regulation, 2010.195Each permit contains gas activities. The BCOGC, in consultation with stakeholders, Section 1 of the Flaring and Venting Reduction Guideline, 2018, on if volumes and flow rates are sufficient to support stable requirements for limiting the release of air contaminants such as monitors progress to reduce the volume of solution gas that is economic evaluation of gas conservation, is similar to Section 2 of combustion. hydrogen sulfide, sulfur dioxide, oxides of nitrogen, hydrocarbons, flared or vented. Alberta’s Directive 060 (see section 12 of the chapter on Alberta). carbon monoxide, and particulate matter. Requirements limiting • The quantity and duration of vented gas must be minimized. British Columbia’s guidance considers a solution gas conservation air contaminants for smaller operations are specified in the Oil • A permit holder must have an adequate program for managing 7. Regulatory Mandates and Responsibilities project with a net present value of less than Can$55,000 (about and Gas Waste Regulation, 2005196 and the Drilling and Production fugitive emissions. US$43,400 as of September 2021) uneconomic. The project The BCOGC and the CER (the federal regulator) have clearly Regulation, 2010.197 Other relevant secondary legislation includes According to Section 1 of the guideline entitled “Approvals and economics should be reevaluated annually (within 12 months of defined responsibilities, with no overlapping or conflicting the Administrative Penalties Regulation, 2011,198 and the Carbon Notifications for Non-Conserving Facilities,” nonroutine flaring the last evaluation) using updated prices, costs, and forecasts. mandates. The BCOGC regulates flaring and venting activities in Neutral Government Regulation, 2008.199 (such as for maintenance and emergencies) does not require a the province. The Environmental Assessment Office, a regulatory 4. Legislative Jurisdictions agency within the provincial government, manages environmental specific approval but may be subject to limitations specified in E. Measurement and Reporting the facility permit. Permit holders should notify residents and the assessments. British Columbia has jurisdiction over flaring, venting, and BCOGC of nonroutine flaring at facilities. 13. Measurement and Reporting Requirements incineration, for which the province has comprehensive 8. Monitoring and Enforcement Chapter 10 of the Flaring and Venting Reduction Guideline, 2018 regulations. Emissions regulations are aligned with federal 10. Authorized Flaring or Venting (see footnote 186) states the requirements for measuring and The BCOGC has the authority to inspect, audit, and enforce legislation and regulations. Section 2 of the Flaring and Venting Reduction Guideline, 2018 on reporting volumes of gas flared, incinerated, or vented. These compliance with laws and regulations, and sanction temporary flaring approval for well testing, states that flaring requirements are in addition to the requirements specified in noncompliance under several laws (see sections 18 and 19 of this 5. Associated Gas Ownership for purposes other than those previously specified (in Section 1), the Measurement Guideline for Upstream Oil and Gas Operations, chapter). It publishes the results of inspections, tickets and fines, The ownership of oil and gas resources is split between the including well testing, must be approved in the facility permit. 2020202; Oil and Gas Activity Operations Manual, 2020203 ; the Oil warning letters, enforcement orders, and contravention decisions provincial government, the federal government, private freehold Approval to flare may be requested in the well permit application and Gas Royalty Handbook, 2014204; and the Drilling and Production on the Compliance and Enforcement website.201 owners, and First Nations. The rights to explore for, develop, or by amending the well permit. Regulation, 2010 (see footnote 197). Permit holders of oil and and produce oil and natural gas, including associated gas, are natural gas production and processing facilities must report transferred to operators through licenses or leases. The Drilling and Production Regulation, 2010 (see footnote 197) volumes of gas greater than or equal to 100 m³ a month that are authorizes flaring at wells if the flaring is in line with the well’s flared, incinerated, or vented. These volumes are to be reported 190 http://www.bclaws.ca/civix/document/id/complete/statreg/08036_01 (accessed August 23, 2021). permit or is related to drilling operations and is necessary because through the BC-S2 or BC-19 forms of the Ministry of Finance. 191 http://www.bclaws.ca/civix/document/id/complete/statreg/96361_01 (accessed August 23, 2021). of an emergency. Flaring is also authorized for well workover or All flaring, incinerating, and venting from routine operations; 192 http://www.bclaws.ca/civix/document/id/complete/statreg/03053_00 (accessed August 23, 2021). 193 https://www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/legislation#ccaa (accessed August 23, 2021). maintenance operations and when the cumulative quantity of emergency conditions; and depressurizing pipelines, compressors, 194 https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/10022_01 (accessed August 23, 2021). 195 http://www.bclaws.ca/civix/document/id/complete/statreg/200_2010 (accessed August 23, 2021). flared gas does not exceed 50,000 m³ a year. Section 43 of the and processing systems must be disclosed. Gas used for a pilot, a 196 http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/32_254_2005 (accessed August 23, 2021). Drilling and Production Regulation, 2010, on flaring notification and purge, or a blanket must be reported as either flared or vented. 197 http://www.bclaws.ca/civix/document/id/complete/statreg/282_2010 (accessed August 23, 2021). 198 http://www.bclaws.ca/civix/document/id/complete/statreg/35_2011 (accessed August 23, 2021). 199 http://www.bclaws.ca/Recon/document/ID/freeside/392_2008 (accessed August 23, 2021). 202 https://www.bcogc.ca/node/8283/download (accessed August 23, 2021). 200 https://www.bcogc.ca/ (accessed August 23, 2021). 203 https://www.bcogc.ca/node/13274/download (accessed August 23, 2021). 201 https://www.bcogc.ca/data-reports/compliance-enforcement/ (accessed August 23, 2021). 204 https://www2.gov.bc.ca/assets/gov/taxes/natural-resource-taxes/publications/royalty-handbook-oil-gas.pdf (accessed August 23, 2021). 58 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 59 Canada: British Columbia Canada: British Columbia The Greenhouse Gas Emissions Reporting Regulation, 2015,205 details 16. Record Keeping • Tickets are issued under the authority of provincial acts for gas or by-products used for production, drilling, or re-injection the conditions and criteria for the mandatory reporting of GHG which the BCOGC has regulatory responsibility, including the are exempt from royalties and production taxes. Gas lost is also Section 10 of the Flaring and Venting Reduction Guideline, 2018, emissions by operators. Operators that emit more than 10,000 Water Sustainability Act, 2014, 209 the Land Act, 1996, 210 and the exempt from royalty and tax if the regulator deems that the loss requires permit holders to produce documentation describing tCO2e a year must collect and report data on their emissions Forest Act, 1996.211 is not the fault of the producer and the producer does not receive estimation of the volume of flared and vented gas and reporting to the BCOGC. Submissions must be based on a process-flow • Charges are recommended to the Crown Counsel for prosecution any compensation for the loss (for example, insurance proceeds). procedures as well as operating logs if requested by the BCOGC. diagram and include emissions from flaring, venting, and other and possible court action. The lost gas includes flared and vented volumes.212 The documentation provided should include assumptions, fugitive emissions. The regulation also establishes verification mathematical formulas, estimation methodologies, and details on bodies to evaluate reports from operators. 22. Use of Market-Based Principles the means used to obtain and update input data. Permit holders G. Enabling Framework should maintain a log for a minimum of 12 months of flaring and In 2008, British Columbia implemented the Carbon Tax 14. Measurement Frequency and Methods 20. Performance Requirements venting events and respond to any public complaints. Regulation.213 The tax applies to the purchase and use of fossil Chapter 10 of the Flaring and Venting Reduction Guideline, 2018, Section 44 of the Drilling and Production Regulation, 2010 (see fuels burned for transportation, home heating, and electricity. It requires permit holders to demonstrate that gas volumes are 17. Data Compilation and Publishing footnote 197) sets performance standards for the flare stacks covers approximately 70 percent of provincial GHG emissions. The determined accurately and reliably. They must have written operated by permit holders of a well or a facility. It also specifies impact of the tax on consumers is compensated for by a reduction The BCOGC publishes monthly and annual flaring data on its documentation detailing the methodology used to determine flared, the measures to be considered if the hydrogen sulfide content of in personal and corporate income taxes by an approximately equal website in the Air Summary Report - Flaring Data.207 The reports incinerated, and vented gas volumes for all their wells, pipelines, and the gas to be flared exceeds 1 mole percent. Flare and incinerator amount. The carbon tax increased gradually from Can$10 (about can be downloaded from the BCOGC website,208 which also has a facilities that must be available for review by an official. systems installed after the date the regulation came into force US$7.9 as of September 2021) per tCO2e in 2008 to Can$30 range of other publications, tools, and data sets designed to must be designed and operated within limits specified by a (about US$24 as of September 2021) per tCO2e in 2012, at which Meters designed for expected flow conditions and range must inform and educate the general public, First Nations, communities, professional licensed or registered engineer. Flaring should point the government froze the rate at Can$30 per tCO2e until be used to measure continuous or nonroutine flare and vent and government officials. not result in the emission of black smoke. Section 2.6, “Site- other jurisdictions implemented similar carbon taxes. In 2018, the sources at all oil and gas production and processing facilities at Specific Requirements Related to Well Flaring,” and Chapter 6, carbon tax was increased to Can$35 (about US$28) per tCO2e; in which the total volumes of gas flared, incinerated, and vented per facility exceeds 500 m³ a day (excluding dilution gas) on an F. Fines, Penalties, and Sanctions “Performance Requirements,” of the Flaring and Venting Reduction April 2019, it rose to Can$40 (about US$32 as of September 2021) Guideline, 2018 (see footnote 186) provide additional information. per tCO2e, which for natural gas corresponds to Can$0.076 per m³. annual average basis. Chapter 2 of the Measurement Guideline for 18. Monetary Penalties In response to COVID-19, the carbon tax will remain at its current Upstream Oil and Gas Operations, 2020, provides details regarding calibration and proving the accuracy of measurement devices. The Administrative Penalties Regulation, 2011 (see footnote 198) 21. Fiscal and Emission Reduction Incentives level until further notice. establishes that a person who contravenes various responsibilities British Columbia has fiscal incentives in place to induce the The Ministry of Environment and Climate Change Strategy has related to flaring and venting (Sections 41–44 of the Drilling and 15. Engineering Estimates lease use or marketing of associated gas. There are two broad been managing a carbon offset program since 2010. In the oil Production Regulation, 2010; see footnote 197) is subject to fines classifications for calculating natural gas royalties: conservation and gas sector, offset projects have reduced flaring or venting, Section 10 of the Flaring and Venting Reduction Guideline, 2018, ranging from Can$20,000 (about US$16,000 as of September gas and nonconservation gas. Conservation gas is natural gas typically by using gas for electricity generation.214 states that the BCOGC will accept flared, incinerated, and vented 2021) to Can$250,000 (about US$200,000 as of September that has been produced as part of oil production that is conserved gas estimates if measurement is not stated as a requirement. The 2021). and marketed instead of flared. All other gas is considered 23. Negotiated Agreements between the Public operator’s estimates should account for all gas flared, incinerated, nonconservation gas. Section 5 of the Oil and Gas Royalty and the Private Sector and vented at their facilities (expressed to the nearest 100 m³ a 19. Nonmonetary Penalties Handbook, 2014, shows how royalties are calculated under various month) during routine, emergency, and maintenance operations, No evidence regarding negotiated agreements between the public The BCOGC also uses the following tools to sanction operators gas prices and well classifications. Royalties paid for conservation including emissions while depressurizing vessels, compressors, and the private sector could be found in the sources consulted. that do not comply with laws and regulations: gas are often as low as 8 percent, compared with up to 27 percent and pipelines. Volume estimates should be based on engineering for nonconservation gas. This difference in royalty rates creates calculations. The BCOGC recognizes the Canada Association of • Orders are issued if there is a failure to comply with the Oil an incentive for producers to capture and market associated gas. Petroleum Producers’ Guide for Estimation of Flaring and Venting and Gas Activities Act, 2008 (see footnote 190), associated In addition, according to Section 5.9 of the handbook, natural Volumes from Upstream Oil and Gas Facilities, 2002,206 as containing regulations, permits or authorizations, or a previous order. acceptable practices for estimating. 209 https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/14015 (accessed August 23, 2021). 210 https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/96245_01 (accessed August 23, 2021). 205 https://www.ecolex.org/details/legislation/greenhouse-gas-emission-reporting-regulation-bc-reg-2492015-lex-faoc164101/ (accessed August 23, 2021). 211 https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/96157_00 (accessed August 23, 2021). 206 http://www.oilandgasbmps.org/docs/GEN23-techniquestomeasureupstreamflaringandventing.pdf (accessed August 23, 2021). 212 https://www2.gov.bc.ca/gov/content/taxes/natural-resource-taxes/oil-natural-gas/reduce/exemptions (accessed August 23, 2021). 207 https://www.bcogc.ca/files/reports/Technical-Reports/air-summary-2015-2018jan-30-2020final.pdf (accessed August 23, 2021). 213 https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/125_2008 (accessed August 23, 2021). 208 https://www.bcogc.ca/data-reports/reports/?topic=39 (accessed August 23, 2021). 214 https://www2.gov.bc.ca/gov/content/environment/climate-change/public-sector/offset-portfolio (accessed August 24, 2021). 60 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 61 Canada: British Columbia Canada: Saskatchewan 24. Interplay with Midstream and Downstream A. Policy and Targets to reduce GHG emissions from flaring and venting in the Regulatory Framework upstream oil and gas sector, including the Oil and Gas Emissions 1. Background and the Role of Reductions Management Regulations, 2019217 Directive PNG036: Venting and Most gas production in British Columbia is exported to other in Meeting Environmental and Economic Flaring Requirements, 2019,218 and Directive PNG017: Measurement provinces or the United States via pipelines. Gas production Objectives Requirements for Oil and Gas Operations, 2015.219 increasingly comes from remote unconventional plays (reservoirs), such as Montney and Horn River in the northeast corner of the Saskatchewan accounts for nearly 30 percent of liquids Section 10 of the Canadian Environmental Protection Act, 1999 province, which are far from consuming regions. The coordination production in Canada. Gas production is associated mostly (see footnote 144) authorizes the minister of the environment of drilling activity with the development of sufficient midstream with gas from oil wells; it accounts for only 2–3 percent of total to defer to equivalent regulations promulgated by a provincial capacity can avoid bottlenecks in transport capacity and hence Canadian production. Associated gas production was rising until government. In May 2020, the federal government concluded reduce flaring. The regulator encourages producers and third 2020, along with increased tight oil activity. that the Saskatchewan regulations would not be equivalent to parties to pursue such coordination of midstream capacity and federal regulations, mainly because the latter fixed the emission The largest GHG sources in Saskatchewan are emissions from new production. intensity limits after 2025 with no further reduction required. As flaring and venting and fugitive emissions during oil, natural the equivalency agreement between the government of Canada gas, and coal and oil sands mining operations. They account for and the government of Saskatchewan terminates at the end of approximately 17 percent of total emissions in the province (see 2024, the government of Saskatchewan will have to introduce footnote 107). Between 2005 and 2018, overall GHG emissions in additional regulatory measures for a new equivalency agreement Saskatchewan increased by 12 percent, or 8.4 million tCO2e, while to be concluded beyond 2024.220 the amount of GHG emissions from associated gas decreased. As part of the 2016 Pan-Canadian Framework on Clean Growth 2. Targets and Limits and Climate Change (see footnote 104), the government of Directive PNG036: Venting and Flaring Requirements, 2019, imposes Canada committed to reducing methane emissions from the several restrictions on flaring and venting: oil and gas sector by 40–45 percent from 2012 levels by 2025. The Saskatchewan government committed to reducing GHG • Section 5.1 states that oil wells and facilities that flare and vent emissions from flaring and venting in the province’s upstream oil a combined volume of associated gas greater than 900 m³ a day and gas sector by 40–45 percent of the 2015 levels as part of the should flare all nonconserved associated gas unless it must be province’s Methane Action Plan.215 O-2 Reg 7: Oil and Gas Emissions vented to avoid emergencies. All existing oil wells or oil facilities Management Regulations, 2019 (Oil and Gas Emissions Management should comply by July 1, 2020. All new wells must comply Regulations, 2019, hereafter)216 required companies to submit immediately. methane emissions reduction plans by September 2019, before • Section 5.2, on “Associated Gas Venting,” states that no compliance obligations took effect on January 1, 2020. operator should vent any volume of gas from a well or facility that contains hydrogen sulfide in a concentration greater than In 2018, the ECCC (see footnote 105) published SOR-2018-66, 10 mole per kilomole of gas, cause off-lease odors, or exceed Regulations Respecting Reduction in the Release of Methane and Saskatchewan Ambient Air Quality Standards.221 Certain Volatile Organic Compounds (Upstream Oil and Gas Sector; see footnote 106). Provinces can adopt these regulations or draft The O-2 Reg 7:Oil and Gas Emissions Management Regulations, 2019, their own to meet or exceed the federal targets. Saskatchewan aim to reduce methane emissions in the province by more than has released and periodically updated several sets of regulations 40 percent between 2020 and 2025. Table 2 (Appendix) limits 215 https://www.saskatchewan.ca/business/environmental-protection-and-sustainability/a-made-in-saskatchewan-climate-change-strategy/methane-action-plan (accessed August 24, 2021). 216 https://publications.saskatchewan.ca/#/products/92804 (accessed August 24, 2021). 217 https://www.saskatchewan.ca/business/agriculture-natural-resources-and-industry/oil-and-gas/environmental-protection/oil-and-gas-emissions-management (accessed August 24, 2021). 218 https://publications.saskatchewan.ca/#/products/103751 (accessed August 24, 2021). 219 https://www.saskatchewan.ca/business/agriculture-natural-resources-and-industry/oil-and-gas/oil-and-gas-licensing-operations-and-requirements/oil-and-gas-drilling-and-operations/ measurement-requirements (accessed August 24, 2021). 220 https://www.canada.ca/en/environment-climate-change/services/canadian-environmental-protection-act-registry/agreements/equivalency/consultation-canada-saskatchewan-methane-oil- gas/emissions-reduction-estimation.html (accessed August 24, 2021). 221 https://envrbrportal.crm.saskatchewan.ca/Pages/SEQS/Table20-SEQS-SAAQS.pdf (accessed August 24, 2021). 62 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 63 Canada: Saskatchewan Canada: Saskatchewan the methane emission intensity by production class and year, Gas Emissions Management Regulations, 2019 (see footnote 216) The environmental screening process for oil and gas exploration Flaring and the Incineration Requirements, 2019 (see footnote 228). starting in 2020 and ending in 2030. An Emissions Reduction Plan require mandatory, results-based methane emissions reduction at and development activities is outlined in the Environmental However, if flared volumes exceed 900 m³ a day, and the flare is is due if the combined potential annual emissions are higher than the company level, not at the level of individual facilities or pieces Review Guidelines for Oil and Gas Activities. 230 They clarify which within 500 meters of an occupied dwelling, public facility, or an 50,000 tCO2e, calculated by Saskatchewan’s Ministry of Energy of equipment. branch of the Saskatchewan Ministry of Environment should be urban center, the gas should be conserved unless the operator and Resources (MER) based on government data (Petrinex 222 contacted first. obtains consent from the occupants or approval from the regulator. or Integrated Resource Information System [IRIS]223 reporting 4. Legislative Jurisdictions information). 8. Monitoring and Enforcement 11. Development Plans Saskatchewan has jurisdiction over flaring, venting, and incineration, for which the province has comprehensive Directive PNG076: Enhanced Production Audit Program, 2016,231 No evidence regarding development plans could be found in the B. Legal, Regulatory Framework, regulations. Emission regulations are aligned with federal describes the procedures of the province’s audit program for sources consulted. and Contractual rights legislation and regulations. the oil and gas industry. Section 15 of the Oil and Gas Emissions Management Regulations, 2019 (see footnote 217) empowers the 12. Economic Evaluation 3. Primary and Secondary Legislation 5. Associated Gas Ownership minister to audit the measurement and reporting of volumes Section 50 of Part VIII, “Production Operations,” of the Oil and Gas and Regulation of associated gas at oil facilities of the licensee at any time to Ownership of oil and gas is split between the provincial Conservation Regulations, 2012 (see footnote 226) states that for determine whether the measurement and reporting comply with The province’s legislation—the Crown Minerals Act, 1985, 224 and the government, the federal government, private freehold owners, conservation purposes, the minister may require the operator the act, implementing regulations, and any applicable directives. Oil and Gas Conservation Act, 1978225—governs oil and gas rights for and First Nations. The rights to explore for, develop, and produce of an oil well to collect and either use or sell the gas produced. Section 10 of the Oil and Gas Conservation Regulations, 2012 (see exploration and production of these resources. Directive PNG036: oil and natural gas, including associated gas, are transferred to Section 50 states that the minister may require the operator to footnote 226) provides that the minister may issue administrative Venting and Flaring Requirements, 2019 (see footnote 218) limits participants through licenses or leases. analyze gas composition. If a product is present in a quantity penalties (see sections 18 and 19 of this chapter). flaring and venting in oil and gas facilities and restricts temporary that can be economically extracted, the minister may require the flaring during well completions. Revisions in 2020 require companies to implement a leak-detection-and-repair program for C. Regulatory Governance D. Licensing/Process Approval product’s separation, conservation, and utilization. gas facilities. Applicable facilities include gas storage facilities, and Organization gas-processing plants, and gas-gathering systems. O-2 Reg 6: The 9. Flaring or Venting without Prior Approval E. Measurement and Reporting 6. Regulatory Authority Oil and Gas Conservation Regulations, 2012 (Oil and Gas Conservation The Oil and Gas Conservation Regulations, 2012 (see footnote 13. Measurement and Reporting Requirements Regulations, 2012, hereafter)226 stipulate gas flaring and venting The MER229 is the primary regulatory authority for the oil and gas 226) stipulate that gas flared or vented at an oil well or facility industry. It develops and implements policies and programs to Directive PNG017: Measurement Requirements for Oil and Gas abatement rules and set penalties for noncompliance. should not exceed 900 m³ a day unless it is an emergency and promote responsible growth and development of the province’s Operations, 2015 (see footnote 219) provides the regulatory a reasonable level of precaution has been taken to protect Directive PNG017: Measurement Requirements for Oil and Gas requirements for the measurement, accounting, and reporting natural resources. human health, public safety, property, and the environment. Operations (see footnote 219) details how fuel gas, vented gas, and of flaring and venting across a variety of oil and gas operations, Section 6 of Directive PNG036: Venting and Flaring Requirements, flared gas are measured for accounting and reporting purposes including flaring and venting at various sites. Directive PNG032: 7. Regulatory Mandates and Responsibilities 2019 (see footnote 218) states that gas venting from a well or in Saskatchewan. It also requires enhanced quantification of Volumetric, Valuation and Infrastructure Reporting in Petrinex, 2016 The MER is responsible for regulating licensees of oil and gas wells facility, including gas plants, is not permitted unless there is associated gas at heavy-oil facilities. Directive PNG032: Volumetric, (see footnote 227) requires all operators to provide well and facility and facilities and managing flaring and venting in accordance an emergency and venting is required to protect human health, Valuation and Infrastructure Reporting in Petrinex227 provides infrastructure information, monthly pipeline split, and volumetric with Directive PNG036: Venting and Flaring Requirements, 2019 (see public safety, property, or the environment, including prevention guidance on reporting volumes in Petrinex. and valuation information electronically via the website of footnote 218). It is responsible for gathering and analyzing data, of a fire or explosion. Petrinex.232 This requirement is stipulated in Section 66 of the Oil Directive S-20: Saskatchewan Upstream Flaring and Incineration reporting requirements for flaring reduction, compliance, and and Gas Conservation Act, 1978 (see footnote 225) and Section 3 Requirements, 2019,228 applies company-level GHG emissions enforcement. 10. Authorized Flaring or Venting of the Petroleum Registry and Electronics Documents Regulations, intensity limits to venting emissions from oil facilities. The Oil and Operators of oil wells and facilities are authorized to flare all 2012.233 Directive PNG032 also requires all emissions to be calculated 222 https://www.petrinex.ca/Pages/default.aspx (accessed August 23, 2021). nonconserved gas volumes of more than 900 m³ a day if they and expressed in CO2e. Directive PNG076: Enhanced Production 223 https://www.saskatchewan.ca/business/agriculture-natural-resources-and-industry/oil-and-gas/oil-and-gas-licensing-operations-and-requirements/integrated-resource-information-system-iris (accessed August 23, 2021). meet the requirements of Directive S-20: Saskatchewan Upstream Audit Program, 2016 (see footnote 231) sets out the requirements 224 https://publications.saskatchewan.ca/#/products/453 (accessed August 24, 2021). 225 https://publications.saskatchewan.ca/#/products/745 (accessed August 24, 2021). 226 https://publications.saskatchewan.ca/#/products/63704 (accessed August 24, 2021). 230 http://www.environment.gov.sk.ca/environmentalreviewguidelinesforoilandgasactivities2015 (accessed August 24, 2021). 227 https://publications.saskatchewan.ca/#/products/87355 (accessed August 24, 2021). 231 https://publications.saskatchewan.ca/#/products/88088 (accessed August 24, 2021). 228 https://publications.saskatchewan.ca/#/products/75523 (accessed August 24, 2021). 232 https://www.petrinex.ca/Pages/default.aspx (accessed August 23, 2021). 229 https://www.saskatchewan.ca/government/government-structure/ministries/energy-and-resources (accessed August 24, 2021). 233 http://extwprlegs1.fao.org/docs/pdf/sk131888.pdf (accessed August 24, 2021). 64 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 65 Canada: Saskatchewan Canada: Saskatchewan for operators to declare the degree to which they have the 16. Record Keeping Starting in 2021, the government of Saskatchewan will release an Section 13 of Directive PNG076: Enhanced Production Audit infrastructure in place to ensure compliance with the regulator’s annual progress report on all commitments, targets, programs, Program, 2016 (see footnote 231) states that if a declaration Section 9 of Directive PNG036: Venting and Flaring Requirements, measurement and reporting requirements. and policies listed in the Methane Action Plan. 239 is not submitted via Petrinex, the Petrinex error EPP001 will 2019 (see footnote 218) states that the licensee should maintain a trigger a penalty in accordance with the Oil and Gas Conservation log of flaring and venting events and respond to public complaints. 14. Measurement Frequency and Methods The logs should: F. Fines, Penalties, and Sanctions Regulations, 2012. Penalties can also be charged for failing to promptly submit the documentation requested by the regulator. Directive PNG017: Measurement Requirements for Oil and Gas • include information on complaints related to flaring and venting 18. Monetary Penalties Operations, 2015 (see footnote 219) provides regulatory events and their resolution Section 10 of the Oil and Gas Conservation Regulations, 2012 (see 19. Nonmonetary Penalties requirements with respect to measurement points used for accounting and reporting purposes. It specifies what volumes • describe each nonroutine flaring and venting incident and any footnote 226) provides that the minister may issue administrative Part XII of the Oil and Gas Conservation Regulations, 2012, must be measured and how (including estimation methods), the changes implemented to prevent future nonroutine events penalties if an operator exceeds the combined emissions limit at authorizes the minister to suspend or shut down wells and other volumes to be reported to the regulator, the accounting procedures • include the date, time, duration, gas source, hydrogen sulfide its oil facilities according to the formula defined in the regulations. production facilities and seal any meter valves. to determine those volumes, and the data to be kept for auditing. concentration, and volumes of each incident The operator may apply to the minister within 30 days of receipt The principal measurement technologies and procedures include, • keep records for a minimum of 12 months. of the assessment notice to defer payment of all or part of the G. Enabling Framework among others, meters for flow volumes, calculated volumes using assessed penalty. a proration formula based on test volumes, estimates of volumes Flaring and venting records should be made available to the 20. Performance Requirements The Oil and Gas Emissions Management Regulations, 2019 (see based on production facility and product characteristics, and MER upon request. Every person who submits a report or footnote 216) set out the penalties for failing to comply with Directive S-20: Saskatchewan Upstream Flaring and Incineration gauge boards for tanks. The directive provides “standards of return following Section 29 of the Management and Reduction of the regulations and directives with respect to submitting the Requirements, 2011 (see footnote 228) provides comprehensive accuracy for gas and liquid measurement that take into account Greenhouse Gases (Standards and Compliance) Regulations, 2019,237 information in Table 1 of Part III of the Appendix. Section 10 states specifications for upstream oil and gas flaring and incineration potential impacts to royalty, equity, reservoir engineering, should retain all documents, methodologies, and information used that the minister may impose a penalty on a company whose oil performance, equipment spacing, and set-back distances. declining production rates, aging equipment, environment, public to prepare the report for a minimum of seven years. facilities produce, in any year, combined emissions that exceed the safety, accuracy and completeness.” 17. Data Compilation and Publishing limit determined in the regulations calculated using the formula 21. Fiscal and Emission Reduction Incentives There are detailed guidelines specifically for venting from A = B x C, where A is the total penalty to be paid; B is the amount The MER publishes monthly Natural Gas Volume and Value Associated gas that is flared or vented within permitted levels different facilities in Guideline PNG035: Estimating Venting and by which the combined emissions exceed the combined emissions Summary reports. 238 Reports detailing the gas produced from is not subject to royalties. According to the Administrative Fugitive Emissions, 2019.234 An Excel-based gas estimation tool limit, expressed in tCO2e and calculated for the year in accordance wells, total gas production, gas flared or vented, and gas available Procedures Related to Associated Gas Royalties/Taxes240 and has been developed to aid operators in estimating vent volumes with subsection 11; and C is the dollar amount per tonne of excess for use or sale can also be downloaded. Under Section 20 of the Oil Crude Oil and Natural Gas Royalty/Tax Factors Information consistently and accurately.235 There are also special guidelines for emissions set out in Table 3 of the Appendix. The penalty per tCO2e and Gas Emissions Management Regulations, 2019 (see footnote 217) Circulars,241 companies are exempt from royalties if royalties heavy-oil projects.236 increases every year until 2024, when the unit penalty is fixed in the minister is required to publish an annual report setting out: make gas production uneconomic. In addition, any gas used for nominal terms (Table 3 in Appendix). on-site power generation is exempt from royalties. The gas royalty 15. Engineering Estimates • the total of combined emissions at all oil facilities in If a correction results in a change in the combined emissions for rate may be as high as 12 percent, depending on the type of gas Saskatchewan Section 4 of Guideline PNG035: Estimating Venting and Fugitive a licensee on December 31 of the year for which the combined well and the production rate of the well. SaskEnergy is launching Emissions, 2019, allows the use of vent gas factors or engineering • the total of combined potential emissions at all oil facilities in emissions are calculated, the licensee is required to pay, within a new Associated Gas Conservation Program to create more estimates unless an operator is otherwise required to meter or Saskatchewan the period specified by the minister, a penalty on any amount by opportunities in the upstream sector for the sale and movement of test, as per Directive PNG017: Measurement Requirements for Oil and • the emissions for all oil facilities that are licensed by each which the combined emissions at the oil facilities exceed the limit methane between oil production facilities for on-site use. Gas Operations, 2015. licensee for the year. on combined emissions, calculated in accordance with Subsection The Saskatchewan Petroleum Innovation Incentive242 provides 11, plus interest, calculated, at a rate of 10 percent a year. This a royalty credit for commercial innovation projects new to payment is in addition to any penalty already paid for that year. Saskatchewan that can better manage GHG emissions. The Oil 234 https://publications.saskatchewan.ca/#/products/103639 (accessed August 24, 2021). 239 https://www.saskatchewan.ca/business/environmental-protection-and-sustainability/a-made-in-saskatchewan-climate-change-strategy/methane-action-plan (accessed September 14, 2021) 235 https://publications.saskatchewan.ca/api/v1/products/105976/formats/118421/download (accessed August 23, 2021). 240 https://publications.saskatchewan.ca/#/products/82300 (accessed August 23, 2021). 236 https://publications.saskatchewan.ca/api/v1/products/77937/formats/87387/download (accessed August 23, 2021). 241 https://publications.saskatchewan.ca/#/products/75619 (accessed August 23, 2021). 237 https://publications.saskatchewan.ca/#/products/92803 (accessed August 23, 2021). 242 https://www.saskatchewan.ca/business/agriculture-natural-resources-and-industry/oil-and-gas/oil-and-gas-incentives-crown-royalties-and-taxes/saskatchewan-petroleum-innovation-incentive 238 https://publications.saskatchewan.ca/#/categories/1242 (accessed August 23, 2021). (accessed August 23, 2021). 66 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 67 Canada: Saskatchewan and Gas Processing Investment Incentive243 offers transferable royalty or freehold production tax credits at a rate of 15 percent of eligible program costs to value-added projects across all oil and gas industry segments such as gas-gathering transportation infrastructure and methane gathering projects. The Oil and Gas Conservation Regulations, 2012 (see footnote 226) allow operators to build pipelines to capture associated gas as qualifying conservation projects to avoid paying penalties. 22. Use of Market-Based Principles The 2016 Pan-Canadian Framework on Clean Growth and Climate Change set a federal benchmark, requiring all provinces and territories to implement carbon pollution pricing systems by 2019. Saskatchewan’s system for large GHG emitters started in January 2019. The federal pricing system is being applied to electricity generation and natural gas transmission pipelines.244 23. Negotiated Agreements between the Public and the Private Sector The Saskatchewan Petroleum Industry/Government Environment Committee245 was formed in 1992 to respond to the need for the government and industry to work cooperatively to resolve provincial environmental management issues. The provincial government agencies represented include the Ministry of Environment, the MER, and the Ministry of Agriculture, on a project-specific or issue-specific basis. Several industrial associations are also represented. The committee addresses matters including climate change, flaring and venting, remediation guidelines, and management standards. 24. Interplay with Midstream and Downstream Regulatory Framework Many of the regulations on flaring, venting, and emissions cover pipeline and storage facilities. Most oil production in Photo credit: © TSLPhoto / Shutterstock Saskatchewan is exported to other provinces or the United States via pipelines. The gaps in the synchronization of drilling activity with the development of sufficient gas midstream capacity can create bottlenecks and lead to increased flaring or venting. 243 https://www.saskatchewan.ca/business/agriculture-natural-resources-and-industry/oil-and-gas/oil-and-gas-incentives-crown-royalties-and-taxes/oil-and-gas-processing-investment-incentive (accessed August 23, 2021). 244 https://icapcarbonaction.com/en/?option=com_attach&task=download&id=625 (accessed August 23, 2021). 245 http://www.environment.gov.sk.ca/Default.aspx?DN=e29a4131-5a56-481b-a4fa-5cfaabf218f5 (accessed August 23, 2021). 68 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 69 Colombia 0.33 billion cubic meters of gas flared in 2021 A. Policy and Targets about 50 percent, to increase the availability of natural gas in the domestic market. In August 2021, the Ministry of Mines and (total oil production 737 thousand barrels per day) 1. Background and the Role of Reductions Energy (MME)247 released a new resolution for public consultation on the use, flaring, and venting of natural gas, and detection in Meeting Environmental and Economic and prevention of fugitive emissions during upstream oil and Objectives gas activities. As a result, MME Resolution 40066/2022 248 was The volume of gas flared in Colombia declined by almost 70 released on February 11, 2022, making Colombia one of the first Change in Flare Gas Volumes* Change in Flare Gas Intensity** percent, from 1 bcm in 2012 to 0.3 bcm in 2021 (figure 6). Oil countries to adopt specific regulation covering the control and production also declined but by only one-fifth. The flaring intensity reduction of fugitive methane emissions in addition to flaring declined steadily year after year during this period. There were 43 and venting. 2015-2021 2015-2020 2015-2021 2015-2020 individual flare sites in the last flare count, conducted in 2019. -60% -52% -46% -39% 2. Targets and Limits In 2020, Ecopetrol endorsed the World Bank’s Zero Routine Flaring by 2030 initiative (World Bank, n.d.; see footnote 3). No evidence regarding targets and limits could be found in the Colombia also participates in the Global Methane Initiative (n.d.; sources consulted. see footnote 29) and the Climate and Clean Air Coalition (n.d.; see * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced footnote 30). At the end of 2020, Colombia submitted an updated B. Legal, Regulatory Framework, NDC to the UNFCCC,246 increasing its commitment to reducing GHG emissions by 2030 from 20 percent to 51 percent, albeit from and Contractual rights Figure 6 Gas flaring volume and intensity in Colombia, 2012–21 a slightly higher business-as-usual-scenario emission level. The 3. Primary and Secondary Legislation and Fl rin Int nsit Fl rin Volum new 2030 target for GHG emissions is 169 million tCO2e, down Regulation from 265 million tCO2e in the original NDC submitted in 2018. 2 3.0 Many mitigation measures are proposed across all sectors of the Law 10/1961249 explicitly prohibited gas flaring in production fields economy, including reducing fugitive emissions across the oil and for the first time. MME Resolution 181495/2009250 constitutes gas sector and using natural gas instead of coal. the main regulatory framework for exploring and producing 2.5 hydrocarbons, with the objective of maximizing their recovery and Cubic m t rs (m³) of In 2010, Ecopetrol launched its current climate change strategy, avoiding waste. Articles 52 and 53 prohibit gas flaring and the which includes monitoring and reporting GHG emissions, reducing 2.0 wasting of gas. The oil and gas sector is subject to all regulations emissions from the company’s operations and supply chain, pertaining to environmental protection and sustainability as well r engaging in research and development, and contributing to the s fl r d/ as consultation requirements with communities, health and safety national climate policy. The company developed a work plan to requirements, and labor conditions. MME Resolution 40687/2022251 s fl r d/b rr l of oil produc d 1 1.5 reduce flaring by 8 million tCO2 by 2021 and carried out some establishes technical standards for offshore hydrocarbon billion m³ of projects to reduce methane leaks from its equipment. Ecopetrol is exploration projects and regulates gas flaring and venting for also seeking to reduce emissions from its operations by 20 percent 1.0 these activities. by 2030 from the 2010 level. Emissions from flaring represent a small share of Ecopetrol’s emissions, but venting and fugitive MME Resolution 40687/2022 updates provisions for flaring, emissions remain significant. venting, and fugitive methane emissions. Operators, in accordance 0.5 with the provisions of the competent environmental authority Over the past decade, re-injection of gas for enhanced oil recovery within the framework of an environmental license, can flare the has decreased from more than 80 percent of gas volumes to gas recovered on the surface as a result of well control operations 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 246 https://www4.unfccc.int/sites/NDCStaging/pages/Party.aspx?party=COL (accessed August 16, 2021). 247 https://www.minenergia.gov.co/ (accessed August 28, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 248 https://www.minenergia.gov.co/documents/10180/23517/49221-40066.pdf (accessed March 3, 2022). This approach is applied to all countries covered in this report in a consistent manner. 249 https://www.redjurista.com/Documents/ley_10_de_1961_congreso_de_la_republica.aspx#/ (accessed August 16, 2021). 250 https://www.minenergia.gov.co/documents/10180/23517/22162-5272.pdf (accessed August 28, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 251 https://www.minenergia.gov.co/documents/10180/23517/37521-res_40687_180717.pdf (accessed August 28, 2021). 70 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 71 Colombia Colombia and initial production tests during the development of exploratory Gas flaring and venting are matters of national jurisdiction. administering and regulating hydrocarbons in Colombia (later, align with the ministry’s national regulations and the National drilling. Venting is banned in both exploration and production, but Decree 4137/2011262 modified the legal status of the ANH and Environmental Licensing Authority’s licensing. The environmental exceptions are granted during an emergency or for maintenance. 5. Associated Gas Ownership converted it into a state agency) license should be obtained before the initiation of a project, work, Additional rules also cover fugitive methane emissions by • transformation of Ecopetrol into a partially state-owned or activity. Article 332 of the Political Constitution, 1991,259 vests the establishing requirements for leak detection, measurement and company (Law 1118/2006263) dedicated to upstream, midstream, subsoil and any nonrenewable natural resources in the state. In repair, technical inspections, and monitoring. For all instances and downstream oil and gas activities within and outside of 8. Monitoring and Enforcement 2003, association contracts with Ecopetrol were replaced with relating to flaring and venting, the respective provisions in Colombia, governed by the applicable private law. exploration and production contracts,260 which apply the same Decree 1760/2003 empowers the ANH to implement the measures MME Resolution 40066/2022 derogate those in MME Resolution principles as the tax-and-royalty regime or concessions. Technical necessary to monitor, enforce regulations, and audit the activities 40687/2017 and MME Resolution 181495/2009. The ANH is under the MME. It has a distinct legal status and evaluation contracts allow evaluation of an area for up to 36 related to the oil and gas industry.266 Audits focus primarily on enjoys administrative and financial autonomy. Ecopetrol became Decree 1056/1953, 252 Petroleum Code, was last amended in 2009. months, but no exploitation is allowed. If exploratory and appraisal items such as control mechanisms, compliance with regulation, another company in the market, leaving the sole regulatory and Further regulations have updated aspects relating to contracts, drilling leads to production, the company is not authorized to sell and reporting, including matters specific to flaring. administrative management of hydrocarbons to the ANH. ANH royalties, and fines, but the Petroleum Code provides key it but can obtain an exploration and production contract to start oversees all contractual oil and gas arrangements except for the The National Environmental Licensing Authority has the power to regulatory guidelines for the oil and gas industry. There are three exploitation. These contracts grant companies the exclusive right association contracts Ecopetrol held as of December 31, 2003. impose sanctions on transgressors of environmental regulations contract types for the exploration and exploitation of oil and gas: to explore and exploit oil and gas in a defined area. Companies and licenses. In the case of offshore activities, the maritime have rights to all oil and gas production or the volumes remaining Decree 70/2001264 grants powers to the MME as the principal • PSCs, known as association contracts, with Ecopetrol authority and the environmental investigations institute also play once royalties have been paid in kind. Companies can dispose of governing body responsible for upstream oil and gas operations. • technical evaluation contracts a prominent role. oil and gas production freely by negotiating with buyers in local or Accordingly, MME Resolution 181495/2009 (see footnote 250) • exploration and production contracts entered into with international markets. updated by Resolution 40098/2015, establishes that the MME the National Hydrocarbon Agency (Agencia National de Article 14 of Law 10/1961 requires all operators, privately or is responsible for issuing any technical rules and administrative D. Licensing/Process Approval Hidrocarburos [ANH]).253 decisions associated with the regulation and imposing applicable state-owned, to avoid wasting any gas produced. Operators sanctions for noncompliance. With Resolution 180877/2012, the 9. Flaring or Venting without Prior Approval Regulations are issued by the MME; the ANH defines rules for should sell gas, re-inject it in the field for future use, or use it ANH and MME executed an interadministrative agreement that Article 6 of MME Resolution 40066/2022 (see footnote 248) technical evaluation and exploration and production contracts. to enhance oil recovery. If the operator does not stop wasting delegated certain inspection functions and regulatory activities to allows flaring during the exploration phase for testing purposes. gas within three years, the government has the right to take Law 23/1973254 defines the rules for pollution and environmental the ANH. Article 25 bans all venting during exploration except for safety the ownership of gas free of charge and ensure its utilization by liability and authorizes the enactment of the Colombian Natural and as part of drilling activities. Article 30 bans all venting during building the required infrastructure. When an environmental license is required, it may be granted Renewable Resources Code, Decree 2811/1974.255 Law 99/1993256 production. Article 34 cites safety and maintenance as the main only at the national level by the National Environmental Licensing defined Colombia’s environmental institutional framework, the reasons for exceptions. In all instances, the vented volumes and Authority (Autoridad Nacional de Licencias Ambientales) in National Environmental System, and introduced environmental C. Regulatory Governance accordance with Decree 1076/2015 (see footnote 257). the underlying reasons for venting need to be reported. licensing. Decree 1076/2015257 compiles all the environmental and Organization rules applicable to the oil and gas sector, including those in 10. Authorized Flaring or Venting Decree 2041/2014258 relating to regulatory requirements for 6. Regulatory Authority 7. Regulatory Mandates and Responsibilities unconventional reservoirs and the new terms applicable for the Any activity or operation undertaken by the operator as part of The ANH grants flaring authorizations, sets measuring standards, Ecopetrol controlled the development of hydrocarbon resources an oil and gas contract requires the relevant documentation and environmental licensing processes. and monitors compliance (see sections 9, 10, 13, and 14 of until Presidential Decree 1760/2003261 introduced two essential forms to be filed with the MME for it to approve and control the this chapter). The Ministry of Environment and Sustainable 4. Legislative Jurisdictions changes in the Colombian petroleum industry: Development265 is the highest environmental authority in applicable activity. • creation of the ANH as a special entity in charge of Colombia, responsible for the environment and renewable natural Article 10 in MME Resolution 40066/2022 requires a flaring 252 https://www.funcionpublica.gov.co/eva/gestornormativo/norma_pdf.php?i=75114 (accessed August 16, 2021). resources management. It regulates the environmental impact authorization during the production phase. Article 18 provides 253 https://www.anh.gov.co/ (accessed August 23, 2021) of Colombia’s oil and gas operations. Regional environmental the details required for a flaring authorization. Specific 254 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=9018 (accessed August 16, 2021). 255 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=1551 (accessed December 29, 2021). agencies have the right to issue regulations, but they must 256 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=297 (accessed August 16, 2021). 257 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=78153 (accessed August 16, 2021). 262 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=44684 (accessed August 16, 2021). 258 https://www.funcionpublica.gov.co/eva/gestornormativo/norma_pdf.php?i=59782 (accessed August 16, 2021). 263 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=68321 (accessed August 16, 2021). 259 https://www.corteconstitucional.gov.co/inicio/Constitucion%20politica%20de%20Colombia%20-%202015.pdf (accessed August 28, 2021). 264 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=66792 (accessed August 16, 2021). 260 http://www.anh.gov.co/Asignacion-de-areas/Relacion-de-areas-asignadas/Contrato EanP TEA/Anexo A.pdf (accessed August 28, 2021). 265 https://www.minambiente.gov.co/index.php (accessed August 16, 2021). 261 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=65495 (accessed August 16, 2021). 266 https://www.anh.gov.co/ (accessed August 28, 2021). 72 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 73 Colombia Colombia requirements for routine flaring are stipulated in article 11, and captured to avoid venting. 16. Record Keeping The ANH may impose fines in case of a breach of any of the for unforeseeable events, article 19 provides for situation-specific contracts it oversees, up to the value of the unfulfilled activity Article 27 of MME Resolution 41251/2016 requires operators flaring authorizations. 14. Measurement Frequency and Methods if the obligations have associated monetary values. If they do to implement a measurement quality management system in not, the ANH can impose a fine of up to US$50,000 for the first ANH Circular 18/2014 on gas control and flaring267 specifies that all MME Resolution 41251/2016 covers measurement frequency accordance with Colombian Technical Standard NTC-ISO 10012, breach. Each subsequent breach will result in a fine up to the requests to flare should be submitted in writing to the ANH. The and methods. Article 7 states that the quality of gaseous Management Systems for Measurement, 2003.269 Article 28 of the smaller of twice the amount initially imposed or the value of the ANH authorizes the gas volume, time of flaring, and whether the hydrocarbons should be determined by establishing the density, resolution details the logging of daily measurements. Operators contract’s guarantee. gas flared should be subject to royalty. composition, and calorific value. For the official measurement should prepare a digital or physical log of daily control activities, points, monthly analysis of hydrocarbons with up to 12 carbon audits, calibrations, training, verifications related to the official 19. Nonmonetary Penalties 11. Development Plans atoms using gas chromatography should be performed. Quality measurement, and production inspection at wellheads. Subsection tests should be carried out on representative samples taken at 6 requires operators to keep records containing the information Upon expiration of the terms indicated by the ANH for the Article 32 in MME Resolution 40066/2022 requires new projects official sampling points using Section 14 of the latest version necessary for operating the measurement management system. payment of fines or the fulfillment of the obligations breached to be designed to capture vented gas. Existing projects have to of the American Petroleum Institute’s Manual of Petroleum by the contractor, the ANH may terminate the contract if the upgrade their facilities for capture or flaring of otherwise vented gas within the required timeframe of two years. Measurement Standards. Article 17 states that all gas produced 17. Data Compilation and Publishing contractor has not fulfilled its obligations. Article 11 of the should be continuously measured. A daily log of physical and Petroleum Code, 1956, states that any difference of fact or a The ANH publishes annual management reports on its website.270 electronic data should be kept per the American Petroleum technical nature that may arise between the interested parties 12. Economic Evaluation Institute Manual of Petroleum Measurement Standards. They include data on gas flaring and the authorizations granted. and the government on the matters dealt with by the code that Article 52 of MME Resolution 181495/2009 details possible flaring cannot be resolved amicably will be submitted to the opinion exceptions in cases where gas capture is not economically viable. In the late 2010s, the Comptroller General of the Republic (Contraloría General de la República), the auditor of the ANH, F. Fines, Penalties, and Sanctions of three experts, one selected by the government, one by the The operator must justify that gas capture is uneconomic, and the interested party, and one by a third party. Article 68 states that MME must approve the justification. investigated whether the ANH was adequately enforcing natural 18. Monetary Penalties the government may terminate any contract or cancel a license gas production measurement and whether the information MME Resolution 181495/2009 (see footnote 250) establishes granted if a dispute is decided in the government’s favor. For routine flaring, articles 11 and 16 in MME Resolution provided was transparently disclosed with easy and user-friendly fines specific to gas flaring and venting. According to Article 40066/2022 reaffirm the above approach for gas that cannot be access. The Comptroller General of the Republic concluded that produced economically viable. the data and the disclosure procedures conformed to industry 52, operators must pay royalties on flared, vented, or otherwise G. Enabling Framework wasted gas unless an exception was obtained from the ANH. best practices and were managed in a timely, comprehensive, and Article 64 imposes a fine of up to US$5,000 on any violation, in 20. Performance Requirements E. Measurement and Reporting reliable manner. accordance with Article 67 of the Petroleum Code (see footnote No evidence regarding performance requirements for flaring 252). Article 82 in MME Resolution 40066/2022 (see footnote 13. Measurement and Reporting Requirements 15. Engineering Estimates and venting could be found in the sources consulted. For fugitive 248) confirms that the sanctions for infringement of its rules are methane emissions, article 50 in MME Resolution 40066/2022 MME Resolution 41251/2016268 regulates the measurement of the Section 3 of MME Resolution 41251/2016 states that methods those in article 21 of the Petroleum Code and article 67 of Decree (see footnote 248) states that the required leakage elimination volume and quality of the hydrocarbons for the purposes of paying other than direct measurements, such as engineering estimates, 1056/1953 (see footnote 252). Article 26 of Law 1753/2015271 program needs to cover at least 95 percent of all leaking gas. royalties. Article 17 states that the volume of gas used in a facility may be used to fulfill measurement requirements in special cases states that the MME may impose fines of 2,000–100,000 for artificial lift or injection, consumption in operations, power and with prior authorization from the supervisory authority. times the legal monthly minimum wage for each breach of Section 29 requires a description of the volumetric and mass 21. Fiscal and Emission Reduction Incentives generation, and flaring should be measured. All flaring should have the obligations established in the Petroleum Code. The ANH received prior approval from the ANH. ANH Circular 18/2014 (see balance equations of liquid oil, water, and gas and field facilities may impose fines in case of a breach of any of the contracts No evidence regarding fiscal and emission reduction incentives footnote 267) states that operators should report the volumes of highlighting the consumption, estimated losses, re-injection it oversees, up to the value of the unfulfilled activity if the could be found in the sources consulted. total gas produced; associated gas used for generating electricity, and gas flared, and equipment used for their determination and obligations have associated monetary values. If they do not, the running compressors, or re-injection; and gas flared within the quantification. Descriptions should be provided separately for ANH can impose a fine of up to US$50,000 for the first breach. 22. Use of Market-Based Principles first seven days of each month. Articles 28, 29, and 30 in MME initial tests, extensive testing, and commercial production. Each subsequent breach will result in a fine up to the smaller of In May 2017, at the One Planet Summit in Paris, Colombia joined Resolution 40066/2022 (see footnote 248) require reporting of twice the amount initially imposed or the value of the contract’s Canada, Chile, Costa Rica, Mexico, and the US states of California gas being vented and article 38 requires the quantification of gas guarantee. 269 https://idrd.gov.co/sitio/idrd/sites/default/files/imagenes/ntc-iso10012 medicion y equipos0.pdf (accessed August 16, 2021). 267 http://www.anh.gov.co/la-anh/Normatividad/Circular 18 de 2014.pdf#search=circular%2018%202014 (accessed August 28, 2021). 270 https://www.anh.gov.co/la-anh/sobre-la-anh/informes-de-gestion (accessed August 28, 2021). 268 https://www.minenergia.gov.co/documents/10180/23517/37318-Resolucion-41251-23Dic2016.pdf (accessed August 16, 2021). 271 https://www.funcionpublica.gov.co/eva/gestornormativo/norma_pdf.php?i=61933 (accessed August 16, 2021). 74 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 75 and Washington and the Canadian provinces of Alberta, British Columbia, Nova Scotia, Ontario, and Quebec in launching the Carbon Pricing in the Americas Cooperative Framework.272 Law 1931/2018273 established the National Program of Greenhouse Gas Emissions Tradable Quotas, a national emissions trading system (sistema de cupos y créditos), which is still awaiting implementation. 23. Negotiated Agreements between the Public and the Private Sector No evidence regarding negotiated agreements between the public and the private sector could be found in the sources consulted. 24. Interplay with Midstream and Downstream Regulatory Framework Since its establishment under Laws 142/1994274 and 143/1994,275 the Commission on Regulation of Energy and Gas has been the principal regulatory body responsible for regulating gas transport and commercialization. It regulates energy and gas activities to ensure the availability of efficient energy and appropriate competitive structures that prevent companies from achieving dominant positions. Gas regulations encompass aspects ranging from contractual relations and technical standards to transport conditions, sale terms, distribution, and consumption. The Unified Transportation Regulation, outlined in the Commission on Regulation of Energy and Gas Resolution 071/1999,276 establishes open and nondiscriminatory access to natural gas pipelines. MME Resolution 40066/2022 (see footnote 248) requires development of a program to eliminate fugitive methane emissions in upstream operations and other parts of the value chain, such as storage facilities. Photo credit: © Javier Crespo 272 The UNFCCC (2017) announced the framework in May 2017 (https://unfccc.int/news/leaders-across-the-americas-step-up-carbon-pricing). The ensuing “Paris Declaration on Carbon Pricing in the Americas” is dated December 12, 2017 (https://www.ieta.org/resources/News/Press_Releases/2017/Declaration%20on%20Carbon%20Pricing_FINAL.pdf). 273 https://www.funcionpublica.gov.co/eva/gestornormativo/norma.php?i=87765 (accessed August 16, 2021). 274 http://www.bogotajuridica.gov.co/sisjur/normas/Norma1.jsp?i=2752 (accessed August 16, 2021). 275 https://www.minenergia.gov.co/documents/10180/667537/Ley_143_1994.pdf (accessed August 16, 2021). 276 http://apolo.creg.gov.co/Publicac.nsf/Indice01/Resoluci%C3%B3n-1999-CREG071-99 (accessed August 16, 2021). 76 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 77 Ecuador 1.24 billion cubic meters of gas flared in 2021 A. Policy and Targets Historically, more than half of associated gas in Ecuador has been flared. Petroamazonas has been responsible for most oil production (total oil production 493 thousand barrels per day) 1. Background and the Role of Reductions and hence gas flaring. Its main flaring reduction initiative, the in Meeting Environmental and Economic Optimization of Power Generation and Energy Efficiency Program Objectives (Optimización de la Generación Eléctrica y Eficiencia Energética en el Sistema Interconectado Petrolero) has been under way The volume of gas flared in Ecuador increased from 0.8 bcm in Change in Flare Gas Volumes* Change in Flare Gas Intensity** since 2009.281 It builds on previous efforts and aims to use 2012 to 1.2 bcm in 2016 (figure 7). After falling to 0.9 bcm in 2018, associated gas for electricity generation, reduce the consumption flare gas volumes started to increase again, surpassing 1.2 bcm of largely imported diesel, and produce LPG. At the end of in 2021, when the flaring intensity reached its highest level since 2020, Petroamazonas merged with Petroecuador, a national oil 2015-2021 2015-2020 2015-2021 2015-2020 2012. During this period, oil production fell slightly. There were 62 company that had been in charge of midstream and downstream 17% -2% 34% 11% individual flare sites in the last flare count conducted in 2019. activities.282 The merged company, known as Petroecuador, Petroamazonas, a state-owned upstream oil company,277 endorsed continues to pursue the flaring reduction initiative.283 the World Bank’s Zero Routine Flaring by 2030 initiative in 2016 (World Bank, n.d.; see footnote 3)., followed by the endorsement 2. Targets and Limits * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced in 2018 by the Ministry of Energy and Non-Renewable Natural No evidence regarding targets and limits could be found in the Resources (Ministerio de Energía y Recursos Naturales no sources consulted. Renovables [MERNNR]). Ecuador also participates in the Global Methane Initiative (n.d.; see footnote 29). Figure 7 Gas flaring volume and intensity in Ecuador, 2012–21 B. Legal/Regulatory Framework In 2019, Ecuador submitted its updated first NDC to the and Contractual Rights Fl rin Int nsit Fl rin Volum 2 7 UNFCCC.278 It committed to an unconditional reduction of 12 percent of its GHG emissions by 2025 from the levels in the 3. Primary and Secondary Legislation business-as-usual scenario. In 2012, the energy sector accounted and Regulation 6 for 47 percent of GHG emissions in Ecuador. Mitigation strategies The main law governing the oil and gas sector is the Hydrocarbons in the NDC include energy efficiency and gas utilization for power Cubic m t rs (m³) of Law, 1978,284 which was amended in 2010 as part of major sector 5 generation and LPG production. Flaring reduction is classified reform. Article 34 stipulates that associated gas can be used under energy efficiency improvement. by operators only for development, production, and transport r The National Strategy on Climate Change 2012–2025279 operations or re-injection into deposits, with prior authorization s fl r d/ 4 s fl r d/b rr l of oil produc d integrates mitigation initiatives to address climate change from the Ministry of Hydrocarbons. In 2018, the Ministry of 1 through 2025 and coordinates climate change actions in various Hydrocarbons merged with two other ministries (mining and billion m³ of 3 priority sectors, including the energy sector. The National electricity) to create the Ministry of Energy and Nonrenewable Development Plan 2017–2021280 sets as objectives for the oil and Natural Resources (Ministerio de Energía y Recursos Naturales no gas industry the promotion of good management practices for Renovables [MERNNR]). Article 35 indicates that MERNNR can 2 pollution reduction, conservation, mitigation, and adaptation to approve the use of associated gas for industrial or commercial the effects of climate change. purposes. 1 277 https://www.petroamazonas.gob.ec/ 0 0 278 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Ecuador%20First/Primera%20NDC%20Ecuador.pdf (accessed August 17, 2021). 279 https://www.ambiente.gob.ec/wp-content/uploads/downloads/2017/10/ESTRATEGIA-NACIONAL-DE-CAMBIO-CLIMATICO-DEL-ECUADOR.pdf (accessed August 17, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 280 https://www.planificacion.gob.ec/wp-content/uploads/downloads/2017/10/PNBV-26-OCT-FINAL_0K.compressed1.pdf (accessed August 17, 2021). 281 https://www.latinamerica.undp.org/content/rblac/es/home/library/poverty/optimizacion--generacion-electrica-y-eficiencia-energetica-en-el.html (accessed August 19, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 282 Petroecuador was created by Executive Decree No. 315, 2010, amended by Executive Decree No. 1351A, 2012. Petroamazonas was created in 2007 and transformed into a state-owned enterprise by This approach is applied to all countries covered in this report in a consistent manner. Executive Decree 314, 2010. 283 https://www.bnamericas.com/es/noticias/ecuador-optimizara-operaciones-de-electricidad-e-hidrocarburos (accessed August 19, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 284 https://www.ambiente.gob.ec/wp-content/uploads/downloads/2018/05/Ley-de-Hidrocarburos-1978.pdf (accessed August 17, 2021). 78 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 79 Ecuador Ecuador Article 57 of Executive Decree 1215, 2001,285 states that operators to Petroecuador, which will pay only the expenses incurred by sector. Although independent, ARC works closely with the Vice authorization from MERNNR. Exceptions for flaring and venting must prioritize the re-injection of associated gas for enhanced operators to deliver gas. Ministry of Hydrocarbons within MERNNR. ARC’s mission is to without prior approval under special circumstances such as oil recovery. Any gas not used for these purposes should be used, ensure the optimal use of hydrocarbon resources and ensure public emergency conditions could not be identified in official documents. preferably for electricity generation, subject to a technical and C. Regulatory Governance investment and productive assets in the oil and gas sector by economic assessment. The Hydrocarbon Operations Regulation, regulating and controlling operations and related activities. 10. Authorized Flaring or Venting 2018,286 defines MERNNR’s authority with respect to the use of and Organization MERNNR292 is responsible for executing, planning, and According to Article 72 of the Hydrocarbon Operations Regulation, associated gas in development and production operations, its 6. Regulatory Authority administering government energy policy. Articles 50, 71, 72, and 2018 (see footnote 286) flaring must be included in technical transportation, flaring, and for injection or re-injection purposes. 73 of the Hydrocarbon Operations Regulation, 2018,293 which state analysis and approved by MERNNR. Article 73 reiterates that Until mid-2020, the Agency for the Regulation and Control of Ministerial Agreement No. 050, 2011, 287 updates air quality that MERNNR’s authorization is required for the use of associated flaring must be technically justified and at a minimum level. Hydrocarbons (Agencia de Regulación y Control Hidrocarburifero) and air emission standards of the Unified Text of Secondary gas in development and production operations, its transportation, Article 57 of Executive Decree 1215, 2001 (see footnote 285) also regulated the exploration, exploitation, industrialization, refining, Environmental Legislation (Texto Unificado de Legislación flaring, and for injection or re-injection into reservoirs. mentions that flaring is allowed with prior approval if full use is transportation, and commercialization of hydrocarbons. In Secundaria de Medio Ambiente). Ecuador’s Organic Code on the not technically and economically feasible. 2020, it merged with the regulators overseeing the mining and The Vice Ministry of Hydrocarbons manages the assignment, Environment, 2017, 288 supersedes all previous environmental electricity sectors to create the Agency for the Regulation and administration, and modification of oil and gas acreage areas legislation and consolidates most environmental legislative Control of Energy and Nonrenewable Natural Resources (Agencia 11. Development Plans and contracts.294 The Directory of Operations and Production is matters under one law. de Regulación y Control de Energía y Recursos Naturales no responsible for planning, managing, and evaluating the oil and gas Article 50 of the Hydrocarbon Operations Regulations, 2018 (see Renovables [ARC]).289 This merger of regulatory agencies aligns sector regulations and policies. footnote 286) requires operators to seek the approval of MERNNR 4. Legislative Jurisdictions with the merger of ministries to create MERNNR. The ARC before development and production activities by presenting the assumed the responsibilities, obligations, and practices of the Gas flaring and venting are matters of national jurisdiction. Article 8. Monitoring and Enforcement operations program with technical or economic justifications. 34 of the Hydrocarbons Law, 1978, states that MERNNR manages, Agency for the Regulation and Control of Hydrocarbons. The operations program should include estimated volumes of ARC has wide-ranging authority to conduct financial and authorizes, and controls gas obtained from oil exploration and associated gas for various destinations as described in section 7 Petroecuador is the only entity authorized to buy and sell oil, technical audits of oil and gas operations and inspect exploration, development and production at the national level. above. MERNNR’s authorization allows flaring of the volumes of gas, and refined products. It is also responsible for most of the oil production, refining, storage, transportation, and distribution associated gas so estimated in the operations program. and gas production in Ecuador. The company is also tasked with sites to ensure compliance with laws, regulations, contracts, 5. Associated Gas Ownership negotiating and signing contracts with other companies on behalf plans, and budgets.295 Article 42 of the Environmental Rules for of the government. 12. Economic Evaluation The state exclusively owns subsoil hydrocarbon resources Hydrocarbon Activities, 2001 (see footnote 285) states that the in Ecuador, which it allows domestic and foreign oil and gas Ministry of Environment’s Undersecretariat for Environmental Article 57 of Executive Decree 1215, 2001, requires operators to The Ministry of Environment oversees some special provisions companies to invest in via bidding rounds. There are various Quality is responsible for monitoring and supervising operators have an approved Environmental Management Plan establishing under its jurisdiction, in its role of monitoring and auditing the upstream contract types. The most common are technical service to ensure they fulfill their obligations with respect to their feasible technical alternatives to gas flaring for emission environmental management of all industrial activity.290 The contracts for exploration and exploitation and participation environmental management plans, including emissions. Audits are reduction and control. It also requires prioritization of associated Undersecretariat of Climate Change serves as the coordinating contracts (following the principles established for PSCs), in carried out at least every two years to monitor the environmental gas for re-injection and enhanced oil recovery. If re-injection is and facilitating unit for climate finance. s which the contractor and the state share production (or its aspects of operators’ activities or when noncompliance with an not possible, a technical and economic analysis should be carried value). Contractors have rights to oil and gas according to the environmental management plan has been detected. out to identify the best use of the gas, preferably for electricity 7. Regulatory Mandates and Responsibilities generation. If the technical and economic conditions do not allow contract terms (Article 32 of the Hydrocarbons Law, 1978). Article 34 of the Hydrocarbons Law, 1978, vests natural gas produced in Article 11 of the Hydrocarbons Law, 1978 (see footnote 284) states full use in certain facilities, unused gas may be flared, with prior association with oil in the state. Article 36 stipulates that the that the Agency for the Regulation and Control of Hydrocarbons 291 D. Licensing/Process Approval authorization from MERNNR. Ministry of Hydrocarbons (now MERNNR) may require fields with (now ARC) is the technical and administrative body responsible for 9. Flaring or Venting without Prior Approval a high gas-to-oil ratio to deliver associated gas free of charge regulating technical and operational activities in the oil and gas Article 39 of the Hydrocarbons Law, 1978 (see footnote 284) states that operators cannot waste, vent, or flare natural gas without 285 https://www.ambiente.gob.ec/wp-content/uploads/downloads/2012/09/RAOHE-DECRETO-EJECUTIVO-1215.pdf (accessed August 17, 2021). 286 https://www.gob.ec/sites/default/files/regulations/2018-10/Reglamento-de-operaciones-hidrocarburiferas.pdf (accessed January 24, 2022). 287 https://www.ambiente.gob.ec/wp-content/uploads/downloads/2012/10/Acuerdo-50-NCA.pdf (accessed August 17, 2021). 288 http://www.asambleanacional.gob.ec/es/system/files/ro-cod-ambiente-ro-s-983-12-04-2017.pdf (accessed August 17, 2021). 292 https://www.recursosyenergia.gob.ec/wp-content/uploads/2019/02/Plan-Estrategico-Institucional-2019-2021-MERNNR.pdf (accessed August 17, 2021). 289 https://www.controlrecursosyenergia.gob.ec/ (accessed August 18, 2021). 293 https://www.gob.ec/sites/default/files/regulations/2018-10/Reglamento-de-operaciones-hidrocarburiferas.pdf (accessed December 29, 2021). 290 https://www.ambiente.gob.ec/organigrama-del-ministerio-del-ambiente/ (accessed August 17, 2021). 294 https://www.recursosyenergia.gob.ec/wp-content/uploads/2018/09/organigrama.pdf (accessed August 17, 2021). 291 http://siscoh.controlhidrocarburos.gob.ec/comercializacionCldhWeb/faces/protegido/inicio.xhtml (accessed December 29, 2021). 295 https://www.controlhidrocarburos.gob.ec/wp-content/uploads/MARCO-LEGAL-2016/Registro-Oficial-Edicio%CC%81n-Especial-321-Acuerdo-Ministerial-9.pdf (accessed August 18, 2021). 80 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 81 Ecuador Ecuador E. Measurement and Reporting 16. Record Keeping 19. Nonmonetary Penalties 24. Interplay with Midstream and Downstream No evidence regarding record-keeping requirements could be found Article 90 of Executive Decree 1215, 2001, provides the following Regulatory Framework 13. Measurement and Reporting Requirements in the sources consulted. nonmonetary sanctions: Flared volumes of associated gas at each site are relatively small Article 73 of the Hydrocarbon Operations Regulation, 2018 (see and subject to production fluctuations. With the Optimization of • Operators may be removed from the register that allows them footnote 286) requires operators to measure the volume of gas 17. Data Compilation and Publishing to provide services, thereby revoking operators’ rights. Electrical Generation and Energy Efficiency Program, Petroecuador flared and report the results to ARC. It ensures compliance with aims to reduce associated gas flaring. Gas is allocated to Petroamazonas used to issue annual management reports that • The Ministry of Environment may temporarily suspend the volumes from technical documents approved by MERNNR. Article centralized electricity generation facilities in the Amazon region included information on gas flaring reduction achieved in their operator’s activities until there is compliance. 87 of the Hydrocarbon Operations Regulation, 2015, states that (Oriente Basin) and distributed through an interconnected system Optimization of Power Generation and Energy Efficiency Program. annual emission reports are due to ARC the first month of each for public and private companies. subsequent year. The report should describe the use and flaring of Reports from 2016, 2017, and 2019 are available online.297 After G. Enabling Framework the merger of Petroecuador and Petroamazonas, at the end of associated natural gas. 2020, this reporting was expected to continue under Petroecuador 20. Performance Requirements Articles 30 and 57 of Executive Decree 1215, 2001 (see footnote Article 57 of Executive Decree 1215, 2001 (see footnote 285) states 285) require operators to monitor their emissions, including from flaring. Emissions from flares must comply with maximum limits F. Fines, Penalties, and Sanctions that flares should achieve complete gas combustion. The location, height, and direction of flares should be designed to minimize set in table 3 of annex 2 of the decree. 18. Monetary Penalties emissions and heat impact on the environment. At each gas According to Article 77 of the Hydrocarbons Law, 1978 (see flaring site, emissions will be periodically monitored. 14. Measurement Frequency and Methods footnote 284) ARC can sanction operators for noncompliance with Article 73 of the Hydrocarbon Operations Regulation, 2018, requires laws, regulations, contracts, or budgets that govern oil and gas 21. Fiscal and Emission Reduction Incentives operators to perform chromatographic analysis of the gas operations. Penalties are based on an assessment of the severity No evidence regarding fiscal and emission reduction incentives flared and report the results to ARC annually. Reports should be of the offense, negligence, damage, economic loss to the state, could be found in the sources consulted. submitted to the Ministry of the Environment with the following and other pertinent matters. frequency: Article 57 of Executive Decree 1215, 2001 (see footnote 285) gives 22. Use of Market-Based Principles • monthly for drilling operations based on daily discharge and operators 30 days in which to take corrective actions if flaring of No evidence regarding the use of market-based principles to weekly emissions analysis associated gas is not in compliance with air quality regulations. reduce flaring, venting, or associated emissions could be found in • quarterly for all other operational phases, facilities, and Article 90 states that the Ministry of Environment will apply the sources consulted. activities based on quarterly discharges for emissions sanctions for noncompliance in accordance with Article 77 of the • annually for flares located in storage facilities. Hydrocarbons Law, 1978. The fines imposed by ARC or the Ministry 23. Negotiated Agreements between the Public of Environment are up to the following: and the Private Sector 15. Engineering Estimates • 500 times the unified basic remuneration for the first-time No evidence regarding negotiated agreements between the public Flared volumes are calculated as the difference between total violation and the private sector could be found in the sources consulted. fluid production and gas used onsite (for power generation and • 500–1,000 times the unified basic remuneration for the second- reinjection, for example). Gas flow rates are measured with time violation sensors or estimated based on the gas-to-oil ratio and other • 1,000–2,000 times the unified basic remuneration for the third- production characteristics. Article 5 of the ministerial Agreement 091, time violation. 2007,296 states that vertical flare or vent stacks are not required to measure and report emissions; instead, operators can use the In 2020, the unified basic remuneration was equal to US$400. equation provided in the agreement to establish the minimum height needed to facilitate the dispersion of contaminants and heat. 296 https://www.gob.ec/sites/default/files/regulations/2018-09/Documento_Acuerdo-Ministerial-091_0.pdf (accessed August 18, 2021). 297 https://www.petroamazonas.gob.ec/wp-content/uploads/downloads/2020/06/Reporte-Gerencial-2019.pdf (accessed August 18, 2021). 82 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 83 Egypt, Arab Republic of 2.08 billion cubic meters of gas flared in 2021 A. Policy and Targets operators to capture the associated gas they are currently flaring or venting, especially from new upstream projects. (total oil production 561 thousand barrels per day) 1. Background and the Role of Reductions in Meeting Environmental and Economic 2. Targets and Limits Objectives No evidence regarding targets and limits could be found in the The volume of gas flared in the Arab Republic of Egypt averaged sources consulted. PSCs call for avoiding the waste of petroleum Change in Flare Gas Volumes* Change in Flare Gas Intensity** 2.7 bcm in 2012, rose to 2.8 bcm in 2014–16, and fell to 2.1 bcm in resources but also for making sure that oil production is not 2021 (figure 8). The flaring intensity did not vary much during the impaired if associated gas cannot be utilized (see sections 3 and 9 same period. There were 103 individual flare sites in the last flare of this chapter). Based on data from the Egypt General Petroleum 2015-2021 2015-2020 2015-2021 2015-2020 count, conducted in 2019. Company (EGPC), flaring from more than two-thirds of the well -26% -16% -10% -3% sites is less than 1 million standard cubic feet (mmscf) a day.301 In June 2017, Egypt submitted its first NDC to the UNFCCC.298 The The Egyptian Environmental Affairs Agency (EEAA)302 may impose NDC does not commit Egypt to targets for limiting GHG emissions emissions limits in the EIA (see section 7 of this chapter), but no but lists adaptation strategies focusing on increasing the resilience specific limits on emissions from flares or vents could be found in of such sectors as agriculture and tourism. It also lists GHG the sources consulted. * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced mitigation actions, including flaring and venting reduction. In 2017, the Egyptian government endorsed the World Bank’s Zero Routine Flaring by 2030 initiative (World Bank, n.d.; see footnote 3). B. Legal, Regulatory Framework, Figure 8 Gas flaring volume and intensity in Egypt, Arab Rep., 2012–21 According to Egypt’s First Biennial Update Report to the and Contractual rights Fl rin Int nsit Fl rin Volum UNFCCC, released in 2018, flaring and venting from oil and gas 3. Primary and Secondary Legislation 3 14 activities accounted for less than 3 percent of GHG emissions and Regulation in the country.299 The report estimates that fuel combustion by The Environmental Protection Law 4, 1994 (amended by Law 9, industries such as power generation, transportation, and refining 12 2009)303 and the implementing regulations cover emissions from accounted for 85 percent of all GHG emissions. These and other combustion, including flaring (see sections 6 and 7 of this chapter). activities are grouped under the energy sector, which is collectively Cubic m t rs (m³) of 10 responsible for 87 percent of total GHG emissions. To date, GHG Concession agreements are granted for exploration. The three 2 mitigation actions have focused primarily on the energy sector. parties: r They include the reform of energy subsidies, investment in wind s fl r d/ 8 • the government as the owner of oil and gas s fl r d/b rr l of oil produc d and solar power generation, enhancement of energy efficiency, and replacement of higher-carbon fuels with natural gas or • a local private company or a foreign company billion m³ of 6 biomass.300 Egypt has also used the CDM of the UNFCCC. • one of three state-owned petroleum companies (“national companies” hereafter): EGPC, which directly or indirectly 1 The government has been promoting the use of natural gas controls shares in dozens of joint ventures and privately held 4 and enacted a new law to open the gas sector to competition. companies; Ganoub El Wadi Petroleum Holding, which oversees regulated by a new regulator (see section 24 of this chapter). petroleum activities mainly in the southern region of Egypt; and These reforms and government efforts to increase gas use— 2 thee Egyptian Gas Holding Company (EGAS), which has been a which would reduce GHG emissions by substituting it for fuels party to all gas concession agreements since 2004. with higher GHG emissions intensity—may create incentives for 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 298 See Table 3 in https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Egypt%20First/Egyptian%20INDC.pdf (accessed August 13, 2021). 299 Annex D in http://www.eeaa.gov.eg/portals/0/eeaaReports/N-CC/BUR%20Egypt%20EN.pdf (accessed August 13, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 300 Table 3.1 of the Biennial Update Report to the UNFCCC: http://www.eeaa.gov.eg/portals/0/eeaaReports/N-CC/BUR%20Egypt%20EN.pdf (accessed August 13, 2021). This approach is applied to all countries covered in this report in a consistent manner. 301 See table 3 and associated discussion in https://onepetro.org/IPTCONF/proceedings-abstract/20IPTC/3-20IPTC/D033S061R001/155988 (accessed August 13, 2021). 302 http://www.eeaa.gov.eg/en-us/home.aspx (accessed August 13, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 303 http://www.eeaa.gov.eg/en-us/laws/envlaw.aspx (accessed August 13, 2021). 84 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 85 Egypt, Arab Republic of Egypt, Arab Republic of If there is a commercial discovery of oil and gas, a PSC is negotiated, 7. Regulatory Mandates and Responsibilities company and “the contractor shall negotiate in good faith on the 12. Economic Evaluation and a joint venture is established between the contractor and one of best way to avoid impairing the production in the interests of the Article 40 of Law 4, the Environmental Protection Law, 1994/2009 No regulatory requirement to evaluate opportunities to minimize the three national companies, the latter of which holds a 50 percent parties.” One implication of this clause is that flaring or venting is (see footnote 303) requires emissions from combustion for all flaring and venting could be identified in available official stake. The concession agreements call on operators to follow not curtailed if doing so is detrimental to the project economics. purposes to be within the limits The limits are detailed in the documents. PSCs offer a structure for facilitating the sale of more generally accepted industry methods “to prevent loss and waste annexes of Executive Regulations 338, 1995 (amended in 2005). 305 associated gas to the EGPC and EGAS—and to other parties once of petroleum.” Other clauses of the agreements create potential 10. Authorized Flaring or Venting The emissions listed do not include CO2 or methane. Article 40 the gas sector is reformed—for the local market. conflicts (see section 7 of this chapter). also states that the responsible parties will “be held to take No explicit language on the authorization of flaring or venting could be identified in available official documents. The language in PSCs 4. Legislative Jurisdictions all precautions necessary to minimize the pollutants in the combustion products.” and Executive Regulations 338, 1995 (see footnote 305) suggest that E. Measurement and Reporting National laws and regulations govern the flaring and venting of as long as flaring and venting were allowed under the development 13. Measurement and Reporting Requirements Guidelines for the EIA, published in 2001 by the EEAA, do not associated gas. plan and the EIA—both overseen by the national companies in the specifically mention flaring or venting, but they do cover gaseous No evidence regarding the measurement and reporting joint venture—there is no need for a separate permit. emissions (Paragraph 3.6.3), which would include emissions requirements could be found in the sources consulted. However, 5. Associated Gas Ownership from gas flaring, and require monitoring and environmental industry studies suggest that the EGPC, as the joint venture 11. Development Plans The government owns all oil and gas resources. The partner management plans (Paragraphs 3.9–3.11).306 Article 43 of partner, has access to flaring and venting data.307 The EIA of companies in the PSCs are given title to their shares of the Executive Regulations 338, 1995, covers oil and gas operations PSCs require development plans. The initial plan describes the oil and gas activities requires a monitoring plan, which should produced oil and gas, including associated gas. provided it is used and calls for best international industry practices to prevent gas development concept for efficient exploitation of oil, gas, and outline “monitoring intervals and reporting procedures” of the in field operations (for example, for power generation or enhanced leaks and flares and vents. The EGPC is responsible for approving condensate reserves to meet the needs of domestic and external air emissions covered in an individual EIA. Article 17 of Executive oil recovery). They can dispose of their shares of oil and gas or reviewing EIAs and environmental protection measures markets. Upon a commercial discovery, the national company and Regulations 338, 1995 (see footnote 305) requires regulated extracted per the terms of the PSCs.304 Priority is given to meeting consistent with global best practices and ensuring proper the contractor produce a more detailed development plan, which entities to maintain records. Article 18 empowers the EEAA to local gas market requirements, as determined by the participating implementation. is then submitted for approval by the minister of petroleum and conduct inspections and tests to confirm the accuracy of records. national company. Other clauses in PSCs govern the pricing and mineral resources. Article 43 assigns some responsibilities to the EGPC. sharing of associated gas under different circumstances and at 8. Monitoring and Enforcement A current map of the National Gas Pipeline Grid System is different times of an asset’s life (see section 11 of this chapter). 14. Measurement Frequency and Methods The EEAA is responsible for checking compliance with provided in an annex of a typical PSC; it has the same equal force environmental regulations and enforcement of the EIA. It has and effect as other provisions of the PSC. The map is referenced in No evidence regarding specified measurement frequency and C. Regulatory Governance the authority to conduct inspections (see section 13 of this parts of the PSC that address the gas sales agreement; it is used methods could be found in the sources consulted. and Organization chapter). The national companies have access to operating primarily to identify the nearest connection to the pipeline grid. facilities as partners in joint ventures and act as liaisons between 15. Engineering Estimates 6. Regulatory Authority the partnership operating the field and the EEAA during the A recent PSC sets forth various fiscal terms relating to cost No evidence regarding engineering estimates could be found in the The Ministry of Petroleum and Mineral Resources plays an EIA process. In accordance with the PSC terms, the national recovery, expenses, and production sharing (see footnote 304). It sources consulted. overarching regulatory role for the oil and gas sector. Although companies approve development plans, which may include allows for allocating gas (and, if gas is processed, LPG) that is not there is no specific reference to flaring or venting in PSCs, associated gas utilization options, and are responsible for ensuring used in operations by the national company and the contractor. compliance with development plans. Gas utilization may cover The PSC also provides principles and formulas to be used to 16. Record Keeping contractors and operators are subject to Law 4 and the associated regulations. The ministry often acts through the EGPC, EGAS, and flaring and venting. determine the prices of gas and LPG. The prices for the local Under the EIA, operators must keep a log of emissions from the Ganoub El Wadi Petroleum Holding as joint venture partners market are negotiated by the EGPC or EGAS and the contractor; combustion. No reference to flared gas volumes and composition the export price of gas is calculated as a netback value. These with companies investing in Egyptian upstream assets. The EEAA D. Licensing/Process Approval prices are used in the valuation of associated gas in cost-recovery could be identified in the EIA guideline or other official documents. However, PSCs focus on marketing LPG (mostly propane and is part of the Ministry of Environment and is the environmental regulator responsible for conducting an EIA for new upstream oil 9. Flaring or Venting without Prior Approval calculations. The PSC provides details on the sales of gas and LPG butanes), suggesting that other hydrocarbons can be flared or and gas projects and monitoring emissions from combustion. in local and export markets, pricing and payments associated with vented. The focus on LPG in PSCs also suggests that records on PSCs state that if associated gas cannot be used, the national such sales, and the rights of the EGPC and EGAS, as defined in the volumes are kept for fiscal purposes, at least for some natural gas gas sales agreements. liquids. 304 For an example of a PSC, see https://apexintl.com/wp-content/uploads/2018/04/7-2016-EGPC-Model-Agreement.pdf (accessed August 13, 2021). 305 http://www.eeaa.gov.eg/portals/0/eeaaReports/N-Law/law4_reg_new_text_arb.doc (accessed August 13, 2021). 306 http://www.eeaa.gov.eg/portals/0/eeaaReports/N-EIA/Petrol-En.pdf (accessed August 13, 2021). 307 For example, table 3 in following paper is based on EGPC data: https://onepetro.org/IPTCONF/proceedings-abstract/20IPTC/3-20IPTC/D033S061R001/155988 (accessed August 13, 2021). 86 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 87 Egypt, Arab Republic of Egypt, Arab Republic of 17. Data Compilation and Publishing 23. Negotiated Agreements between the Public These reforms and government efforts to increase gas use may and the Private Sector create incentives for operators to capture more of the associated Industry reporting suggests that the EGPC has flare volume data, gas they are currently flaring or venting. The strength of the but a public report detailing these data could not be found in the Development plans for upstream facilities must be agreed upon by incentive depends on the proximity of the field to processing sources consulted. all joint venture partners including the national companies. These facilities and pipeline networks, the age of the field, the gas-to- negotiated plans provide the main opportunity for incorporating oil ratio, the share of natural gas liquids in produced volumes, F. Fines, Penalties, and Sanctions flaring and venting reduction from the beginning of concept and other technical and geological factors. The incentive to development. reduce routine flaring is probably highest for new developments, 18. Monetary Penalties especially if the LPG content is high. 24. Interplay with Midstream and Downstream No evidence regarding monetary penalties could be found in the sources consulted. Regulatory Framework The government has been promoting the use of more natural 19. Nonmonetary Penalties gas within the economy. It has a strategy for increasing the use of CNG vehicles. The government provides financial support for No evidence regarding nonmonetary penalties could be found in converting older gasoline or diesel vehicles into CNG, selling new the sources consulted. PSCs give national companies partnering CNG vehicles, and expanding the CNG filling station network.309 in joint ventures certain rights over associated gas, which may EGAS is expanding the distribution network to connect more lead them to take over the gas rights from the partners. However, residential buildings to gas supplies. The government enacted a it is unclear whether such a situation leads to any changes in the new Gas Market Law (No. 196)310 in 2017 and established the Gas volumes of flared or vented gas. Regulatory Authority311 in 2017. The sector’s restructuring is intended to introduce competition in the gas market via third- G. Enabling Framework party access to the pipeline network. This restructuring aims to give consumers or gas-trading companies the ability to procure Performance Requirements 20. gas supplies from producers within Egypt or via LNG imports. No evidence regarding performance requirements could be found Previously, EGAS was the single buyer of natural gas and the de in the sources consulted. facto regulator of the gas sector. The Cabinet sets the prices of natural gas delivered to different 21. Fiscal and Emission Reduction Incentives customer classes. As part of gas market reforms, prices were raised No evidence regarding fiscal or emission-reduction incentives for all buyers except residential consumers. Industries such as could be found in the sources consulted. cement found the reformed gas prices too high and switched to coal. In 2020, the Cabinet lowered gas prices for all industrial users.312 22. Use of Market-Based Principles Given the increased availability of LNG and increased domestic gas production, lower prices may still allow cost recovery to suppliers. Egypt has implemented two CDM projects. One, registered in As one of the reasons cited for the lack of investment in flaring and 2006, targeted methane venting at a landfill facility. The second venting reduction at oil and gas facilities has been that gas prices project, registered in 2013, targeted flare gas recovery at a large are below cost recovery, the market reforms are promising, although refinery.308 the Cabinet’s differentiation of prices by customer class and the risk of frequent readjustments create uncertainty. 308 Table 3.2 of the Biennial Update Report to the UNFCCC: http://www.eeaa.gov.eg/portals/0/eeaaReports/N-CC/BUR%20Egypt%20EN.pdf (accessed August 13, 2021). 309 https://www.zawya.com/mena/en/business/story/Egypt_to_convert_450K_cars_to_run_on_natgas_in_three_year_Official-SNG_208448215/ (accessed August 13, 2021). 310 https://www.gasreg.org.eg/law-for-gas-market-activities-regulation/ (accessed August 13, 2021). 311 https://www.gasreg.org.eg/ (accessed August 13, 2021). 312 https://www.gasreg.org.eg/natural-gas-pricing/ (accessed August 13, 2021). 88 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 89 Gabon 1.34 billion cubic meters of gas flared in 2021 A. Policy and Targets component of its commitment to reduce GHG emissions in its first NDC,314 submitted to the UNFCCC in 2016. In accordance with (total oil production 175 thousand barrels per day) 1. Background and the Role of Reductions decisions 1/CP.19 and 1/CP.20 and its national development plan in Meeting Environmental and Economic (the Gabon Emergent Strategic Plan), Gabon has unconditionally Objectives committed to reducing emissions by at least 50 percent by 2025 compared with the business-as-usual scenario defined in The volume of gas flared in Gabon increased from 1.3 bcm in Change in Flare Gas Volumes* Change in Flare Gas Intensity** its NDC. The flaring of associated gas represented 23 percent of 2012 to 1.6 bcm in 2016. Following an increase in 2019 and 2020, Gabon’s direct emissions in 2000. Between 2010 and 2025, the volumes fell to 1.3 bcm in 2021 (figure 9). The flaring intensity government expects that measures adopted to reduce routine reached its highest level in 2020 but dropped again in 2021 while flaring will reduce GHG emissions by 17.3 million tonnes of CO2. 2015-2021 2015-2020 2015-2021 2015-2020 still remaining above the long-term average. Among the countries -14% -6% 5% 16% reviewed in this report, Gabon’s flaring intensity in 2021 was Gabon’s legislation includes provisions designed to end routine gas second only to that of the República Bolivariana de Venezuela. flaring and develop its associated and nonassociated gas reserves There were 48 individual flare sites in the last flare count, with a view to transporting and selling natural gas to large conducted in 2019. industrial users in the country. Article 118 of the new petroleum law, Law No. 002/2019,315 sets out a 10-year gas plan, the * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced Gabon is the fifth-largest oil producer in Sub-Saharan Africa. objectives and conditions of which will be defined by regulation. Current production is half its peak level, in 1997. It increased The provisions made in the model PSC align with the key aspects slightly in 2019 to about 220,000 barrels a day, thanks to the of the new petroleum code, although field-specific arrangements Figure 9 Gas flaring volume and intensity in Gabon, 2012–21 commissioning of new projects and investments to restore specific can vary. Fl rin Int nsit Fl rin Volum sites. The country has sizable associated gas resources. More than 90 percent of gas production is re-injected313 or flared for lack of A National Climate Plan was developed to introduce climate 2 25 economic alternatives. concerns in the country’s development program, and the Climate Council (Conseil National Climat) has been given a prominent Extreme volatility of oil prices in recent years prompted a position in the government. The objectives are to combat significant reorganization of Gabon’s oil and gas industry. Shell 20 climate change and its effects, prevent deforestation, halt land sold its assets to the Carlyle Fund at the end of 2017. In July Cubic m t rs (m³) of degradation, and stop biodiversity erosion. At the same time, it 2020, Perenco bought a large part of the assets of Total Gabon mentions the potential for new opportunities offered by the green and became the leading national producer (producing 416 million economy (Green Gabon). r 15 m³ of gas in 2019), supplying thermal power plants in Port-Gentil s fl r d/ and Libreville with approximately 200 megawatts (MW) of gas- 1 s fl r d/b rr l of oil produc d 2. Targets and Limits fired power generation capacity. Despite the efforts made since billion m³ of 2009 to diversify the economy, the oil sector remains leading At the United Nations Climate Summit in Durban in December 10 contributor to the national budget. According to the International 2011, President Ali Bongo Ondimba announced the objective set Monetary Fund, the share of oil in Gabon’s gross domestic product for Gabon’s oil industry of reducing the volume of gas flared by (GDP) was 38.5 percent in 2019. 2015 by a minimum of 60 percent (compared with 2009 levels). 5 This target was not captured in legislation, but a national gas In 2016, Gabon endorsed the World Bank’s Zero Routine Flaring flaring reduction plan was prepared. The plan required all oil by 2030 initiative (World Bank, n.d.; see footnote 3). It also companies operating in Gabon to submit individual plans detailing participates in the Climate and Clean Air Coalition (n.d.; see how they would reduce gas flaring at their facilities. 0 0 footnote 30). Gabon presented routine flaring reduction as a core 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 313 Maximizing oil production in Gabon generally requires a careful balancing of reservoir pressure related to oil and gas drives, often involving the re-injection of gas into the gas cap, and at times water This approach is applied to all countries covered in this report in a consistent manner. into the underlying water reservoir. Also, as many of the oil reservoirs have relatively low natural pressure, gas lift is a widespread technology. 314 https://www.ctc-n.org/content/indc-gabon (accessed August 26, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 315 http://www.droit-afrique.com/uploads/Gabon-Code-2019-hydrocarbures.pdf (accessed August 26, 2021). 90 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 91 Gabon Gabon B. Legal, Regulatory Framework, Following the introduction of the new legislation, investor • Article 17 states that the ministry in charge of hydrocarbons - undertaking any activity in the oil and gas supply chain, with interest increased, and Gabon has signed nine new oil production (MPGHM) is the competent authority ensuring implementation the same rights and obligations as any other operator and Contractual rights contracts. As of the time of writing, no decrees had been put in of the government’s policy on the upstream and downstream oil - entering into agreements with the state, in the same way as place to issue regulations for Law No. 002/2019. and gas industry. 3. Primary and Secondary Legislation and private companies, to operate new gas-processing facilities Regulation • Article 18 states that the application of the regulations and pipeline infrastructure, potentially in a joint venture with Article 61 of Gabon’s Environmental Law, Law No. 007/2014,320 governing the upstream, midstream, and downstream oil and private operators. Before August 2014, the oil industry in Gabon was governed by requires prior approval of an EIA by the Ministry of Environment gas sectors is to be carried out by the ministry department in Law No. 15/1962,316 as amended by Law No. 14/74, 1975,317 and for offshore oil and gas operations. charge of hydrocarbons, currently the General Directorate of 7. Regulatory Mandates and Responsibilities Law No. 14/82, 1983. None of these laws contained provisions to Hydrocarbons (Direction Generale des Hydrocarbures [DGH]).321 limit flaring and venting. Such provisions were first introduced 4. Legislative Jurisdictions The DGH was created by Decree No. 346/PR/MERH, 1977. It is • Article 28 defines the responsibilities of an independent responsible for the implementation of Gabon’s oil policy and the in legislation in November 2009. through a decree forbidding Gas flaring and venting are matters of national jurisdiction. administrative authority in the oil and gas sector management and development of its hydrocarbon resources. continuous flaring of associated gas (Arrêté N° 00268/MMPH/SG/ (responsibilities currently with DGH), which include the following: Article 242 of Law No. 002/2019 states that the DGH’s control DGH), and in 2010, through a decree imposing penalties on flaring 5. Associated Gas Ownership - guaranteeing free competition in the oil and gas sector, per relates to compliance with the specifications and technical to be gradually applied from January 2011 to December 2014 Article 10 of Law No. 002/2019 provides that all hydrocarbon the Central African Economic and Monetary Community characteristics of hydrocarbons, petroleum products, gas, and (Arrêté N° 00827/MMPH/SG/DAEJF). These decrees have never resources, essential infrastructure, studies, data, and information (Communauté Économique et Monétaire de l’Afrique Centrale) derivatives sold in the domestic market and the quality of water, been enforced. acquired or produced during oil operations are the exclusive Code on anti-corruption sludge, and used oils from hydrocarbon activities. The DGH’s PSCs govern most hydrocarbon activities.318 The latest model version property of the state. Article 124 further provides that the activities encompass technical, accounting, legal, and fiscal - contributing to the development of technical specifications bans flaring and venting while allowing several exceptions. PSCs can associated gas from an oil deposit not allocated to self- administration (Article 243). in the oil and gas sector and ensuring operators’ compliance include specific clauses departing from general regulations. consumption in oil operations and the nonassociated gas declared with technical, quality, hygiene, health, and environmental The Ministry of Environment323 is mandated to authorize gas not commercially exploitable remain the property of the state. On August 28, 2014, the government enacted Law No. 011/2014319 specifications, as defined in the legislation flaring and venting under extraordinary circumstances and to encourage exploration and development and reduce gas flaring In line with the requirements established for PSCs as the primary - guaranteeing pricing transparency and nondiscriminatory approve (jointly with the MPGHM) gas flaring reduction plans for by promoting gas monetization options. Law No.011/2014 offered licensing agreement, Article 117 requires natural gas producers third-party access to essential infrastructure. production fields. more attractive fiscal terms for commercializing gas (Article to deliver to the state or to a third party designated by it, on a • Article 27 reiterates the right of the National Hydrocarbons 8. Monitoring and Enforcement 124) but also included a domestic market obligation. Routine gas priority basis, a share of their annual production to satisfy the Company (Société Nationale des Hydrocarbures) to participate flaring was prohibited, and oil companies were given 12 months domestic market’s needs. The methods for determining the share Article 246 of Law No. 002/2019 states that the measurement in exploiting, marketing, and distributing hydrocarbons and their to comply. A tolerance limit (threshold) for gas flaring was to of natural gas are set by regulation and hydrocarbon contracts. of oil and gas production is the exclusive prerogative of the state associated products. Founded in 2011, the National Hydrocarbons be set for each field. Companies that did not comply with these The official sale price is set by regulation. but that its responsibilities and functions can be delegated. An Company—also known as the Gabon Oil Company322—reports provisions were to be subject to gas-flaring penalties to be defined important responsibility of the regulator is to regularly check to the President’s Office and is under the technical supervision in future regulations (Articles 129 and 130). The government has the legal right to take over the commercialization of gas and C. Regulatory Governance of the MPGHM and the financial supervision of the Ministry of the compliance of all measurement devices and equipment in the presence of the operator. According to Article 251, the MPGHM is related transportation infrastructure in case of noncompliance and Organization Economy. The new law no longer expressly refers to this company to carry out technical audits on integrity, guaranteeing the regular as the national operator. The Gabon Oil Company is defined only (Articles 125, 128, and 149). and optimal functioning of all measuring, metering, and other 6. Regulatory Authority as an operator whose capital is held exclusively by the state. Its Despite the above attempt to make fiscal terms more attractive, installations for oil and gas production. The DGH is to collect data functions include the following: Article 16 of Law No. 002/2019 (see footnote 315) refers to an from operators and monitor gas flaring. Because of the scarcity investors did not find the fiscal regime in Law No. 011/2014 institutional structure composed of the Ministry of Petroleum, – holding the government’s interests in national hydrocarbon of resources at the DGH and the absence of well-defined reporting attractive, and Gabon recorded no investment in the sector in Gas, Hydrocarbons, and Mines (Ministère du Pétrole, du Gaz, des resources and shares in private companies guidelines, the quality and quantity of data collected are generally the five years following its adoption. The government enacted Hydrocarbures et des Mines [MPGHM]), a regulatory authority, a – investing on behalf of the state (alone or in joint ventures with poor and do not provide a sound basis for enforcing regulations. a new hydrocarbons law, Law No. 002/2019 (see footnote 315), national operator, and advisory bodies: private companies) in upstream or downstream oil and gas promulgated by Decree No. 00112/PR, repealing Law No. 011/2014. projects 316 http://extwprlegs1.fao.org/docs/pdf/gab39460.pdf (accessed August 26, 2021). 317 http://extwprlegs1.fao.org/docs/pdf/gab71176.pdf (accessed August 26, 2021). 318 http://gabon12thround.com/wp-content/uploads/CEPP-Type-zone-offshore-profond-et-tr%C3%A8s-profond.pdf (accessed August 27, 2021). 321 http://www.petrole.gouv.ga/397-ancien-site/14-ancien-secretariat-general/15-directions-generales/518-direction-generale-des-hydrocarbures/ (accessed August 27, 2021). 319 https://s3.amazonaws.com/rgi-documents/d45dc151470ccd8427573351263c19ded229d1a7.pdf (accessed August 26, 2021). 322 http://www.gabonoil.com/ (accessed August 27, 2021). 320 http://extwprlegs1.fao.org/docs/pdf/Gab174571.pdf (accessed August 26, 2021). 323 http://www.environnement.gouv.ga/ (accessed August 27, 2021). 92 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 93 Gabon Gabon D. Licensing/Process Approval gas balance in accordance with the procedures to be set by future Article 269 of section 2 imposes a penalty of CFAF 50 million–CFAF law). The government’s share of profit gas is 25 percent for the regulation. Article 182 mandates that all hydrocarbon permit 2.5 billion (about US$89,000–US$4.5 million as of September conventional zone and 20 percent for deep offshore zones. 9. Flaring or Venting without Prior Approval holders provide the DGH with a report on its activities and any 2021) on any contractor that violates the prohibition on routine gas Law No. 002/2019 offers the possibility of removing the corporate administrative, technical, economic, and financial information flaring. The same penalty applies if the contractor does not execute Article 125 of Law No. 002/2019 (see footnote 315) prohibits the tax of 35 percent on the contractor’s share of profit oil in the related to its operational responsibility, quality, health, and the flaring reduction plan or comply with the flaring thresholds set flaring and venting of gas in Gabon. No evidence of situations old law and lowers the proportional mining royalty, which is now the environment under the conditions and time required by the by the regulation. Article 278 imposes a penalty of CFAF 10–CFAF exempt from this general prohibition without government approval 7–15 percent for liquid hydrocarbons produced onshore and 5–12 regulations. The model PSC states that any flared volumes must 100 million (about US$18,000–US$180,000 as of September 2021) could be found in the sources consulted. However, at the request of percent for offshore. For natural gas, these rates are 5–10 percent be reported to the DGH monthly. on any contractor that deters inspections by the DGH. Article 280 the contractor, the environmental authority can authorize flaring onshore and 2– 8 percent offshore. The new legislation also imposes a penalty of CFAF 1–CFAF 2.5 billion (about US$1.8 million– and venting for a period. improves cost-recovery terms for operators. The cost-recovery 14. Measurement Frequency and Methods US$4.5 million as of September 2021) on any contractor that limits for liquids are 70 percent for onshore and 75 percent for violates the provisions relating to measuring or metering oil and 10. Authorized Flaring or Venting Article 251 of Law No. 002/2019 states that the units, methods, and gas, including system calibration. offshore; the limits for gas are 80 percent for onshore and 90 standard conditions for measuring the volumes of oil and gas and percent for offshore. According to Article 125 of Law No. 002/2019, at the request of the the marketing of natural gas or products derived from oil and gas contractor and on the advice of the MPGHM, flaring and venting 19. Nonmonetary Penalties may be authorized within a period determined by the Ministry of are set by regulation. No regulations have yet been approved. There 22. Use of Market-Based Principles is also no stated requirement for the fiscal metering of flare gas. Article 263 of Law No. 002/2019 states that the applicable Environment. Upon notification, the applicable thresholds (subject No evidence regarding the use of market-based principles to future legislation and hydrocarbon contracts will provide to periodical revision) will be determined for each field. reduce flaring, venting, or associated emissions could be found in 15. Engineering Estimates administrative sanctions. Article 265 provides for the withdrawal the sources consulted. of authorizations and bans on oil and gas production for repeated 11. Development Plans Law No. 002/2019 states that gas stream volumes can be offenses. This provision is not new: In January 2013, Gabon Article 126 of Law No. 002/2019 requires operators to submit a gas estimated based on gas-to-oil ratios or measured by ultrasonic or revoked the Obangué license of Addax Petroleum after the 23. Negotiated Agreements between the Public flaring reduction plan for all their production fields for the joint other gas flow meters. company allegedly failed to pay customs duties and comply with and the Private Sector approval of the MPGHM and the Ministry of Environment. other laws. In 2011, Gabon committed to reducing the volume of gas flared 16. Record Keeping by 2015 by a minimum of 60 percent compared with 2009 levels. 12. Economic Evaluation No evidence regarding record-keeping requirements could be found G. Enabling Framework A national gas flaring reduction plan required all oil companies in the sources consulted. operating in Gabon to submit plans to reduce gas flaring on No evidence regarding economic evaluations could be found in the sources consulted. 20. Performance Requirements their operating assets. Accordingly, oil companies implemented 17. Data Compilation and Publishing several flare-reduction projects from 2011 to 2015. These projects Article 128 of Law No. 002/2019 (see footnote 315) requires oil resulted in a moderate reduction of about 10 percent of the E. Measurement and Reporting The DGH is in charge of collecting, processing, and disseminating and gas producers to develop or use suitable techniques for volumes flared. flaring data within the government (notably the Climate Council). the recovery and re-injection of gas to optimize production and 13. Measurement and Reporting Requirements conserve the resource. Article 129 states that future regulations 24. Interplay with Midstream and Downstream Article 127 of Law No. 002/2019 (see footnote 315) requires F. Fines, Penalties, and Sanctions will define methods for controlling the volumes of gas flared and Regulatory Framework gas discharged and set forth plans to reduce flaring. operators to equip production facilities with flare measuring 18. Monetary Penalties Article 8 of Law No. 002/2019 states that any license holder of an devices. Article 248 requires that the ministry responsible 21. Fiscal and Emission Reduction Incentives administrative authorization to carry out hydrocarbon activities for hydrocarbons approve the choice, location, installation, Law No. 002/2019 (see footnote 315) sets a series of sanctions, has access to essential infrastructure, subject to availability and modification, and addition of any equipment for measuring and including penalties for contractors that fail to submit required In the model PSCs (see footnote 318), contract terms for oil are the priority of access granted to certain holders by the DGH. This metering oil and gas production. Article 127 requires operators studies and reports for their upstream activities, gas-flaring clearly defined, but terms for possible gas discovery or associated third-party access is exercised in line with the principles of tariff to report the volumes of gas flared to the ministry responsible violations, and noncompliance with regard to flaring-reduction gas volumes remain vague (subject to a separate agreement). transparency, equal treatment, and nondiscrimination. for hydrocarbons. Failure to declare any volume of gas flared plans or flaring thresholds. Article 265 doubles the penalties in Article 215 of Law No. 002/2019 reduces the government’s subjects the operator to a fine, the amount of which will be set by the event of a repeated offense. Article 266 provides that future minimum share of profit oil in PSCs to 45 percent for the regulation in the future. Article 119 states that contractors are regulations will determine the methods for the payment of conventional zone and 40 percent in offshore oil exploitation required to transmit to the DGH all information relating to the penalties. (against 55 percent and 50 percent, respectively, in the 2014 94 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 95 Indonesia 1.67 billion cubic meters of gas flared in 2021 A. Policy and Targets targets to reduce economy-wide GHG emissions. (total oil production 658 thousand barrels per day) 1. Background and the Role of Reductions B. Legal/Regulatory Framework in Meeting Environmental and Economic Objectives and Contractual Rights The volume of gas flared in Indonesia decreased from 3.5 bcm in 2012 3. Primary and Secondary Legislation Change in Flare Gas Volumes* Change in Flare Gas Intensity** to 1.7 bcm in 2021 (figure 10). The rate of decline was much greater and Regulation than for oil production, which fell by more than 20 percent during Articles 2 and 3 of the 2001 Oil and Gas Law, Law 22/2001,327 cover the period. The flaring intensity correspondingly followed a generally the environmental considerations relevant to the country’s oil and 2015-2021 2015-2020 2015-2021 2015-2020 declining trend, falling by more than oil production. There were 152 gas industry. -43% -35% -32% -28% individual flare sites in the last flare count, conducted in 2019. Ministerial regulation ESDM 31/2012328 regulates gas flaring. Indonesia endorsed the World Bank’s Zero Routine Flaring It assigns overall flaring responsibility to the ESDM and its by 2030 initiative in 2017 (World Bank, n.d.; see footnote 3). directorate, the Directorate General of Oil and Gas (DG Migas). It also participates in the Global Methane Initiative (n.d.; see ESDM 31/2012 covers the conditions under which flaring is * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced footnote 29). In 2021, Indonesia submitted an updated NDC to permitted, procedures to follow in all instances of gas flaring, and the UNFCCC324 that committed it to an unconditional reduction metering and reporting requirements (see sections 9 and 10 of this of 29 percent and a conditional reduction of 41 percent in GHG chapter). Figure 10 Gas flaring volume and intensity in Indonesia, 2012–21 emissions by 2030 relative to its business-as-usual scenario. The Fl rin Int nsit Fl rin Volum NDC does not mention flaring or venting. The primary objective of ESDM 32/2017329 is to optimize resource use, by increasing the use of otherwise flared gas (Article 2). 4 12 In 2010, the government launched the Indonesia Climate Change In Article 1, the country’s Special Task Force for Upstream Oil Sectoral Roadmap,325 an initiative to incorporate the climate and Gas Business Activities (Satuan Kerja Khusus Pelaksana change agenda in the country’s development plan. In 2012, Kegiatan Usaha Hulu Minyak Dan Gas Bumi [SKK Migas]) is given 10 the Ministry of Energy and Mineral Resources (Kementerian responsibility for the business aspects. In this context, SKK Migas Energi Dan Sumber Daya Mineral [ESDM]) issued specific flaring Cubic m t rs (m³) of 3 is tasked with marketing gas that might otherwise be flared and regulations to optimize resource utilization and reduce flaring setting the price of this gas. 8 and GHG emissions. Building upon these efforts, the government r in 2017 issued the National Energy Strategy,326 which included a Government Regulation 35/2004,330 issued by the president of s fl r d/ s fl r d/b rr l of oil produc d transition to a cleaner, more climate-smart energy sector. Indonesia, regulates business activities related to the upstream oil 2 6 and gas sector without any specific mention of flaring or venting. billion m³ of 2. Targets and Limits Although not directly aimed at flaring and venting of associated gas, several regulations lay the foundations for the pricing of gas 4 No evidence regarding sector-wide targets and limits could be sold to other sectors: found in the sources consulted. However, Indonesia does set 1 operational limits on flaring (see section 10 of this chapter). Its • Government Regulation 36/2004331 regulates gas use in the 2 NDC and the Indonesia Climate Change Sectoral Roadmap set downstream sector, defined as processing, transport, and storage of gas. 324 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Indonesia%20First/Updated%20NDC%20Indonesia%202021%20-%20corrected%20version.pdf (accessed August 30, 2021). 0 0 325 http://extwprlegs1.fao.org/docs/pdf/ins167258.pdf (accessed August 25, 2021). 326 https://policy.asiapacificenergy.org/node/4173 (accessed August 25, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 327 https://eiti.ekon.go.id/v2/wp-content/uploads/2017/07/UU-22-Tahun-2001-tentang-Minyak-dan-Gas.pdf (accessed August 25, 2021). 328 https://jdih.esdm.go.id/index.php/web/result/783/detail (accessed August 25, 2021). In this chapter, all laws, decrees, and regulations are designated by numbers followed by the years in which they Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. were enacted. For example, ESDM 31/2012 was issued in 2012. This approach is applied to all countries covered in this report in a consistent manner. 329 https://jdih.esdm.go.id/index.php/web/result/1664/detail (accessed August 25, 2021). 330 https://jdih.esdm.go.id/peraturan/PP%20No.%2035%20Thn%202004.pdf (accessed August 25, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 331 https://jdih.esdm.go.id/storage/document/PP%20No.%2036%20Thn%202004.pdf (accessed August 25, 2021). 96 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 97 Indonesia • Ministerial regulations ESDM 58/2017332 and ESDM 14/2019333 7. Regulatory Mandates and Responsibilities • 5 mmscf a day (six-month field average) in a field 14. Measurement Frequency and Methods establish the pricing mechanisms for gas transported by • 0.3 percent of gas-processing facility intake Flaring-related responsibilities are divided between the ESDM According to Article 8 of ESDM 31/2012, contractors or license pipeline sold on the domestic market. (including DG Migas) and SKK Migas. According to ESDM 31/2012, • 0.8 percent of refinery intake. holders are required to submit regular flaring reports to DG Migas • Ministerial regulation ESDM 45/2017334 covers the use of gas for the ESDM sets the policy direction and DG Migas formulates and every six months. These reports must cover items such as flare electricity generation, such as volume allocation for national If the above limits are exceeded, Articles 4 and 5 of ESDM implements policies and technical standards (Article 1). Regarding gas volumes and countermeasures. purposes (Article 3) or price setting, for which Article 8 of the 31/2012 require contractors or license holders to conduct a gas the use of gas that might otherwise have been flared, Article 1 of amendment ESDM 10/2020335 provides numerical updates. optimization study and submit it to DG Migas for evaluation, ESDM 32/2017 appoints SKK Migas as the agency responsible for 15. Engineering Estimates based on which DG Migas can approve operational flaring. DG managing the bidding process for the associated gas currently 4. Legislative Jurisdictions Migas is required to provide reasons for rejecting the submission. Article 7 of ESDM 31/2012 permits calculated flare gas volumes being flared under the guidance and supervision of the ESDM for gas other than sour gas below the threshold of 3 mmscf a day Gas flaring is a matter of national jurisdiction. (see section 22 of this chapter). According to ESDM 45/2017 (see footnote 334), in combination with the amendment in Article 8 of 11. Development Plans per facility or if the installed meter is not working properly. In the event of an irregularity or a failure to report, DG Migas requires 5. Associated Gas Ownership ESDM 10/2020 (see footnote 335), the ESDM is also responsible for Unless flaring is permitted, associated gas is usually not that a meter be installed. overseeing natural gas used in electricity generation. covered by cooperation contracts and, therefore, not part of Article 6 of Law 22/2001 and Article 24 of Government Regulation field development plans. However, each cooperation contract 35/2004 state that ownership of gas remains entirely with the 16. Record Keeping government until the point of delivery, when the contractor 8. Monitoring and Enforcement must contain environmental management provisions (Article 11 of Law 22/2001 (see footnote 327) and Article 39 of Government There is no obligation to maintain logs outside of the standard assumes ownership of cost oil and gas and the contractual If flaring limits are exceeded, the contractor or license holder is Regulation 35/2004; see footnote 330), although they are not reporting requirements. share of profit oil and gas. Ownership of gas not sold, including required to conduct a gas optimization study for submission to required to include flaring and venting according to the existing associated gas, remains with the government. Gas-related DG Migas, which can then either approve or reject its findings business activities, including the transfer of ownership, are legislation. 17. Data Compilation and Publishing (Articles 3–5 of ESDM 31/2012). SKK Migas is entitled to revoke covered in the cooperation contracts, a type of agreement specific the utilization license for gas previously or otherwise flared if the DG Migas receives gas flaring reports regularly and is known to to Indonesia that closely follows the industry practice established promised implementation commitment is not met in time (Article 12. Economic Evaluation be willing to share them upon request on a case-by-case basis. for PSCs. In line with the above, Articles 4–8 of ESDM 32/2017 10 of ESDM 32/2017). Article 4 of ESDM 31/2012 requires contractors or license holders DG Migas does not formally or regularly publish flaring-related authorize SKK Migas to conduct the sales process through a to conduct a comprehensive gas optimization study when statistics. bidding mechanism for gas that would otherwise have been flared. D. Licensing/Process Approval exceeding the permissible flare gas volumes. Article 5 requires DG Migas to evaluate this study before approving or rejecting flaring F. Fines, Penalties, and Sanctions C. Regulatory Governance 9. Flaring or Venting without Prior Approval permits. Article 7 of ESDM 32/2017 (see footnote 329) requires bidders for associated gas currently being flared to provide 18. Monetary Penalties and Organization Article 6 of ESDM 31/2012 (see footnote 328) allows flaring technical, commercial, and financial parameters when competing without the prior submission of a gas optimization study if it is No evidence regarding monetary penalties could be found in the for gas volumes. SKK Migas evaluates the bid proposals and 6. Regulatory Authority done is for safety reasons, because of an emergency, or as part of sources consulted. makes recommendations on bid selection to the ESDM. well testing. However, the ESDM’s inspection service needs to be Articles 1 and 9 of ESDM 31/2012 (see footnote 328) assign overall notified within 24 hours of the incident, and a written report must 19. Nonmonetary Penalties responsibility and approval powers for flaring permission and reporting activities to the ESDM and DG Migas. Article 1 of ESDM be submitted to DG Migas for subsequent verification purposes. E. Measurement and Reporting Articles 4 and 5 of ESDM 31/2012 (see footnote 328) require 32/2017 (see footnote 329) appoints SKK Migas as the country’s 13. Measurement and Reporting Requirements contractors or license holders that exceed the limits allowed special task force for managing upstream oil and gas activities 10. Authorized Flaring or Venting for flaring in Article 3 to conduct a gas optimization study for Article 7 of ESDM 31/2012 (see footnote 328) sets metering under cooperation contracts, making it responsible for the Article 3 of ESDM 31/2012 sets the following volume limitations on submission to DG Migas, which can then approve or reject the requirements for flared gas. Specifically, it requires meters to utilization of gas that would otherwise have been flared. Although gas flaring authorized by DG Migas: findings. Article 10 of ESDM 32/2017 (see footnote 329) allows SKK be used if flaring more than 3 mmscf a day per facility and in all not an institution within the ESDM, SKK Migas is under the Migas to revoke the flare gas allocation from the selected bidder • 3 percent of the field’s gas production cases if sour gas is being flared. If flaring less than 3 mmscf a day guidance and supervision of the ESDM. if they fail to commence work within three months following the or if the meter on site cannot read measurements, the operator 332 https://jdih.esdm.go.id/index.php/web/result/1727/detail (accessed August 25, 2021). award or fail to start production within 12 months. However, there can calculate the volume of gas flared instead of metering it. 333 https://jdih.esdm.go.id/index.php/web/result/1950/detail (accessed August 25, 2021). are no known cases of revocation. 334 https://jdih.esdm.go.id/index.php/web/result/1694/detail (accessed August 25, 2021). Article 8 requires the submission of regular gas flaring reports. 335 https://jdih.esdm.go.id/storage/document/Permen%20ESDM%20No%2010%20Tahun%202020_SALINAN.pdf (accessed August 25, 2021). 98 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 99 Indonesia G. Enabling Framework downstream license holders to make surplus facility capacity available to third parties, which would help integrate flare gas 20. Performance Requirements commercialization projects. The only performance standards identified relate to the requirement to start production and flare gas utilization within 12 months of the award date in the bid rounds conducted by SKK Migas for gas being flared. There is no mention of an emission standard to be achieved. 21. Fiscal and Emission Reduction Incentives No evidence regarding fiscal and emission reduction incentives could be found in the sources consulted. 22. Use of Market-Based Principles Article 7 of ESDM 32/2017 (see footnote 329) appoints SKK Migas to sell gas currently being flared through a bidding process. The bid parameters include the price the bidder is willing to pay, investment commitment, and the production period. Based on an evaluation of the bid parameters, SKK Migas makes recommendations to the EDSM, which selects the bid winner. The gas price offered by bidders has a ceiling of US$0.35/mmBtu for bidders that are public entities and US$3.67/MMBtu for private entities. All prices are subject to correction factors based on the content of the contaminants. Given the significant difference in bid price ceilings, the other project parameters would need to be very attractive to attract private sector interest. 23. Negotiated Agreements between the Public and the Private Sector No evidence regarding negotiated agreements between the public Photo credit: © Herdik Herlambang / Shutterstock and the private sector could be found in the sources consulted. 24. Interplay with Midstream and Downstream Regulatory Framework Several regulations relate to the transport and pricing of gas that is sold to other sectors further downstream (see section 3 of this chapter). Downstream activities are supervised by a separate regulatory agency, BPH Migas. Article 31 of Government Regulation 36/2004 (see footnote 331) requires midstream and 100 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 101 Kazakhstan 1.51 billion cubic meters of gas flared in 2021 A. Policy and Targets the Environmental Code guided different phases of the ETS market. There is no explicit mention of venting in either the subsoil or (total oil production 1,764 thousand barrels per day) 1. Background and the Role of Reductions environmental laws, but the GHG ETS began covering methane in Meeting Environmental and Economic emissions in 2021. Objectives KazMunayGas is a partner in the largest upstream projects— Kazakhstan has achieved a remarkable reduction in both the including Tengiz, Kashagan, and Karachaganak. Flaring from Change in Flare Gas Volumes* Change in Flare Gas Intensity** volume of gas flared and the flaring intensity in recent years. these projects has been reduced, in some cases significantly. For Between 2012 and 2021, both metrics fell by about two-thirds. example, the operator of the Tengiz field, Tengizchevroil,341 reduced The volume flared fell from 4 bcm in 2012 to 1.5 bcm in 2021, flaring emissions by more than 94 percent within a decade via 2015-2021 2015-2020 2015-2021 2015-2020 and the flaring intensity fell at an even faster rate from 7.2 m3 to several capital projects, including an investment in a four-year -59% -60% -62% -62% 2.3 m per barrel of crude oil produced (figure 11). Oil production 3 gas utilization project to eliminate routine flaring. The project’s increased by 16 percent during this period. There were 77 success was recognized with an Excellence in Flaring Reduction individual flare sites in the last flare count, conducted in 2019. Award at the 2012 GGFR forum.342 In 2016, the government and the national oil company, * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced 2. Targets and Limits KazMunayGas, endorsed the World Bank’s Zero Routine Flaring by 2030 initiative (World Bank, n.d.; see footnote 3). Kazakhstan also No evidence regarding overarching targets and limits could be participates in the Global Methane Initiative (n.d.; see footnote found in the sources consulted. However, Article 146 of the Law Figure 11 Gas flaring volume and intensity in Kazakhstan, 2012–21 29). In December 2016, Kazakhstan submitted its first NDC to the on Subsoil and Subsoil Use, 2017, prohibits the flaring of raw gas.343 Fl rin Int nsit Fl rin Volum UNFCCC. It set an unconditional target of a 15 percent reduction According to Article 147, operators must “carry out activities in GHG emissions from the 1990 level by the end of 2030. The NDC aimed at minimizing the volume of raw gas flaring.” The Ministry 5 8 also includes a reduction target of 25 percent as a conditional of Energy calculates permissible volumes of gas that can be flared contribution.336 (see section 7 of this chapter). Field development plans must 7 include a section detailing how raw gas will be processed and Kazakhstan has prohibited flaring associated gas since the mid- utilized. 4 2000s, with certain exceptions. The Law on Subsoil and Subsoil Cubic m t rs (m³) of 6 Use, 2017,337 prohibits most flaring and vests the ownership of associated gas in the state unless an upstream contract grants B. Legal/Regulatory Framework and Contractual Rights r 5 3 ownership rights to the licensee. The Law on Gas and Gas Supply, s fl r d/ 2012,338 promotes greater use of natural gas in the Kazakh 3. Primary and Secondary Legislation s fl r d/b rr l of oil produc d 4 economy and introduces the state’s preferential right to purchase billion m³ of gas from licensees. and Regulation 2 3 Kazakhstan first banned flaring in the mid-2000s, when the Previously, flaring emissions were regulated under the government amended the statutes that governed upstream oil Environmental Code, 2007,339 which was superseded in July 2021 by 2 and gas activities (for example, the Petroleum Law, 1995); asked the Environmental Code, 2021.340 Kazakhstan established the first 1 operators to cease flaring; and prohibited new developments GHG emissions trading system (ETS) in Asia in 2013. Updates to 1 336 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Kazakhstan%20First/INDC%20Kz_eng.pdf (accessed August 13, 2021). 337 https://adilet.zan.kz/eng/docs/K1700000125 (accessed August 13, 2021). 0 0 338 https://adilet.zan.kz/eng/docs/Z1200000532 (accessed August 13, 2021). 339 https://adilet.zan.kz/eng/docs/K070000212 (accessed August 13, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 340 https://adilet.zan.kz/rus/docs/K2100000400 (accessed August 13, 2021). 341 Current partners of Tengizchevroil are Chevron (50 percent), ExxonMobil Kazakhstan (25 percent), KazMunayGas (20 percent), and LukArco (5 percent). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 342 Kazakhstan’s success was reported in World Bank (2011), https://www.worldbank.org/en/news/feature/2011/06/27/russia-kazakhstan-lead-way-to-reduce-gas-flaring-and-lower-emissions This approach is applied to all countries covered in this report in a consistent manner. (accessed August 13, 2021). 343 Raw gas is defined as “any hydrocarbons, regardless of their specific gravity, extracted from the subsoil in the gaseous state at normal atmospheric temperatures and pressures, including untreated Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) natural, associated, shale gas, coalbed methane, and non-hydrocarbon gases contained in them.” 102 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 103 Kazakhstan Kazakhstan without associated gas utilization plans. The Law on Subsoil and the 2010 version of the subsoil law. It reiterates the principle of scheduled or unscheduled inspections, enlist specialists from dispersion of the smoke plume, while the design of the flare units Subsoil Use, 2017, prohibits the flaring of associated gas, with the state’s ownership of associated gas. Article 15 of the Law on state bodies and other organizations as well as foreign and local must ensure the complete combustion of hydrocarbons.” certain exceptions. The law superseded the 2010 version. It Gas and Gas Supply, 2012, gives the state the right to purchase gas experts, and request any document and data deemed necessary includes the same flaring restrictions but adds some clarifications. that is not authorized for self-use. for ensuring compliance. The DSCHS coordinates with two 11. Development Plans interregional departments of the Ministry of Energy: the Western The Environmental Code, 2021 (see footnote 340) requires entities Article 147 of the Law on Subsoil and Subsoil Use, 2017, requires responsible for gaseous emissions to obtain a permit and C. Regulatory Governance Interregional Department of State Inspection in the Oil and Gas Complex and the Southern Interregional Department of State operators to minimize the volume of raw gas flaring and field introduces the concept of an integrated environmental permit (see and Organization Inspection in the Oil and Gas Complex. development plans to include a section on raw gas processing section 13 of this chapter). In 2011, GHG regulations were added or utilization. Field development plans are reviewed by the to the Environmental Code. Relevant articles have been updated as 6. Regulatory Authority MEGNR has the authority to inspect facilities for compliance Central Commission for Exploration and Development “with the necessary to set the new quotas for phases of the national ETS with environmental permits. If a facility exceeds its permissible involvement of independent experts with special knowledge in The Ministry of Energy is the “authorized body” (regulator) of regime. emissions levels from flares, MEGNR has the authority to penalize the field of geology and development and not interested in the hydrocarbons. The Ministry’s Department of State Control in violations of environmental permits. results of the examination,” as stipulated in Article 140. Articles the Sphere of Hydrocarbons and Subsoil Use (DSCHS) regulates 4. Legislative Jurisdictions flaring. The Ministry of Ecology, Geology, and Natural Resources 134–143 detail the necessary project documents and the review process.347 The Ministry of Energy’s Department of Subsoil Use The flaring of associated gas and the emissions associated with (MEGNR) is the environmental regulator and has jurisdiction D. Licensing/Process Approval organizes an independent review of project documents and flaring are regulated primarily at the national level, but local over flaring emissions. Territorial divisions of MEGNR and local 9. Flaring or Venting without Prior Approval development plans.348 According to Article 147, the gas-processing authorities have jurisdiction over environmental regulation (Article executive bodies play roles in implementing environmental program is to be updated every three years. Annual reports on the 28 of the Environment Code, 2021). According to the Environmental regulations. According to Article 146 of the Law on Subsoil and Subsoil Use, implementation of the program must be submitted to the Ministry Code, 2021, local executive bodies, in agreement with the national 2017 (see footnote 337), a permit is not required for flaring under of Energy. environmental regulator, have the power to “establish stricter 7. Regulatory Mandates and Responsibilities emergency conditions. The operator must report the reasons environmental standards” for air emissions if local conditions for and volumes of flaring to the Ministry of Energy and MEGNR According to regulations defining its objectives and functions, 12. Economic Evaluation warrant them (Article 200). Local executive bodies and the the DSCHS, on behalf of the Ministry of Energy, is responsible within 10 days. An emergency is defined as a threat to personnel regional subdivision of the national environmental regulator can life, public health, or the environment. Article 147 of the Law on Subsoil and Subsoil Use, 2017, prohibits for developing rules for issuing flaring permits and ensuring their introduce temporary measures during unfavorable meteorological the extraction of hydrocarbons without processing all raw gas. approval and registration.345 The Ministry of Energy is responsible conditions or increased urban air pollution, including shutting 10. Authorized Flaring or Venting However, the law provides for several exceptions, all of which for, and the DSCHS participates in, estimating permissible down facilities (Article 210). These and other powers granted to must be outlined in the field development plan. Article 146 volumes of raw gas flaring, measurement, and calculation According to Article 146 of the Law on Subsoil and Subsoil Use, 2017, local executive bodies cover stationary and mobile sources of air provides exceptions under which flaring is permitted; Article 147 standards, as stipulated in Article 146 of the Law on Subsoil and flaring is allowed during emergencies, well testing, trial operation emissions, including the combustion of raw gas in flares (Article adds several others. The field development plan may include the Subsoil Use, 2017 (see footnote 337). These standards are reflected of the field, and if it is unavoidable on technical grounds. Except 202). Taxes on emissions and penalties for violations are paid operator’s own use of the gas or its sale to other parties. If these in field development plans and EIAs. The standards can be revised in an emergency, flaring under all other circumstances requires a mostly to local governments. options cannot be justified economically, the field development in response to technological developments or individual needs of permit from the Ministry of Energy. Applications for a permit to plan may include re-injection for storage or enhanced oil recovery fields. MEGNR is responsible for conducting EIAs or approving the flare raw gas can be submitted online.346 5. Associated Gas Ownership EIAs conducted by licensed companies and issuing environmental as long as other methods are ineffective in maintaining reservoir There are special considerations for the northern Caspian Sea pressure and re-injection does not harm the environment. Kazakhstan uses concessions to grant companies the right to permits, including those for emissions from flares. Emissions from flares should be within the flare volumes allowed in flare permits. region. For example, according to Article 274 of the Environmental explore and exploit hydrocarbons, except for legacy PSCs (signed Code, 2021 (see footnote 340), flaring of liquids during well There are also regional considerations. For example, Article 274 before January 1, 2009).344 Article 147 of the Law on Subsoil and If they are not, environmental regulations prevail and penalties operations is prohibited and “flaring of hydrocarbons during well of the Environmental Code, 2021 (see footnote 340) prohibits the Subsoil Use, 2017 (see footnote 337) states that companies must levied accordingly. testing should be minimized using the best available technology, injection of associated gas for enhanced oil recovery in excess minimize flaring of associated gas and that associated gas is “the of the design parameters and volumes approved in the field property of the state” unless an upstream contract assigns gas 8. Monitoring and Enforcement which is the safest for the environment.” The best available technology is identified during the EIA. Such flaring is allowed development plan in the northern Caspian Sea region. These plans rights to the licensee for self-use (see section 12 of this chapter). The DSCHS is responsible for monitoring and enforcing compliance “only under favorable weather conditions conducive to the must be reviewed by an expert panel organized by the Department The Law on Gas and Gas Supply, 2012 (see footnote 338) refers to with the oil and gas industry permits it issues. It can conduct 346 https://www.gov.kz/services/3737?lang=en (accessed August 13, 2021). 344 EY (2019), https://www.ey.com/en_gl/tax-guides/global-oil-and-gas-tax-guide-2019. 347 A practical summary of project documents and approval process can be found in Seitimov (2018), https://doi.org/10.2118/192527-MS (accessed January 5, 2022). 345 https://www.gov.kz/memleket/entities/energo/about/structure/departments/position/309/1?lang=en (accessed August 13, 2021). 348 https://www.gov.kz/memleket/entities/energo/about/structure/departments/activity/305/1?lang=en (accessed August 13, 2021). 104 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 105 Kazakhstan Kazakhstan of Subsoil Use of the Ministry of Energy before being considered by entities if appropriate. Companies in Category I still need to 16. Record Keeping to the local government at the location of the emission source, the latter for approval. conduct an EIA. Article 113 defines the best available techniques, according to Article 577 of the Tax Code, 2017.356 No evidence regarding record-keeping requirements could be their purpose, and criteria for determining such techniques across found in the sources consulted. However, industry reports suggest Article 133 of the Law on Subsoil and Subsoil Use, 2017 (see footnote E. Measurement and Reporting sectors listed in Appendix 3. Techniques are intended to cover that operators must keep a log of metered flare volumes or 337) authorizes the Ministry of Energy to penalize violators of technologies as well as processes, practices, and approaches to estimates based on approved calculation methods. Flare meters subsoil use contract terms unless operators bring the operation 13. Measurement and Reporting Requirements designing, building, operating, maintaining, and decommissioning into compliance within the designated period (up to six months collect data on continuous and intermittent flaring at the flare facilities. Article 113 establishes the Bureau of Best Available Flaring during oil and gas operations must be measured and stack. The data should be entered in the unified state system of depending on the violation). Subsoil use contracts capture Technologies, falling within MEGNR, and outlines its tasks. The reported to the Ministry of Energy. Article 76 of the Law on Subsoil subsoil use management along with operational data. All flaring approved project documents such as field development plans that bureau will develop guidelines on the best techniques for all areas and Subsoil Use, 2017 (see footnote 337) requires licensees to report must be classified by location (onshore, offshore); duration, type must have gas utilization scope and flares. Paying penalties does by July 1, 2023 (Article 418). on their activities covered under the permits issued by the Ministry of gas (sweet or sour); composition; cause of flaring (planned, not negate the obligation to bring the operation into compliance. of Energy. These reports may be periodic or one-time in nature. unplanned); and source (tag number of the equipment, which is The operator has the right to ask for an extension of the specified The Ministry of Energy develops standards for permissible raw gas 14. Measurement Frequency and Methods period for compliance, which must be approved by the Ministry of often a pressure relief valve).353 flaring volumes, measurement, and calculation in accordance with Ministry of Energy Order 203, 2018,350 approves reporting rules Energy after an expert review. Article 146. These standards should be observed in all reporting. for oil and gas as well as mineral operations. These rules are 17. Data Compilation and Publishing According to Article 356 of the Code on Administrative Infractions, Order 164, 2018, is the most recent ministerial order approving the represented in annex tables and are developed in accordance with No evidence regarding data compilation and publishing 2014, flaring without a permit, except when allowed by law, or methodology for calculating flare volumes.349 Article 132 of the Law on Subsoil and Subsoil Use, 2017, which lists could be found in the sources consulted. However, the annual violation of permit conditions “shall entail a fine on subjects of the reports oil and gas licensees must submit. Article 145 calls Article 203 of the Environmental Code, 2021 (see footnote 340) reports of KazMunayGas include raw gas flaring volumes from small entrepreneurship in amount of 250, on subjects of medium for a unified state system of subsoil use management (a digital details monitoring requirements for emissions, including from KazMunayGas operations for the last several years. 354 entrepreneurship in the amount of 500, on subjects of large database). Article 16 of the Law on State Statistics, 2010351 gives flares. Environmental permits, based on the EIAs, require the entrepreneurship in the amount of 2,000 monthly calculation administrative bodies the right to acquire statistical information. measurement of emissions to ensure compliance. They should also indices.”357 Article 356 also lists penalties for hydrocarbon include a list of acceptable metering methodologies or, if metering Annex 24 of Order 203 requires daily reporting of associated gas F. Fines, Penalties, and Sanctions extraction without using and processing raw gas, violations of production and Annex 26 requires monthly reporting of volumes is not feasible, allowed calculation methodologies. Article 186 requirements in approved project documents, and environmental of associated and natural gas used, lost, marketed, re-injected, or 18. Monetary Penalties states that monitoring at Category I facilities, which includes requirements. No evidence of penalties by the Ministry of Energy flared. upstream oil and gas, “should include the use of an automated Both hydrocarbon and environmental regulators can impose under these articles for violation of flare permits could be found. system for monitoring emissions into the environment.” Facilities penalties, the former for violating a flaring permit and the latter 15. Engineering Estimates operating before July 1, 2021, have until January 1, 2023, to for violating an emissions permit. Penalties for violation of 19. Nonmonetary Penalties install automated systems for monitoring emissions (Article 418). No details relating to engineering estimates could be identified emission permits are more common. Article 106 of the Law on Subsoil and Subsoil Use, 2017, provides The data from automated emissions monitoring are considered in the relevant regulation, but industry reports suggest that for early termination of the subsoil use contract under certain primary data and are to be included in the new “National Bank of companies report flare volumes based on meter readings or Article 175 of the Environmental Code, 2021 (see footnote 340) conditions, including violations of the contract terms. The operator Data on the State of the Environment and Natural Resources of engineering estimates. According to one paper on flare reduction authorizes MEGNR to assign daily monetary penalties. Interest can dispute the early termination decision in court within two the Republic of Kazakhstan” (Articles 155 and 156). MEGNR will at the Kashagan field, operators have developed methodologies is charged if payments are delayed or the offending party does months of receiving the notice. No case of contract termination use these data to monitor compliance with environmental permits to estimate flare volumes as a backup to meter data.352 For not bring the operation into compliance within the specified time. based on a flare permit violation could be identified. with or without a site visit (Article 174). emissions from flares, metered or calculated estimates are According to Article 356 of the Code on Administrative Infractions, accepted, but Environmental Code, 2021 (see footnote 340) requires 2014,355 failure to perform the environmental requirements during The Environmental Code, 2021, introduces the concept of the mandatory automated emissions monitoring for Category I subsoil use entails fines, the level of which depends on the size and integrated environmental permit, which is mandatory for facilities going forward. income of the operator. In addition, environmental taxes are paid Category I facilities (Article 111) starting January 1, 2025, for on all emissions, even when emissions are below the limits granted facilities commissioned on or after July 1, 2021 (Article 418). The in permits. The penalties and taxes for stationary sources are paid permit is granted by MEGNR, in collaboration with other state 353 See Table 1 and associated discussion in Mukhamedkali (2017). 354 https://www.kmg.kz/uploads/reports/KMG_AR2020_ENG.pdf (accessed August 13, 2021). 349 https://adilet.zan.kz/rus/docs/V1800016961#z19 (accessed August 13, 2021). 355 https://adilet.zan.kz/eng/docs/K1400000235 (accessed August 13, 2021). 350 http://spon.energo.gov.kz/download/order203.docx (accessed August 13, 2021). 356 https://adilet.zan.kz/eng/docs/K1700000120 (accessed August 13, 2021). 351 https://adilet.zan.kz/eng/docs/Z100000257 (accessed August 13, 2021). 357 Monthly calculation index applicable to these penalties is set at 2,917 Kazakhstani Tenge for 2021 (about US$6.82 as of September 20213). Historical values can be found at https://egov.kz/cms/ 352 Mukhamedkali (2017), https://doi.org/10.2118/188207-MS (accessed January 5, 2022). en/articles/article_mci_2012 (accessed August 13, 2021). 106 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 107 Kazakhstan Kazakhstan G. Enabling Framework 22. Use of Market-Based Principles Article 15 of the Law on Gas and Gas Supply, 2012, establishes the preferential rights of the state to purchase raw or processed Kazakhstan initiated the first ETS in Asia in 2013.359 Phase 20. Performance Requirements (“commercial”) gas assigned to the operator under the upstream II covered 2014 and 2015. Phase III was delayed until the contract. KazTransGas is responsible for procuring the gas from Article 202 of the Environmental Code, 2021 (see footnote 340) establishment, in 2018, of an online platform for monitoring, upstream operators. Article 15 stipulates that the raw gas price details the standards for permissible emissions. It also clarifies reporting, and verifying GHG emissions. The Environmental Code can include the cost of recovering raw gas, the cost of delivering it that these standards apply to all flares other than those deemed was periodically updated to include GHG quotas and related to a location where KazTransGas can take possession, and a profit technologically unavoidable by the regulator, the Ministry of obligations and standards to assist with the evolution of the ETS margin of no more than 10 percent. The price of commercial gas Energy. According to Article 200, local executive bodies have market. The Environmental Code, 2021, includes a more extensive can also include the cost of processing. the power to “establish stricter environmental standards” coverage of GHG regulation and ETS compliance in Kazakhstan for air emissions if local conditions warrant it. According to and covers six GHGs instead of only CO2, which was the case in the The National Energy Report, 2019, of the Kazakhstan Association Article 39, emissions standards for facilities with an integrated early days of the ETS. of Oil, Gas, and Energy Sector Organizations (Kazenergy) suggests environmental permit will be established based on the best that the price paid by KazTransGas has not been sufficient to Operators of oil and gas installations with annual GHG emissions cover “the costs associated with recovering associated sour wet available techniques as determined by the new Bureau of Best of more than 20,000 tCO2e must obtain quotas. The penalty gas that must be gathered, processed, and transported to an Available Technologies (see section 13 of this chapter). for noncompliance was waived in 2013 and 2014 but was about injection point.” However, the price has been sufficient to cover the US$35/tCO2e in 2021. Operators of installations with emissions 21. Fiscal and Emission Reduction Incentives cost of delivering “shallow dry gas” to KazTransGas.361 According of 10,000–20,000 tCO2e a year must report emissions annually, to the KazMunayGas 2020 Annual Report (see footnote 354), According to Article 127 of the Environmental Code, 2021, emission although they are not required to participate in the ETS. The five operating companies, in which KazMunayGas is a partner, taxes are calculated using base levies for various emissions, average 2020 price was about US$1.1 per tCO2e. The 2021 ceiling sell their gas to KazTransGas under Article 15 of the Law on including those from flaring, provided in tax laws. For example, under the National Allocation Plan is 159.9 million tCO2e. The next Gas and Gas Supply, 2012, and five others, including the Tengiz, according to Article 576 of the Tax Code, 2017 (see footnote 356), plan is expected to cover five years. Karachaganak, and Kashagan operations, sell gas directly to base tax rates for emissions from flaring are 20–278 times as domestic and export markets or use it for re-injection or meeting large as the same emissions from other stationary sources. 23. Negotiated Agreements between the Public their own heat and electricity needs. Paragraph 8 of Article 576 states that local authorities may and the Private Sector increase the tax rates up to 200 percent of the base rate, except The 2020 Annual Report of KazTransGas acknowledges the for emissions from flares, which can be increased to more than No evidence regarding negotiated agreements between the public need to increase wholesale prices to ensure the commerciality of 200 percent of the base rate. and the private sector could be found in the sources consulted. domestic gas sales. It refers to a ministerial meeting in August 2020 that called for an annual increase of 15 percent between Recent changes to the Tax Code align it with the Environmental 24. Interplay with Midstream and Downstream 2021 and 2026.362 Although domestic gas sales are twice as large Code, 2021. According to Article 575 of Law No. 402-VI, 2021, the Regulatory Framework as export volumes, revenues from domestic sales accounted for base tax rates for emissions from stationary sources will be only 6 percent of revenues in 2018,363 mainly because regulated doubled from January 2025, and emissions from flaring will be The Law on Gas and Gas Supply, 2012 (see footnote 338) supports prices of gas delivered to customers have been kept artificially assessed at the same rate as stationary sources.358 Article 130 of the government’s policy of increasing gas use across the country to low.364 Phased increases of transportation tariffs and retail prices, the Environmental Code, 2021, provides tax relief to facilities that avoid wasting the country’s natural resources and replace coal and possibly based on netback pricing, are part of the strategic obtain an integrated environmental permit through the adoption other fuels with higher emissions. The national gas system operator objectives of KazTransGas.365 Reforming gas pricing and sending of the best available techniques (see section 13 of this chapter). KazTransGas, wholly owned by KazMunayGas, is also trying to the right price signals across the natural gas value chain is Penalties will be heavier for facilities that do not adopt the best reduce fugitive emissions across its transmission and distribution expected to provide incentives to reduce flaring further by offering available techniques. network. Since 2018, KazTransGas has used remote methane a commercially viable alternative to upstream operators and sensing, which identified 3,963 leaks by the end of 2020.360 Fixing serving the government’s gasification policy efficiently. these leaks will reduce methane emissions and avoid waste of gas. 361 For example, see page 102 of the report: https://www.kazenergy.com/upload/document/energy-report/NationalReport19_en.pdf (accessed August 13, 2021). 358 https://online.zakon.kz/Document/?doc_id=37992947 (accessed August 13, 2021). 362 See pages 7–-8 of the KazTransGaz annual report: https://kaztransgas.kz/images/01_reports/annual-2020-eng.pdf (accessed August 13, 2021). 359 The discussion in this section is based primarily on ICAP Carbon Action (2021), https://icapcarbonaction.com/en/ets-map?etsid=46 (accessed January 5, 2022). Legal references are confirmed from 363 See page 11 of the following KazTransGaz presentation: https://kaztransgas.kz/images/01_reports/NDR_May_2018_eng.pdf (accessed August 13, 2021). the Environmental Code, 2021. 364 For example, the final selling price to consumers at Nur-Sultan (capital city) was set at less than US$70 per 1,000 m³ for 2020 (page 9 of the KazTransGaz annual report). 360 See page 36 of the annual report of KazTransGaz (2021), https://kaztransgas.kz/images/01_reports/annual-2020-eng.pdf (accessed January 5, 2022). 365 See pages 11 and 28 of the KazTransGaz annual report: https://kaztransgas.kz/images/01_reports/annual-2020-eng.pdf (accessed August 13, 2021). 108 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 109 Libya 5.97 billion cubic meters of gas flared in 2021 A. Policy and Targets 2. Targets and Limits No evidence regarding targets and limits could be found in the (total oil production 1,246 thousand barrels per day) 1. Background and the Role of Reductions sources consulted. in Meeting Environmental and Economic Objectives B. Legal/Regulatory Framework Oil production in Libya has fluctuated wildly in recent years. Change in Flare Gas Volumes* Change in Flare Gas Intensity** Between 2012 and 2021, daily oil production averaged 0.8 million and Contractual Rights barrels, ranging from 0.4 million to 1.4 million barrels. The volume 3. Primary and Secondary Legislation of gas flared correspondingly fluctuated, falling from 5.9 bcm in 2015-2021 2015-2020 2015-2021 2015-2020 and Regulation 2012 to 2.4 bcm in 2016, declining sharply to 2.5 bcm in 2020, and 128% -5% -14% 8% increasing again to 6 bcm in 2021 (figure 12). The flaring intensity Following multiple updates, Law no. 25, the Petroleum Law, 1955 during this period fluctuated, reaching its highest level in 2020, (Petroleum Law, 1955, hereafter)367 forms the basis for all technical, but then dropping again in 2021 on the back of an increase in oil commercial, and environmental aspects of petroleum activities in production. Of the countries covered in this review, the flaring Libya. Law no. 24, 1970368 established the National Oil Corporation intensity in Libya in 2021 ranked fourth. There were 86 individual (NOCORP). * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced flare sites in the last flare count, conducted in 2019. Annex 2 of the Petroleum Law, 1955, contains a model petroleum With the establishment of the Technical Centre for Protection concession contract that outlines how the commercial and of the Environment in the early 1980s, Libya was among the operational principles of early petroleum licenses are to be Figure 12 Gas flaring volume and intensity in Libya, 2012–21 first North African countries to establish a government agency regulated. The document does not mention specifics related to Fl rin Int nsit Fl rin Volum tasked with protecting the environment. The agency was later associated gas, flaring, or venting. Crucial aspects relating to the 7 18 renamed the Environment General Authority and given additional handling of associated gas are covered in confidential licensing responsibilities and powers. Until recently, it acted as an agreements between the government and license holders. 16 6 independent and autonomous institution; after recent changes The Model Production Sharing Contract, 2006, mentions the use in the government, it now reports directly to the Ministry of the and disposal of associated gas, but much is left to the notion 14 Cubic m t rs (m³) of Environment. of compliance with the Good Oilfield Practices, as defined 5 12 Libya ratified both the Paris Agreement and the Kyoto Protocol366 in the model PSC. The model PSC only forms the basis for r but has not yet submitted an NDC to the UNFCCC. It is undergoing negotiations between the NOCORP and license holders. The PSCs s fl r d/ 4 10 substantial political changes following the formation of a new are individually negotiated and may differ in detail, although s fl r d/b rr l of oil produc d government. These changes may have a significant impact on the they must all comply with the Petroleum Law, 1955. All but one billion m³ of 8 oil and gas sectors and environmental management. Therefore, concession agreement have reportedly been renegotiated and 3 the government’s approach to gas flaring and venting, including converted to PSCs.369 6 the regulation and regulatory practices currently in place, is Law no. 15, the Environment Law, 2003 (Environment Law, 2003, 2 subject to change. hereafter)370 is an update of the original Law no. 7, Protection of the 4 Environment, 1982.371 At its core is protecting and improving the 1 environment, specifically relating to water, soil, air, and food. 2 0 0 366 https://unfccc.int/node/61101 (accessed August 25, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 367 https://security-legislation.ly/sites/default/files/lois/169-Law%20No.%20%2825%29%20of%201955_EN.pdf (accessed August 25, 2021). 368 https://www.resourcedata.org/dataset/rgi-law-no-24-1970-establishment-of-national-oil-corporation-/resource/ea89cfd6-cd10-4b8f-aed2-c26b18fd0782 (accessed August 25, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 369 The Model Production Sharing Contract, 2006, can be found at https://www.resourcecontract/ocds-591adf-9619723902/download/pdf (last accessed on January 24, 2022). Information on the This approach is applied to all countries covered in this report in a consistent manner. PSCs can be found in EY (2019), https://www.ey.com/en_gl/tax-guides/global-oil-and-gas-tax-guide-2019 (accessed January 5, 2022). 370 http://extwprlegs1.fao.org/docs/pdf/lib45081.pdf (accessed August 25, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 371 http://extwprlegs1.fao.org/docs/pdf/lib46429.pdf (accessed August 25, 2021). 110 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 111 Libya 4. Legislative Jurisdictions 7. Regulatory Mandates and Responsibilities in line with the Good Oilfield Practices, as per Article 11. In cases of E. Measurement and Reporting noncompliance with the requirements stipulated in the petroleum Hydrocarbon and environmental matters are subject to national According to Article 2 of the Petroleum Law, 1955 (see footnote concession, the license can be revoked, as per Article 18. Article 13. Measurement and Reporting Requirements laws and jurisdiction. Flaring and venting are not directly 367), the Petroleum Committee recommends key decisions on 25 of the Model Production Sharing Contract, 2006, allows for regulated. such matters as granting, assigning, renewing, relinquishing, According to Article 13 of the Model Production Sharing Contract, termination of a PSC if there has been a material breach of the and canceling licenses and concessions to the minister of oil 2006 (see footnote 369), metering is required only for excess obligations and a failure to remedy the breaches in question. 5. Associated Gas Ownership and gas, who ratifies the decisions. The Petroleum Committee associated gas in commercial discoveries. Article 2 of the also appoints the director of petroleum affairs, with whom it The Environment Law, 2003, gives the Ministry of the Environment Petroleum Law, 1955 (see footnote 367) allows the Director of All subsurface oil and gas resources are the property of the Libyan (and the Environmental General Authority under it) the right to shares monitoring and inspecting powers. The responsibilities of Petroleum Affairs to inspect meters to ensure accuracy. state, according to Article 1 of the Petroleum Law, 1955. Licenses monitor pollution levels and require emission permits for facilities the director of petroleum affairs also cover operational aspects in Libya were originally structured as concessions, but PSCs have covered by the regulation. become the norm with the introduction of the model Exploration with the license holders, such as tracking exploration activities, 14. Measurement Frequency and Methods approving fiscal assessments, and reviewing technical reports. and Production Sharing Agreement starting in 2006. In PSCs, title No evidence regarding specified measurement frequency and to the contractor’s share of the production is transferred in the However, until recently, NOCORP had far-reaching regulatory D. Licensing/Process Approval methods could be found in the sources consulted. powers and assumed regulatory functions assigned to the form of cost oil and gas and the contractor’s share of profit oil and ministry and the Petroleum Committee. Following recent changes 9. Flaring or Venting without Prior Approval gas. For associated gas, the transfer of title takes place only if the in the government, the Ministry of Oil and Gas was reestablished 15. Engineering Estimates gas is commercialized (subject to the approval of the development Neither the Petroleum Law, 1955 (see footnote 367) nor the with regulatory powers over the oil and gas industry and authority No evidence regarding engineering estimates could be found in the plan). Model Production Sharing Contract, 2006 (see footnote 369) over NOCORP. The role of the director of petroleum affairs remains sources consulted. explicitly bans or allows flaring or venting of associated gas. essentially unchanged. Article 13 of the Model Production Sharing Contract requires C. Regulatory Governance disposal of noncommercial associated gas in accordance with 16. Record Keeping The Management Committee, comprising members from NOCORP and Organization (which chairs the committee) and license holders, manages PSCs the Good Oilfield Practices. The Management Committee decides Article 5 of the Model Production Sharing Contract, 2006, requires and can issue decisions that are binding on operators. They whether excess associated gas is classified as commercial or the operator to maintain operational records (daily and monthly) 6. Regulatory Authority predominantly cover compliance with the existing regulation, noncommercial. in line with the Good Oilfield Practices, which also cover excess The formation of a new government in early 2021 has affected adherence to the Good Oilfield Practices, and the commerciality associated gas in commercial discoveries. There is no requirement the various regulators responsible for gas flaring and venting. The assessment of associated gas not used in petroleum operations, 10. Authorized Flaring or Venting to maintain logs for flared or vented gas volumes. establishment of the Ministry of Oil and Gas and the Ministry of referred to as excess associated gas in Article 1 of the Model See the previous section. the Environment is likely to be relevant to flaring and venting. At Production Sharing Contract, 2006 (see footnote 369). All 17. Data Compilation and Publishing the time of writing, not all changes had been fully implemented. commercial aspects of the PSCs are subject to negotiation The information provided in this and the next sections is therefore 11. Development Plans No evidence regarding data compilation and publishing could be between NOCORP and the contractors. subject to change. Article 13 of the Model Production Sharing Contract, 2006, requires found in the sources consulted. However, the Ministry of Oil and When it comes to environmental matters such as air emissions, the Management Committee to approve the development plan for Gas is producing overall oil and gas volume reports (not specific Within the oil and gas sector, responsibilities are clearly allocated the Environment Law, 2003, empowers the Environmental General to flaring and venting), which are shared with the oil and gas any excess associated gas deemed commercial. to the minister of oil and gas, who oversees the Petroleum Authority with monitoring and inspection. These powers could also operators active in the country. Committee. The ministry also influences the Management entail flaring- and venting-related matters, although NOCORP 12. Economic Evaluation Committees supervising the PSCs, given its authority over NOCORP, which sends members to the Management Committee is better positioned to cover environmental matters and private sector counterparts, issues with which it has extensive experience. Article 13 of the Model Production Sharing Contract, 2006, assigns F. Fines, Penalties, and Sanctions and also chairs it. the commerciality assessment of excess associated gas to the 18. Monetary Penalties 8. Monitoring and Enforcement Management Committee. If the gas is not commercial, NOCORP The Environmental General Authority was established as an No evidence regarding monetary penalties could be found in the can exercise the right to take the gas free of charge after independent and autonomous institution with its functions and Article 2 of the Petroleum Law, 1955, empowers the Ministry of sources consulted. separating it from oil. responsibilities laid out in the Environment Law, 2003 (see footnote Oil and Gas (mostly through the director of petroleum affairs) 370). Following recent changes in the government, the Ministry of to access production-related data. The ministry can also visit the Environment was established. It has assumed responsibility production facilities to ensure that operations are being conducted for, and control of, the Environmental General Authority. 112 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 113 Libya 19. Nonmonetary Penalties 24. Interplay with Midstream and Downstream Article 18 of the Petroleum Law, 1955 (see footnote 367) states Regulatory Framework that license revocation is possible for reasons stated in the Article 13 of the Model Production Sharing Contract, 2006, asks the bilateral commercial agreements with NOCORP. Article 5 of private and public parties involved to use any surplus capacity in the Model Production Sharing Contract, 2006 (see footnote 369) processing and transport facilities for excess associated gas, but requires operators to conduct all petroleum operations diligently this request does not constitute a formal requirement. and in line with the applicable petroleum and environmental laws and the Good Oilfield Practices. Article 25 allows for the termination of a PSC in the case of a material breach of the contractual obligations, provided that remedies have not been started within 90 days following the receipt of the formal notice. No evidence could be found of license revocation due to poor flaring and venting practices. G. Enabling Framework 20. Performance Requirements No evidence regarding performance requirements could be found in the sources consulted. However, the main performance standards stipulated in the key pieces of regulation revolve are based on the Good Oilfield Practices, as defined in Article 1 of the Model Production Sharing Contract, 2006 (see footnote 369). 21. Fiscal and Emission Reduction Incentives No evidence regarding fiscal and emission reduction incentives could be found in the sources consulted. 22. Use of Market-Based Principles No evidence regarding the use of market-based principles to reduce flaring, venting, or associated emissions could be found in the sources consulted. 23. Negotiated Agreements between the Public and the Private Sector Photo credit: © Said Zr/ Shutterstock No evidence regarding negotiated agreements between the public and the private sector could be found in the sources consulted. 114 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 115 Malaysia Libya 2 billion cubic meters of gas flared in 2021 A. Policy and Targets Despite the focus on sustainable development and environmental protection across these key government initiatives, no regulations (total oil production 510 thousand barrels per day) 1. Background and the Role of Reductions or government policies explicitly cover gas flaring and venting. in Meeting Environmental and Economic Instead, these topics are treated in confidential documents, such Objectives as the production and operations procedures and guidelines, and licensing arrangements, such as PSCs and risk service contracts. Between 2012 and 2021, oil production in Malaysia rose and Change in Flare Gas Volumes* Change in Flare Gas Intensity** peaked in 2016 before falling to the lowest level in 2021, 2. Targets and Limits significantly lower than that in 2012. The volume of gas flared fell to its lowest level in 2021, but due to the even more significant There is no evidence of any specific government-imposed flaring 2015-2021 2015-2020 2015-2021 2015-2020 decline in oil production, the flaring intensity did not fully track or venting-related targets or limits in the sources consulted. -46% -35% -31% -24% this significant downward movement (figure 13). There were 56 However, Petroleum Nasional Berhad (Petronas), the national oil individual flare sites in the last flare count, conducted in 2019. company, has publicly pledged to reach net-zero carbon emissions by 2050.375 It will do so by deploying (among other levers) its Malaysia has ratified both the Paris Agreement and the Kyoto operational strengths to reduce gas flaring and venting, capture Protocol/372 It submitted its first NDC373 to the UNFCCC in 2016 * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced methane emissions, and optimize production operations. and an update in 2021. Malaysia has committed to reducing its carbon intensity (GHG emissions as a percent of GDP) relative to 2005. The updated NDC increased the unconditional contribution B. Legal/Regulatory Framework Figure 13 Gas flaring volume and intensity in Malaysia, 2012–21 for carbon-intensity reduction from 35 percent in the 2016 and Contractual Rights Fl rin Int nsit Fl rin Volum submission to 45 percent. All seven GHGs are covered, but flaring and venting are not mentioned in the NDC, even though it notes 3. Primary and Secondary Legislation 4 18 the importance of the oil and gas industry as a key sector of the and Regulation Malaysian economy. 16 The Petroleum Development Act, 1974,376 forms the basis for all Malaysia has historically taken a strategic approach to domestic oil- and gas-related activities in Malaysia, defining items such as 14 energy issues, starting with the National Petroleum Policy, 1975 hydrocarbon ownership and the role of Petronas. The Petroleum Cubic m t rs (m³) of 3 (efficient utilization of petroleum resources); the National Energy Development Act, 1974 and Petronas’ Memorandum and Articles 12 Policy, 1979 (efficient utilization of energy and elimination of of Association, 1983,377 define the rights and responsibilities of r wasteful and nonproductive use); and the National Depletion Policy, Petronas. The Petroleum Regulations, 1974,378 complement the s fl r d/ 10 1980 (prolonging the life span of the nation’s oil and gas reserves. It Petroleum Development Act, 1974 regarding license applications s fl r d/b rr l of oil produc d 2 has continued adjusting and expanding these policies with follow- and data provision. The Gas Supply Act, 1993,379 covers gas billion m³ of 8 up initiatives. At the macroeconomic level, successive Malaysia transport and the related metering issues. The regulator in charge Plans 374 have aimed to put the country, its people, and economy on of it is defined in the Energy Commission Act, 2001.380 6 a growth trajectory. These aims include sustainable growth and the The Environmental Quality Act, 1974,381 established the principles 1 reduction of GHG emissions, with tCO2e a year per unit of GDP as a 4 of environmental protection. It is supported by the Environmental sustainable consumption and production indicator. 2 372 https://unfccc.int/node/61107 (accessed August 25, 2021). 373 https://www4.unfccc.int/sites/submissions/INDC/Published%20Documents/Malaysia/1/INDC%20Malaysia%20Final%2027%20November%202015%20Revised%20Final%20UNFCCC.pdf (accessed August 25, 2021). 374 https://www.pmo.gov.my/the-malaysia-plan/ (accessed August 28, 2021). 0 0 375 https://www.petronas.com/sustainability/net-zero-carbon-emissions (accessed August 25, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 376 http://www.fao.org/faolex/results/details/en/c/LEX-FAOC038181 (accessed August 25, 2021). 377 https://www.petronasgas.com/CorpGov/Documents/PGB%20M%20and%20A.pdf (accessed August 25, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 378 http://www.fao.org/faolex/results/details/en/c/LEX-FAOC040266/ (accessed August 25, 2021). This approach is applied to all countries covered in this report in a consistent manner. 379 https://resourcegovernance.org/sites/default/files/Gas%20Supply%20Act%201993.pdf (accessed August 25, 2021). 380 http://www.fao.org/faolex/results/details/en/c/LEX-FAOC099068 (accessed August 25, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 381 https://www.env.go.jp/en/recycle/asian_net/Country_Information/Law_N_Regulation/Malaysia/Malaysia_mal13278.pdf (accessed August 25, 2021). 116 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 117 Malaysia Quality (Clean Air) Regulation, 2014,382 and the Environmental Quality C. Regulatory Governance 1974, its subordinate director-general of environmental quality targets and approve plans for associated gas. Any planned flaring (Prescribed Activity) (Environmental Impact Assessment) Order, can issue emission licenses and carry out monitoring activities or venting requires justification. 2015. 383 The limitations set on air pollutants also apply to oil and and Organization and assessments across upstream, midstream, and downstream gas operations across upstream, midstream, and downstream operations. Given the MPM’s authority over upstream operations, 11. Development Plans 6. Regulatory Authority operations. it can be assumed that any upstream-specific action will be The PPGUA provides guidance regarding the field development The Petroleum Development Act, 1974, vests the powers and carried out in close coordination. The Malaysia-Thailand Joint Authority Procedures for Production plan and its review and approval, including the arrangement for responsibilities over hydrocarbon resources in Petronas. Petronas Operations, 2009, 384 is an intercountry agreement governing any potential gas flaring system in the overall development. As is under the control and direction of the prime minister (Section 3 8. Monitoring and Enforcement production operation procedures in shared areas. It sets ground a key principle, all new developments must be designed for zero of the Petroleum Development Act, 1974). The prime minister also rules for flaring and venting. The requirements for exemptions By monitoring the implementation of the PPGUA, the MPM gains continuous flaring and venting. has the power to make regulations relating to the exploration from these rules appear comparable to those stipulated in insights into the remaining lifecycle of upstream activities, and exploitation of hydrocarbons (Section 7), which he or she Section 34 of the Environmental Quality Act, 1974, in conjunction confidential arrangements with contractors and operators. including the use of associated gas, across the country’s portfolio. may delegate (Section 7A). The Malaysia Petroleum Management with the First Schedule of the Environmental Quality (Prescribed (MPM) within Petronas carries out the regulatory responsibilities The MPM can set gas supply targets for the operator and conduct The Petronas Procedures and Guidelines for Upstream Activities Activity) (Environmental Impact Assessment) Order, 2015 (see assigned to Petronas, making it the upstream regulator in quarterly performance reviews. It also sets annual flaring or (PPGUA) 385 state detailed country-specific requirements, including footnote 383) entitles the minister of environment and water to Malaysia. venting limits. If these limits are exceeded, the operator needs to the key provision that upstream activities are to be carried out ask for an EIA for upstream oil and gas developments, including notify the MPM and provide a mitigation plan. The MPM can then, in line with good and modern petroleum practices, including Based on the Environmental Quality Act, 1974, the minister pipeline and storage construction plans (no requirements for at its sole discretion, issue an exemption. Noncompliance can lead flaring and venting. Although not a regulation, these guidelines of environment and water is responsible for managing installations specific to flaring and venting). The director-general to legal and financial consequences. carry significant weight, given the influence of Petronas as the the environment and limiting waste, emissions, and other of environmental quality reviews and approves or rejects the hydrocarbon resource owner with a direct reporting line to the environmentally adverse factors. In line with Section 3, he or development plans based on the submitted report. In case of prime minister. she appoints the director-general of environmental quality, D. Licensing/Process Approval rejection, a resubmission with an improved development concept who administers the provisions of the Environmental Quality Act, is typically allowed. 4. Legislative Jurisdictions 1974; the Environmental Quality (Clean Air) Regulation, 2014 (see 9. Flaring or Venting without Prior Approval Hydrocarbon and environmental matters are subject to national footnote 382); and other laws and regulations. On issues such as Section 10 of the Malaysia-Thailand Joint Authority Procedures 12. Economic Evaluation emissions management, the responsible Petronas department for Production Operations, 2009 (see footnote 384) bans flaring laws and jurisdiction. Flaring and venting are not publicly No evidence regarding economic evaluations could be found in the (MPM for upstream activities and the health-safety-environment and venting without prior approval except in the following regulated but are governed by Petronas’ commitments. sources consulted. department for activities covering all business lines) typically circumstances: liaises with the director-general of environmental quality. 5. Associated Gas Ownership • during well cleaning and testing periods (not exceeding 48 E. Measurement and Reporting hours) Following Section 2 of the Petroleum Development Act, 1974, 7. Regulatory Mandates and Responsibilities ownership and exclusive exploration and development rights • in emergencies, such as shutdowns or pressure relief 13. Measurement and Reporting Requirements The MPM is in charge of production-licensing arrangements with over oil and gas are vested in Petronas. Subject to an approved • during maintenance (not exceeding one week) The PPGUA provides guidance regarding minimum technical external companies, including the terms of contracts; controls development plan, Petronas has the option of maintaining title • during temporary equipment failure (not exceeding 72 hours) requirements and the approval process for metering systems. the work programs and budgets; and oversees compliance to the associated gas that is neither used in operations nor • during gas release from facilities when alternative uses of gas Flaring and venting volumes need to be reported, in line with with guidelines and regulations. As flaring- and venting-related marketed. As with all other PSCs, title to cost oil and gas and the are not economic. measurement requirements, every month (see section 8 of this matters are captured in the PPGUA (typically referred to in contractor’s share of profit oil and gas is transferred to the PSC chapter). confidential licensing arrangements), the MPM has significant contractor. By contrast, under risk service contracts, which are 10. Authorized Flaring or Venting influence over the treatment of associated gas. In line with Section 8 of the Malaysia-Thailand Joint Authority fee-based, no title to any oil and gas produced is transferred. Based on the responsibilities vested in the minister of environment Procedures for Production Operations, 2009 (see footnote 384), Section 10 of the Malaysia-Thailand Joint Authority Procedures for and water, according to Section 3 of the Environmental Quality Act, the license holder must maintain production reports, including Production Operations, 2009, in alignment with the requirements of volumes of flared and vented gas, and submit them to the the PPGUA, requires prior approval of any flaring or venting other authorities. Sections 12–15 also detail metering and measurement 382 https://www.ecolex.org/details/legislation/environmental-quality-clean-air-regulations-2014-lex-faoc176891/ (accessed August 25, 2021). than those that occur under conditions listed in the preceding 383 https://eswis.doe.gov.my/helpDocs/No.4%20-%202015/Perintah-Kualiti-Alam-Sekeliling-Aktiviti-Yang-Ditetapkan-Eia-2015_EN.pdf (accessed August 25, 2021). requirements. 384 https://www.mtja.org/pdf/MTJA_procedures_for_production_operations_rev1_14dec09_bw.pdf (accessed August 25, 2021). section. The PPGUA gives the MPM the authority to set gas supply 385 https://platinum.petronas.com/ppgua/pages/ppgua.aspx (password protected) (accessed August 25, 2021). 118 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 119 Malaysia Malaysia 14. Measurement Frequency and Methods 19. Nonmonetary Penalties gas supply to consumers through pipelines. The processing or refining of petroleum or manufacturing of petrochemical products According to Section 8 of the Malaysia-Thailand Joint Authority Termination clauses are typically covered in the PSCs and risk from petroleum is reserved for Petronas. Any exception requires Procedures for Production Operations, 2009, the license holder must service contracts, none of which is publicly available. They state the prime minister’s approval (Section 6 of the Environmental keep daily operations logs and measure production daily and that any noncompliance with the MPM requirements (including Quality Act, 1974). There is no evidence in the sources consulted monthly. Section 14 states that the metering system should be in the PPGUA) can be sanctioned. Section 24 of the Environmental that any exceptions or privileges for using associated gas have accordance with the standards of the American Gas Association or Quality (Clean Air) Regulation, 2014, gives the director-general of been granted. the American Petroleum Institute. environmental quality the right to issue a prohibition order to discontinue operations, if necessary, to safeguard public health, 15. Engineering Estimates safety, or welfare. Section 22 allows the director-general to impose additional requirements on operations or take any other No evidence regarding engineering estimates could be found in the appropriate measure deemed necessary. sources consulted. 16. Record Keeping G. Enabling Framework In line with Section 8 of the Malaysia-Thailand Joint Authority 20. Performance Requirements Procedures for Production Operations, 2009, the license holder must The Third Schedule of the Environmental Quality (Clean Air) keep the records of the operations logs and production reports for Regulation, 2014 (see footnote 382) on limit values and technical at least a year. standards, covers the midstream and downstream oil and gas sectors but not the upstream sectors. 17. Data Compilation and Publishing In its annual and biannual sustainability reports,386 Petronas 21. Fiscal and Emission Reduction Incentives publishes flaring and venting data. In its role as Malaysia’s national No evidence regarding fiscal and emission reduction incentives oil company, it also provides country-wide data for NDC purposes. could be found in the sources consulted. F. Fines, Penalties, and Sanctions 22. Use of Market-Based Principles No evidence regarding the use of market-based principles to 18. Monetary Penalties reduce flaring, venting, or associated emissions could be found in Following Section 7 of the Petroleum Development Act, 1974, the sources consulted. any violation of the act’s provisions can be sanctioned with imprisonment or fines. Section 29 of the Environmental Quality 23. Negotiated Agreements between the Public (Clean Air) Regulation, 2014 (see footnote 382) provides for and the Private Sector imprisonment or fines for violations of the provisions of the Environmental Quality Act, 1974. The PPGUA is aligned with the No evidence regarding negotiated agreements between the public above provisions, in that any noncompliance with their guidelines, and the private sector could be found in the sources consulted. including the provisions on flaring and venting, can lead to legal and financial consequences. No evidence could be found in the 24. Interplay with Midstream and Downstream sources consulted that these provisions have been explicitly Regulatory Framework applied to flaring- or venting-related contraventions. Section 1 of the Gas Supply Act, 1993 (see footnote 379) regulates 386 https://www.petronas.com/sites/default/files/Media/2nd%20Half%202020%20Sustainability%20Disclosure.pdf and https://www.petronas.com/sites/default/files/downloads/PETRONAS%20 Sustainability%20Report%202018.pdf (accessed August 25, 2021). 120 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 121 Mexico Malaysia 6.51 billion cubic meters of gas flared in 2021 A. Policy and Targets 2. Targets and Limits Article 14 of the CNH Technical Provisions for the Use of Associated (total oil production 1,735 thousand barrels per day) 1. Background and the Role of Reductions Natural Gas in the Exploration and Production of Hydrocarbons, in Meeting Environmental and Economic DOF: 07/01/2016389 specifies the methodologies and criteria Objectives for operators to structure their associated gas utilization Between 2012 and 2021, oil production in Mexico fell by one-third, programs and targets. For exploration, the operator indicates Change in Flare Gas Volumes* Change in Flare Gas Intensity** but the volume of gas flared increased by one-third and the flaring the volumes of associated gas that can be utilized given existing intensity more than doubled (figure 14). While the volume of gas technologies, infrastructure, and knowledge of the fields to be flared shows an upward trend since 2018, oil production remained explored. The CNH then reviews the associated gas utilization 2015-2021 2015-2020 2015-2021 2015-2020 largely stable, leading to a corresponding increase in flaring program to establish the targets to be applied throughout the 30% 15% 73% 55% intensity. There were 115 individual flare sites in the last flare exploration stage. For production, the operator needs to achieve count, conducted in 2019. and maintain an annual utilization rate for associated gas of 98 percent. The target must be reached within three years of the In 2016, Mexico endorsed the Zero Routine Flaring by 2030 start of operations. The operator should detail the actions and initiative (World Bank, n.d.; see footnote 3). Mexico also investments needed to achieve and maintain the target annually. * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced participates in the Global Methane Initiative (n.d.; see footnote 29) The CNH reviews the proposed targets and utilization program, and the Climate and Clean Air Coalition (n.d.; see footnote 30). In and where appropriate, modifies and establishes the final targets its updated NDC submitted to the UNFCCC in December 2020,387 to be implemented throughout the production stage. Figure 14 Gas flaring volume and intensity in Mexico, 2012–21 Mexico committed to unconditional contributions of a 22 percent Fl rin Int nsit Fl rin Volum reduction in GHG emissions and a 51 percent reduction in black Article 15 permits operators to propose an adjusted gas utilization carbon by 2030 compared with a business-as-usual scenario. program to the CNH if field conditions make it uneconomic to 7 10 reach the authorized targets after the initial three-year period. In 2016, the National Hydrocarbons Commission (Comisión The CNH may adjust the initial target to maximize crude oil and 9 Nacional de Hidrocarburos [CNH]) set guidelines for the national 6 natural gas production over the long term under economically oil company Petróleos Mexicanos (Pemex) to reduce flaring. The 8 viable conditions. guidelines were expected to be enforced over the coming years. Cubic m t rs (m³) of However, the upstream sector’s lack of financial resources and B. Legal/Regulatory Framework 5 7 investment priorities have prevented major projects from being and Contractual Rights r 6 implemented. s fl r d/ 4 s fl r d/b rr l of oil produc d 5 In June 2016, Mexico joined the United States and Canada in 3. Primary and Secondary Legislation billion m³ of calling for a 40–45 percent reduction in methane emissions 3 and Regulation 4 from their oil and gas sectors by 2025. In November 2018, Mexico’s Agency for Safety, Energy and Environment (Agencia de In 2008, the Mexican Congress issued the Law of the National 2 3 Seguridad, Energía y Ambiente [ASEA]) released the Guidelines for Hydrocarbon Commission, DOF: 11/28/2008.390 Article 3 assigns the Prevention and Comprehensive Control of Methane Emissions from responsibility for regulating the use of natural gas to minimize gas 2 the Hydrocarbons Sector, DOF: 06/11/2018,388 to meet this target. flaring and venting in oil and gas exploration and production to the 1 ASEA’s guidelines require new and existing facilities across the CNH. Article 43 of the Hydrocarbons Law, 2014,391 affirms the CNH’s 1 value chain to meet facility-wide emission limits. responsibility for overseeing the use of associated natural gas. 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 387 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Mexico%20First/NDC-Eng-Dec30.pdf accessed September 14, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 388 http://www.dof.gob.mx/nota_detalle.php?codigo=5543033&fecha=06/11/2018 (accessed August 18, 2021). This approach is applied to all countries covered in this report in a consistent manner. 389 https://www.dof.gob.mx/nota_detalle.php?codigo=5422286&fecha=07/01/2016 (accessed August 18, 2021). 390 http://www.dof.gob.mx/nota_detalle.php?codigo=5070929&fecha=28/11/2008 (accessed August 18, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 391 http://www.diputados.gob.mx/LeyesBiblio/ref/lhidro/LHidro_orig_11ago14.pdf (accessed August 19, 2021). 122 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 123 Mexico Mexico’s oil and gas sector is also subject to the General Law on which sets the gas price at the point the gas enters the Integrated production, processing, transportation, refining, and petrochemicals. of Hydrocarbons, the authorization to flare associated gas is Ecological Equilibrium and Environmental Protection, 2021,392 and National Transportation and Storage System. ASEA can mandate operators to fix sources of polluting emissions, included in the exploration or development plan’s approval other technical environmental standards issued by the Ministry of including those in the oil and gas sector. The law also provides for according to detailed instructions in Articles 14 and 15. Articles Environment (Secretaría de Medio Ambiente y Recursos Naturales [SEMARNAT]) and ASEA. They may impose additional conditions C. Regulatory Governance interinstitutional coordination. Additionally, every contractor is required to submit an EIA and obtain approval from ASEA, granted in 18–27 of the Regulation of the General Law of Ecological Balance and Environmental Protection in the Field of Prevention and Control of on flaring and venting as part of the approval of the environmental and Organization an environmental license, before initiating operations. Atmosphere Pollution, 2014,402 require certain stationary sources— license for upstream petroleum activities. those that emit or may emit odors, gases, solid particles, or liquid 6. Regulatory Authority particles into the atmosphere—to obtain operating licenses, ASEA Guidelines for the Prevention and Comprehensive Control 8. Monitoring and Enforcement Article 3 of the Law of the National Hydrocarbon Commission which SEMARNAT issues by for an indefinite term, and outline the of Methane Emissions from the Hydrocarbons Sector (see Articles 1–4 of the Law of the National Hydrocarbon Commission establishes the CNH394 as the regulator of oil and gas exploration requirements and steps involved in the license application. For the footnote 388), issued as part of Mexico’s international climate empower the CNH to implement the measures necessary to and production. The CNH is under the Secretariat of Energy oil and gas sector, the license application is made to ASEA. commitments, prohibit gas venting, except in emergencies. monitor and audit the oil and gas industry. The CNH can supervise, (Secretaría de Energía [SENER]).395 The CNH’s responsibilities verify, monitor, and, where appropriate, certify compliance with 4. Legislative Jurisdictions include regulating the use of associated natural gas and defining the law’s provisions. Sanctions can be applied in line with the 11. Development Plans technical and operational standards to maximize the recovery Hydrocarbons Law, 2014 (see footnote 391). The CNH may also Article 44 of the Hydrocarbons Law, 2014 (see footnote 391) Gas flaring is a matter of national jurisdiction. Article 95 of the and the value of hydrocarbons in the long term while ensuring the accredit third parties to supervise, inspect, and verify activities. requires oil and gas producers to seek approval from the CNH for Hydrocarbons Law, 2014, vests the regulatory oversight of the oil minimization of gas flaring and venting. ASEA, which reports to exploration and development plans. The CNH Technical Provisions and gas sector exclusively in the federal government. SEMARNAT, oversees the oil and gas sector’s industrial safety, operational safety, and environmental protection.396 D. Licensing/Process Approval for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons require the treatment of associated 5. Associated Gas Ownership natural gas, including flaring, to be specified in exploration and 7. Regulatory Mandates and Responsibilities 9. Flaring or Venting without Prior Approval Article 1 of the Hydrocarbons Law, 2014, vests the “perpetual” development plans. According to Article 5 of the CNH Technical ownership of subsoil oil and gas in the state. Article 4 of the The mechanisms for controlling and permitting flaring and venting are Article 4 of the CNH Technical Provisions for the Use of Associated Provisions, the operator may utilize the associated natural CNH Technical Provisions for the Use of Associated Natural Gas within the remit of the CNH. In carrying out its role, the CNH draws Natural Gas in the Exploration and Production of Hydrocarbons (see gas for the needs of the operation such as fuel for turbines, or in the Exploration and Production of Hydrocarbons states that on the hydrocarbon policy, the National Energy Strategy, and the footnote 398) states that gas venting is allowed only for safety pneumatic pumping or other lifting systems that require gas associated natural gas is the property of the state and that its programs issued by SENER, the head of which is the chair of Pemex’s reasons in emergency cases. Article 6 specifies that the flaring of injection. Alternatively, gas can be conserved through re-injection production is subject to the terms established in the Hydrocarbons board of directors. Historically, Pemex 397 was the only gas producer in associated natural gas is allowed during well testing (as long as or transferred to another contract area or third party via a Law, 2014, assignments, and contracts. CNH technical provisions Mexico. The CNH Technical Provisions for the Use of Associated Natural it is included in the exploration or development plans approved commercial transaction. regulate the use of natural gas. Gas in the Exploration and Production of Hydrocarbons 398 prescribe by the CNH), in situations that pose safety threats, and when productive use is not viable (as shown by the technical-economic Article 10 requires the operator to submit to the CNH a program new methods for measuring gas flaring and venting and attempt to According to the Hydrocarbons Income Act, 2014,393 PSCs and analysis required in Article 11 and approved by the CNH). Article to use associated gas as part of the development plan for each promote gas utilization beyond re-injection. license contracts, the two main forms of agreements in Mexico, 21 requires operators to notify the Commission when they have assignment and contract containing the following information: regulate the ownership of extracted oil and gas. Under PSCs, title ASEA can impose conditions related to flaring and venting when carried out flaring during well tests. The notification should be • a technical-economic analysis to a part of the production is transferred to the contractor in the issuing an environmental license. These conditions focus on preventing sent within 48 hours of the test. If emergency gas venting occurs, form of cost and profit oil and gas. Under a license contract, the • the volume of associated gas to be used and mitigating GHG emissions under Articles 8 and 12 of the ASEA must be informed of the volume vented. The volume of gas contractor owns all extracted oil and gas and can sell its share Regulation of the General Law of Climatic Change (RLGCC Regulation), • a description of the actions and investments for the use, flared or vented must adhere to the provisions issued by the CNH of production on the market. The gas price (often linked to a 2014.399 ASEA Law, 2014,400 extends the need for an EIA to construct conservation, transfer, and, when necessary, flaring, including based on the gas utilization program. The CNH website includes an formula) can be established in the contract or determined by the and operate facilities across the oil and gas value chain, including a general description of facilities and equipment dedicated to example of the implementation experience in the Tepetate field.401 Energy Regulatory Commission (Comisión Reguladora de Energía), flaring or its use, identifying its location, available measurement systems, and maintenance procedures 392 http://biblioteca.semarnat.gob.mx/janium/Documentos/Ciga/agenda/PP03/LGEEPA.pdf (accessed August 18, 2021). 393 http://www.diputados.gob.mx/LeyesBiblio/ref/lih/LIH_orig_11ago14.pdf (accessed August 19, 2021). 10. Authorized Flaring or Venting • a schedule of well tests to be performed 394 https://www.gob.mx/cnh (accessed August 19, 2021). 395 https://www.gob.mx/sener (accessed August 18, 2021). According to Article 10 of the CNH Technical Provisions for the • the operational performance indicators, which must detail the 396 https://www.gob.mx/semarnat (accessed August 19, 2021). Use of Associated Natural Gas in the Exploration and Production 397 https://www.pemex.com/Paginas/default.aspx (accessed August 19, 2021). 398 https://sidof.segob.gob.mx/notas/5588817 (accessed August 19, 2021). 399 https://www.gob.mx/cms/uploads/attachment/file/41923/2015_rene_dof_reglamento_lgcc_en_materia_rene.pdf (accessed August 19, 2021). 401 https://www.gob.mx/cms/uploads/attachment/file/520280/II.4_Dictamen_PAGNA_Asignacion_A-0330-M-Campo_Tepetate_Norte_Chinampa_VF.pdf (accessed August 19, 2021). 400 http://www.diputados.gob.mx/LeyesBiblio/pdf/LANSI_200521.pdf (accessed August 19, 2021). 402 http://www.diputados.gob.mx/LeyesBiblio/regley/Reg_LGEEPA_MPCCA_311014.pdf (accessed August 28, 2021). 124 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 125 Mexico Mexico name and formula of the indicator, frequency of measurement, increased substantially, triggering efforts to reduce emissions, that had resulted in gas flaring. Article 25 requires the CNH to gas from flaring may not exceed 5 percent. However, when the targets, and measurement parameters. particularly in the Northwest Marine Region (in the Cantarell review the quarterly reports within 15 business days of receipt use and re-injection have fiscal or commercial implications, the deposit). In December 2009, the CNH promulgated Resolution and authorizes the CNH to request additional information from measurement uncertainty levels are limited to 1 percent. If natural The programs must include month-by-month forecasts for CNH. 06.001/09, 2009,406 prescribing procedures and techniques the operator. Article 26 requires operators to report monthly the gas is vented for exceptional reasons, the operator should report associated gas use during the first three years and annual to reduce and prevent gas flaring and venting in hydrocarbon associated natural gas balance per the provisions of the CNH such venting to the CNH. In all cases, the chemical composition of forecasts thereafter. The CNH website provides examples of exploration and production. Under these guidelines, Pemex Technical Guidelines in Hydrocarbon Measurement. The information the gas should be determined, either by sampling and laboratory development plans that include approved associated gas use was required to submit to the CNH for its approval oil impact should be submitted following a format found in the CNH Technical analysis or by using installed continuous analyzers. programs. One example is contract CNH-M4-ÉBANO/2018.403 statements for its new projects using the most appropriate Provisions for the Use of Associated Natural Gas in the Exploration and technologies. Noncompliance with these guidelines triggered Production of Hydrocarbons (CNH.17.005/2019). 15. Engineering Estimates 12. Economic Evaluation sanctions. The regulation is mainly performance-based and The ASEA Guidelines for the Prevention and Comprehensive Control of The CNH Technical Guidelines in Hydrocarbon Measurement, requires Pemex to identify and evaluate feasible options for Article 6 of the CNH Technical Provisions for the Use of Associated Methane Emissions from the Hydrocarbons Sector (see footnote 388) 2015, require an indirect gas volume estimation to be made in developing new facilities and increasing associated gas utilization. Natural Gas in the Exploration and Production of Hydrocarbons requires operators to identify the source and quantify the volume accordance with gas-to-oil ratio accounting or by using a system The guidelines expressly require Pemex to provide an economic allows flaring only when technical and economic analysis shows of methane emissions. The information must be reported annually. balance or simulation. According to the ASEA Guidelines for the evaluation and implementation strategy for re-injection and that it is the only viable option. Article 11 requires operators to Prevention and Comprehensive Control of Methane Emissions from the on-site power generation using the cost of utilization treatment conduct a technical and economic analysis to develop alternatives equipment as a factor of analysis. 14. Measurement Frequency and Methods Hydrocarbons Sector (see footnote 388), the volumes of methane for the use of associated gas, to be carried out in line with the emitted may be calculated or measured, but in all cases, the target established and the criteria detailed in Articles 4 and Article 10 of the CNH Technical Guidelines in Hydrocarbon operator must provide a technical justification for the choice of 5 of the Technical Provisions. The analysis should consider E. Measurement and Reporting Measurement, 2015, requires daily and monthly reporting of oil and the methodology applied. If quantification involves calculations, it the composition and volume of the gas; the proximity of the gas measurements to the CNH for the following: may be based on the following: processing, transportation, and distribution infrastructure; the 13. Measurement and Reporting Requirements • the daily volume and quality of production, disaggregating the value of the gas; and the necessary investments to utilize it. • material balance; Article 16 of the CNH Technical Provisions for the Use of Associated average output of oil, condensate, gas, and water The guidelines contain case-by-case evaluation elements. The • mathematical models Natural Gas in the Exploration and Production of Hydrocarbons • the volume of hydrocarbons extracted per oilfield, if applicable regulator and operator are expected to work together to find the • engineering calculations (see footnote 398) requires the operator to follow the standards • the hydrocarbon balance from the well and, if applicable, from best solution for a particular field. Any modifications operators • equipment emission factors established by the manufacturer. established in the CNH Technical Guidelines in Hydrocarbon the oilfield to the measurement point propose to their associated natural gas utilization program Measurement, 2015,407 for measuring and reporting the volumes need to be supplemented with an update of the technical and • the volume of natural gas used or flared of the associated natural gas used. These guidelines were 16. Record Keeping economic analysis, justifying the actions, alternatives, and where • the volume of natural gas vented in exceptional circumstances. subsequently updated in February 2016,408 August 2016,409 and appropriate, a new target to be adopted. Article 33 of the CNH Technical Provisions for the Use of Associated December 2017.410 Article 16 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons (see Article 7 requires operators to maintain the financial resources footnote 398) requires the operator to make available to the CNH Articles 23 and 24 of the CNH Technical Provisions for the Use Natural Gas in the Exploration and Production of Hydrocarbons to cover any damages caused by flaring. The allowed amounts of at all times any information and documents related to the use of of Associated Natural Gas in the Exploration and Production of requires that, for the measurement and reporting of associated flaring are determined according to the Hydrocarbons Law, 2014 associated gas, including the equipment and instruments used. Hydrocarbons require the operator to provide quarterly reporting natural gas volumes, operators consider the conditions of (see footnote 391) or the project-related contracts. The CNH This information should be retained for five years from the effective of progress in implementing the associated gas use program. The pressure and temperature as well as the standards in the existing website provides examples of implementation experience. Two date of the assignment or the corresponding contract. Article 21 report should follow the CNH format outline411 and include the measurement guidelines issued by the CNH. Article 24 states that examples are the Tierra Blanca404 and the Muro405 fields. of ASEA’s Guidelines for the Prevention and Comprehensive Control of volumes of associated gas used, justification for any deviations the program is monitored through quarterly reports provided by from the gas use program, and a summary of unscheduled events the operator to the CNH. These quarterly reports are available on Methane Emissions from the Hydrocarbons Sector (see footnote 388) Between 2007 and 2009, Pemex’s gas flaring and venting levels the CNH’s website. requires the maintenance of records related to methane-emitting 403 https://www.gob.mx/cms/uploads/attachment/file/494577/20190528_SN_Dictamen_PD_Ebano_VP.pdf (accessed August 19, 2021). components and activities at facilities for five years. 404 https://www.gob.mx/cms/uploads/attachment/file/520286/II.4_Dictamen_PAGNA_Asignacion_A-0394-M-Campo_Tierra_Blanca_VF.pdf (accessed August 19, 2021). Article 25 of the CNH Technical Guidelines in Hydrocarbon 405 https://www.gob.mx/cms/uploads/attachment/file/520206/II.4_Dictamen_PAGNA_Asignacion_A-0229-M-Campo_Muro_VF.pdf (accessed August 19, 2021). Measurement, 2015, requires the operator to measure and report 406 http://dof.gob.mx/nota_detalle.php?codigo=5122914&fecha=04/12/2009 (accessed August 20, 2021). 407 https://sidof.segob.gob.mx/notas/5409741 (accessed August 19, 2021). to the CNH the volume of natural gas produced, used, re-injected, 408 https://sidof.segob.gob.mx/notas/5425302 (accessed August 19, 2021). 409 https://sidof.segob.gob.mx/notas/5446478 (accessed August 19, 2021). flared, and vented. Natural gas used should be measured directly 410 https://sidof.segob.gob.mx/notas/5507354 (accessed August 19, 2021). through flow meters. The uncertainty levels for measuring natural 411 https://cnh.gob.mx/regulacion/formatos/?pnl=4881 (accessed August 19, 2021). 126 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 127 Mexico Mexico 17. Data Compilation and Publishing the Federal Law of Administrative Procedure, 2018.415 Article 25 of the G. Enabling Framework began January 1, 2020. Operators of the installations associated ASEA Law, 2014 (see footnote 400) also provides for penalties up to with the development, production, transportation, and distribution The CNH compiles data submitted by operators on flaring 3 million times the minimum wage depending on the severity of the 20. Performance Requirements of hydrocarbons can participate in the trading scheme. Only and venting for public disclosure on the website of the CNH’s violation of the environmental mandates. operators of those facilities with annual emissions of 100,000 Hydrocarbon Information System.412 Information on gas use Article 4 of the CNH Technical Provisions for the Use of Associated tCO2 or more can participate in the trial program. demonstrates the rising volumes of gas that have not been used Natural Gas in the Exploration and Production of Hydrocarbons (see in operations or marketed in recent years.413 Since late 2020, the 19. Nonmonetary Penalties footnote 389) requires operators to conserve associated natural 23. Negotiated Agreements between the Public percentage of gas used fell below 90 percent, well below the 98 No specific nonmonetary penalties for flaring or venting were gas and sets technical standards. SEMARNAT and ASEA have percent target (see section 2 of this chapter). and the Private Sector found. However, Article 85 of the Hydrocarbons Law, 2014, states technical and environmental standards regarding emissions from that within the scope of their oversight, SENER and the CNH oil and gas operations. Articles 71–85 of the ASEA Guidelines for No evidence regarding negotiated agreements between the public F. Fines, Penalties, and Sanctions should sanction serious or repeated violations of the Hydrocarbon the Prevention and Comprehensive Control of Methane Emissions from and the private sector could be found in the sources consulted. Law with suspension or revocation of contracts or removal or the Hydrocarbons Sector cover emissions control measures, such as 18. Monetary Penalties disqualification of the personnel who provided their services to requirements regarding fugitive emission detection systems and 24. Interplay with Midstream and Downstream an operator, assignee, or contractor. Article 70 of the Federal equipment, including the following: Regulatory Framework Article 7 of the CNH Technical Provisions for the Use of Associated Law of Administrative Procedure, 2018, states that administrative Natural Gas in the Exploration and Production of Hydrocarbons • quarterly comprehensive leak-detection-and-repair programs The Pemex Law, 2008,419 created a new legal framework for sanctions should be provided in the respective laws and may states that flaring of associated gas, a nonrenewable resource, • replacement or installation of zero-emitting venting equipment the national oil company. At the same time, responsibility for consist of the following: outside of the approved utilization program would cause an upstream regulation was shifted to the CNH, and the functions • prioritization of capture technologies over flaring to reduce economic loss to the nation and that operators must have • warning of SENER and the Energy Regulatory Commission were emissions from tanks and other equipment the necessary financial resources to cover such losses. This • fine strengthened. In 2013, amendments to Articles 25, 27, and 28 • standards for monitoring and reporting. compensation is in addition to any penalties that may be of the Constitution, 1917,420 were adopted. They allowed for the • additional fine for each day the violation persists imposed under other laws and regulations. Article 34 provides participation of private firms in activities previously reserved for • detention for up to 36 hours 21. Fiscal and Emission Reduction Incentives the state. In 2014, additional transitory articles were signed into that, based on monitoring and supervision, the CNH may initiate • temporary or permanent closure, partial or total closure of No evidence regarding fiscal and other incentives for emission law outlining the main aspects of the secondary legislation needed a sanctioning administrative procedure to determine whether facilities reductions could be found in the sources consulted. In fact, there to implement the different sector legislative changes. there was noncompliance with the technical provisions. Article 35 provides that violations of these provisions will be sanctioned • others indicated by the laws or regulations. is a disincentive to capture associated gas, because the value The 2014 secondary legislation created two bodies—the National in accordance with Articles 85–87 of the Hydrocarbons Law, 2014 of associated gas calculated for royalty purposes is higher than Article 99 of the Regulation of Hydrocarbons Law, 2014,416 details Center for Control of Natural Gas (Centro Nacional de Control (see footnote 391) or specific contracts. the value of nonassociated gas until the contractual price of the procedures and timelines the administrative authorities must del Gas Natural) and National Energy Control Center (Centro natural gas reaches a certain level. The formulas for calculating According to Article 85 of the Hydrocarbons Law, 2014, the follow when imposing fines. Sanctions should be applied without Nacional de Control de Energía)—to operate, monitor, manage, the value of associated and nonassociated gas can be found in seriousness of the violation will be considered when determining prejudice to the civil, criminal, or administrative liability that and coordinate the gas and electricity networks. The National Article 24 of the Hydrocarbon Income Law, 2014,417 which sets $5.5 a sanction. SENER sanctions noncompliance with the terms and results from the application of sanctions by other legal systems Center for Control of Natural Gas was tasked with managing the per mmBtu as the natural gas price above which associated and conditions established in the assignments and contracts, with a fine and, where appropriate, from the revocation of the assignment, old Pemex gas pipeline network. Pemex withdrew from natural nonassociated gas attain the same royalty rates. of 15,000–75,000 times the minimum wage. 414 Operators failing to permit, or authorization, or the termination of the contract. gas transportation, and private investors carried out a rapid comply with an exploration plan or production development plan will expansion of the gas pipeline network. The pipeline transport be penalized with a fine of 150,000–3 million times the minimum According to Article 25 of the ASEA Law, 2014 (see footnote 400), 22. Use of Market-Based Principles capacity was tendered to interested shippers bidding through the ASEA can suspend or revoke licenses, authorizations, permits, or wage. In the case of oil and gas development and production Mexico is working on an Emissions Trading System (Sistema de open season process, and open access to the natural gas network registrations in case of repeat or serious violations or nonpayment activities that do not have a measurement system approved by the Comercio de Emisiones) Test Program. 418 In 2018, an amendment was established. Interconnections with the US pipeline system of financial penalties. However, ASEA reportedly favors a CNH, a fine of three–six million times the minimum wage may be to the General Law on Climate Change (under SEMARNAT) “corrective enforcement” scheme under which operators can find a were strengthened. levied. The application of sanctions and payments are regulated by established an emissions trading system that promotes emission solution to achieve the required reduction. reductions at the lowest possible cost. A three-year trial program 412 https://hidrocarburos.gob.mx/estad%C3%ADsticas/ (accessed August 19, 2021). 413 https://hidrocarburos.gob.mx/media/4402/aprovechamiento-de-gas-natural-mar2021.pdf (accessed August 19, 2021). 417 https://www.dof.gob.mx/nota_detalle_popup.php?codigo=5355983 (accessed August 19, 2021). 414 The term minimum wage means the general minimum daily wage in the Federal District at the time the offense was committed. 418 https://icapcarbonaction.com/en/?option=com_etsmap&task=export&format=pdf&layout=list&systems[]=59 (accessed August 20, 2021). 415 http://www.diputados.gob.mx/LeyesBiblio/pdf/112_180518.pdf (accessed August 19, 2021). 419 http://www.diputados.gob.mx/LeyesBiblio/abro/lpm_2008/LPM_orig_28nov08.pdf (accessed August 20, 2021). 416 http://dof.gob.mx/nota_detalle.php?codigo=5366671&fecha=31/10/2014 (accessed August 19, 2021). 420 https://www.constituteproject.org/constitution/Mexico_2015.pdf?lang=en (accessed August 20, 2021). 128 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 129 Nigeria Mexico 6.63 billion cubic meters of gas flared in 2021 A. Policy and Targets the government to taking measures to ensure the development of flare capture and utilization projects and to work collaboratively (total oil production 1,547 thousand barrels per day) 1. Background and the Role of Reductions with the industry, development partners, providers of flare- capture technologies, and third-party investors. The policy also in Meeting Environmental and Economic points out that the gas flaring penalty (at the time equivalent to Objectives US$0.03/thousand standard cubic feet [mscf]) was too low to act Change in Flare Gas Volumes* Change in Flare Gas Intensity** Nigeria’s oil production fell by nearly 40 percent from 2012 to as a disincentive (making it more economic to flare than to pay the 2021. During this period, the flaring intensity barely changed. penalty) and needed to be raised substantially. The annual Oil and The volume of gas flared declined broadly in proportion to oil Gas Industry Reports published by the Nigeria Extractive Industries Transparency Initiative (NEITI) show that, even at this very low 2015-2021 2015-2020 2015-2021 2015-2020 production, falling 25 percent, from 9.6 bcm to 6.6 bcm (figure 15). There were 166 individual flare sites in the last flare count, penalty rate, some producers have not paid flaring penalties in full -13% -6% 22% 15% conducted in 2019. In June 2016, Nigeria endorsed the World Bank’s Zero Routine Flaring by 2030 initiative (World Bank, n.d.; see footnote 3). It also or at all.423 In 2016, the government launched the Nigeria Gas Flare Commercialization Program (NGFCP),424 targeting 2020 as the participates in the Global Methane Initiative (n.d.; see footnote year by which routine flaring would be ended. This target was * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced 29) and the Climate and Clean Air Coalition (n.d.; see footnote 30). not met. In 2018, the government issued the Flare Gas (Prevention Nigeria submitted its first NDC to the UNFCCC in 2015. It included of Waste and Pollution) Regulations, 2018,425 followed by four sets gas flaring reduction as a mitigation measure, it submitted of associated guidelines.426 An important feature of the 2018 Figure 15 Gas flaring volume and intensity in Nigeria, 2012–21 regulations was a marked increase in the flare payment rate.427 an updated NDC in July 2021.421 The update does not include Fl rin Int nsit Fl rin Volum unconditional contributions pertaining to the energy sector. The 2018 regulations also provided a mechanism, similar to 11 12 Among the sector’s conditional contributions are zero routine the one in Indonesia, for the government to take natural gas flaring by 2030 and a 60 percent reduction in fugitive methane that would otherwise be flared and bid it out to third parties to 10 emissions by 2031. commercialize it. 10 9 Early oil and gas legislation—such as the Petroleum Act, 1969, In August 2021, President Buhari signed the Petroleum Industry Act, Cubic m t rs (m³) of and the Associated Gas Re-injection Act, 1979422—included the 2021 (Petroleum Industry Act hereafter),428 an omnibus act covering 8 prevention of atmospheric pollution and the conservation of the entire the oil and gas value chain. Although it repealed some 8 resources. The Associated Gas Re-injection Act, 1979, prohibited gas previous laws, such as the Associated Gas Reinjection Act, 1979, the r 7 Petroleum Industry Act considers most other laws and regulations s fl r d/ flaring without the written permission of the minister in charge 6 s fl r d/b rr l of oil produc d of oil and gas after January 1, 1984. However, measures to reduce equivalent to having been issued by the new regulators as long 6 flaring gained only limited traction, and the deadlines for ending as they provisions are not inconsistent and until such a time as billion m³ of 5 routine flaring were repeatedly postponed. amendments to the new law repeals them. In particular, it retains 4 4 Petroleum Act, 1969, and several other laws until all licenses and In December 2017, the Ministry of Petroleum Resources published leases signed under them are terminated. The Petroleum Industry 3 the National Gas Policy in the official gazette. The policy commits Act contains five articles on gas flaring, promoting minimization 2 2 421 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Nigeria%20First/NIGERIA%202021%20NDC-FINAL.pdf (accessed August 25, 2021). 422 Nigeria’s major oil and gas laws and regulations are contained in this footnote. The Petroleum Act, 1969, can be found at https://ngfcp.dpr.gov.ng/media/1070/petroleum-act.pdf. The Associated 1 Gas Re-injection Act, 1979, is accessible at https://ngfcp.dpr.gov.ng/media/1065/associated-gas-reinjection-act.pdf. The Federal Environmental Protection Agency Act, 1988, is accessible at https://lawcarenigeria.com/federal-environmental-protection-agency-act/. The The Environmental Impact Assessment Act, 1992, is accessible at https://www.elaw.org/content/nigeria- environmental-impact-assessment-decree-no-86-1992. The National Environmental Standard and Regulations Enforcement Agency (Establishment) Act, 2007, appears at http://www.ilo.org/dyn/ 0 0 natlex/natlex4.detail?p_lang=en&p_isn=87618. The Petroleum (Drilling and Production) Regulations, 1969, are available at http://extwprlegs1.fao.org/docs/pdf/nig120683.pdf. The Petroleum Profits Tax Act, 1958, can be found at http://www.placng.org/lawsofnigeria/laws/P13.pdf. All seven links were accessed on January 10, 2022. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 423 https://neiti.gov.ng/cms/wp-content/uploads/2021/08/NEITI-OGA-2019-Report.pdf (accessed December 29, 2021). 424 https://ngfcp.dpr.gov.ng/ (accessed August 25, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 425 https://ngfcp.dpr.gov.ng/resources/regulations/ngfcp-regulations/ (accessed January 10, 2022). This approach is applied to all countries covered in this report in a consistent manner. 426 https://ngfcp.dpr.gov.ng/resources/guidelines/ (accessed August 25, 2021). 427 Because the Petroleum Act in effect at the time set ceilings on penalties, the much higher payment rates for flaring could not be called penalties in the regulations and were called flare payments. Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 428 http://www.petroleumindustrybill.com/2021/09/01/the-official-gazette-of-the-petroleum-industry-act-2021/#.YVxwyJpKiUl (accessed October 5, 2021) 130 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 131 Nigeria of flaring and reinforcing the basic principles in the Flare Gas not entirely consistent with the Flare Gas (Prevention of Waste and 5. Associated Gas Ownership rounds. Previously, many of these responsibilities belonged to the (Prevention of Waste and Pollution) Regulations, 2018. Pollution) Regulations, 2018 (see footnote 425), which prohibit, at minister under the Petroleum Act, 1969 (see footnote 422). Associated gas is owned by producing companies, except in fields a cost of a significant additional penalty, producers of associated governed by PSCs and technical service contracts. The Petroleum The Environmental Protection Agency Act, 1988, empowers the 2. Targets and Limits gas that was being flared as of January 1, 2020, from making Industry Act (see footnote 428) assigns ownership of associated gas agency to inspect, search, seize, and arrest in its areas of attempts to monetize the gas and eliminate flaring if the gas The Associated Gas Re-injection (Continued Flaring of Gas) not used or commercialized by licensees to the Commission, which responsibility, which include air quality control, ozone protection, was selected for an auction. Although the 2021 law refers to the Regulations, 1984, set criteria for when flaring is allowed. No auctions the gas. Following a bidding process, selected bidders can and noise control. Regarding oil-related pollutants, Paragraph 24 2018 regulations, the Commission will revise those regulation and evidence of enforcement is available in the sources conducted. assume the associated gas ownership (without royalty obligations) explicitly mentions providing support to the Ministry of Petroleum issued new regulations, including regulations that clarify that flare The National Effluent Limitation Regulation, 1991,429 issued by the and commercialization rights. PSC contractors are entitled to use Resources when requested. The National Environmental Standard payments are now penalties under the Petroleum Industry Act. Federal Environmental Protection Agency, placed limits on the associated gas for their own purposes, but any gas—associated and Regulations Enforcement Agency (Establishment) Act, 2007 (see concentrations of hydrocarbons in atmospheric emissions. Section Section 13 of the Flare Gas (Prevention of Waste and Pollution) or nonassociated—that will be monetized is owned by a newly footnote 422) empowers the agency to enforce compliance with 12.3 of the Flare Gas (Prevention of Waste and Pollution) Regulations, Regulations, 2018, increased the payment for flared gas by nearly restructured national oil company, the Nigerian National Petroleum international treaties and agreements in the oil and gas sector 2018, ban routine flaring for greenfield projects. two orders of magnitude (see section 18 of this chapter) and set Company Limited (NNPC Ltd). Previously, only gas produced under in Paragraph 7 but explicitly excludes authority over any other out procedures for competitive bid processes to auction the gas already signed PSCs belonged to the Nigerian National Petroleum activities in the sector. being flared to third parties. These auctions are integral to the Corporation (NNPC), predecessor to the NNPC Ltd. B. Legal/Regulatory Framework NGFCP. 8. Monitoring and Enforcement and Contractual Rights The Federal Environmental Protection Agency Act, 1988 (see footnote C. Regulatory Governance The Petroleum Industry Act (see footnote 428) grants nearly all 3. Primary and Secondary Legislation 422) empowers the agency to take measures to reduce air and and Organization monitoring and enforcement powers to the Commission and the and Regulation noise pollution. In performing its functions, the agency may Authority. The Minister of Petroleum revokes or suspends licenses inspect permits, licenses, and devices used for environmental 6. Regulatory Authority upon the recommendation of the either of the regulators. The Petroleum Act, 1969 (see footnote 422) granted to the protection; enter land, buildings, and vehicles; and perform tests. minister in charge of oil and gas the exclusive power to issue The Petroleum Industry Act assigns significant regulatory powers The Environmental Impact Assessment Act, 1992 (see footnote regulations, including regulations supporting the conservation 422) requires the authorization of any decision likely to affect the to the Commission and the Authority. The Commission has D. Licensing/Process Approval of petroleum resources and the prevention of atmospheric regulatory authority over gas flaring and venting in upstream oil environment (Section 1) and names the oil and gas industry as one pollution. The Petroleum Industry Act (see footnote 428) narrows and gas production; the Authority regulates the commercialization 9. Flaring or Venting without Prior Approval of the industries requiring a mandatory study (Section 12). the powers of the minister and transfers some previously held of previously flared gas. No evidence regarding flaring or venting without prior approval powers to the newly established Nigerian Upstream Regulatory Section 7 of the Niger Delta Development Commission (Establishment, could be found in the sources consulted. Commission (the Commission hereafter) and Nigerian Midstream etc.) Act, 2000,430 states that the Niger Delta Development The Federal Environmental Protection Agency regulates air and Downstream Regulatory Authority (the Authority hereafter). Commission is to tackle economic and environmental problems quality and other environmental emissions, including in the oil and gas industry. The National Environmental Standard and 10. Authorized Flaring or Venting Section 105 authorizes the Commission to take gas destined for in the Niger Delta region and advise the federal government flaring at the flare stack free of charge. Section 107 authorizes and member states on preventing and controlling oil spills, gas the Regulations Enforcement Agency ensure compliance with No regulations have yet been issued to support Section 107 of issuance of permits for flaring or venting for a specific period if flaring, and environmental pollution. It states that the Niger Delta international treaties in the oil and gas sector. the Petroleum Industry Act, which provides for permits for flaring flaring or venting is required to start up a facility or for strategic Development Commission is to liaise with oil and gas prospecting or venting for a specific period if either is required to start up a operational reasons, including testing. Section 104 earmarks and producing companies on pollution prevention and control. 7. Regulatory Mandates and Responsibilities facility or for strategic operational reasons. There is no reference the flaring penalties paid to the Commission for environmental to venting, except in greenfield developments, where it is forbidden Under the Petroleum Industry Act the minister of petroleum (along with routine flaring) in Section 12 of the Flare Gas (Prevention remediation and relief of the host communities in the oil-producing 4. Legislative Jurisdictions is responsible for policy formulation. The Commission and area on which the penalties are levied. Section 108 requires all of Waste and Pollution) Regulations, 2018 (see footnote 425). Flaring and venting are under national jurisdiction. All laws the Authority are responsible for technical and commercial producers of natural gas to submit a plan to eliminate flaring are signed by the president of the Federal Republic of Nigeria, regulation of their respective areas. Sections 6 and 7 enumerate to the Commission within 12 months of the effectiveness date the objectives of the Commission, which include ensuring strict 11. Development Plans and regulations are prepared by line ministries in the federal of the Petroleum Industry Act, or by August 2022, in accordance government, except in oil and gas, where they are prepared by the implementation of environmental policies, laws, and regulations; Section 108 of the Petroleum Industry Act requires all licensees and with the regulations issued by the Commission. This provision is Commission and the Authority. ensuring minimization of waste and optimization of government lessees to submit a natural gas flare elimination and monetization revenues; setting and enforcing standards and regulations; issuing plan to the Commission prepared in accordance with (yet-to- 429 http://extwprlegs1.fao.org/docs/pdf/nig120290.pdf (accessed September 24, 2021). 430 https://www.chr.up.ac.za/images/researchunits/bhr/files/extractive_industries_database/nigeria/laws/Niger-Delta%20Development%20Commission.pdf (accessed August 25, 2021). permits and other authorizations; and conducting all licensing 132 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 133 Nigeria Nigeria be-issued) regulations by the Commission. The clause suggests 15. Engineering Estimates its monthly financial and operational performance reports,434 21. Fiscal and Emission Reduction Incentives that development plans in the will need to include measures to covering data going back to January 2015 for gas flared in Section 3.9 of the Guidelines for Flare Gas Measurement, Data Section 13 of the Flare Gas (Prevention of Waste and Pollution) eliminate routine flaring and venting. operations with NNPC participation. As of September 2021, Management and Reporting Obligations provides for computation Regulations, 2018, imposes a flare gas payment of US$2.00 per the most recent data published on the EITI Support Open Data procedures during the transition period before the required mscf in a license area or field producing 10,000 barrels a day of 12. Economic Evaluation website were from July 2021. meters are fully installed. The same procedures are to be oil or more and US$0.50 per mscf in areas producing less. The Paragraph 43 of the Petroleum (Drilling and Production) Regulations, followed in the event that one or more meters are unavailable fees apply to all associated gas flared, whether routine nonroutine 1969 (see footnote 422) requires the producer to submit a or not functioning properly. F. Fines, Penalties, and Sanctions and whether the producer has the right to commercialize the feasibility study, program, or proposals for the utilization of gas or not. Even before the enactment of the Petroleum Industry natural gas no later than five years after the commencement 16. Record Keeping 18. Monetary Penalties Act, no PSC contractor had been permitted to monetize gas, of production. However, the Petroleum Industry Act grants the Section 21 of the Flare Gas (Prevention of Waste and Pollution) although such authorization was in principle possible by asking Section 15 of the Flare Gas (Prevention of Waste and Pollution) ownership of all gas produced in PSCs to the restructured Regulations, 2018 (see footnote 425) imposes a payment of the government to issue a supplementary agreement, an avenue Regulations, 2018, calls for maintenance of daily logs of metered national oil company NNPC Ltd, which also signs all future PSCs US$2.50 per mscf for all gas flared or vented in noncompliance closed by the 2021 law. There are, however, two exceptions to this volumes of flared and vented gas, the format and manner of representing the Federation. As such, there will be no economic with any of seven specified requirements in the regulations, otherwise universal payment: which are specified by the DPR. The logs must be submitted to the evaluation of gas monetization by any PSC contractors. including those for reporting, granting site access to the regulator, • war, community disturbance, insurrection, or a natural disaster DPR—the Commission as soon as it becomes operational—within and using metering equipment. Repeat offenders risk license beyond the control of the oil producer 21 days of the end of the reporting period. The producer is to keep E. Measurement and Reporting them for at least 36 months. revocation. Section 21 describes the current flare payments. • the signing by the oil producer of a deliver-or-pay agreement with a third party that has been granted a permit to access gas 13. Measurement and Reporting Requirements 19. Nonmonetary Penalties in an auction conducted by the federal government. 17. Data Compilation and Publishing Part IV of the Flare Gas (Prevention of Waste and Pollution) Under Section 3 of the Petroleum Industry Act (see footnote 428), Section 19 of the Flare Gas (Prevention of Waste and Pollution) Payments are to be made within a month of the end of each Regulations, 2018 (see footnote 425) contains measurement the minister of petroleum can revoke or suspend petroleum Regulations, 2018, requires the DPR to collect gas flaring data quarter. NEITI has been tracking the payment record. According to and reporting requirements, including procedures, that are licenses and leases for noncompliance, upon the recommendation and publish them in its annual reports, which are posted on the the Oil and Gas Industry Audit Report 2019 published by NEITI (see further detailed in the Guidelines for Flare Gas Measurement, Data of the Commission. Section 217 states that any dispute between agency’s external website with a time lag.432 In addition, NEITI footnote 423), US$308 million was paid in 2019, up from US$15 Management and Reporting Obligations431 issued by the previous a licensee or a lessee and the Commission is to be settled by the collects data and publishes them in its annual Oil and Gas Industry million in 2018. The DPR began issuing invoices for the new flare regulator, the Department of Petroleum Resources (DPR). Section Federal High Court. Sections 21 and 22 of Flare Gas (Prevention Reports (see footnote 423). As of October 2021, the DPR’s website payments only in 2019. The huge increase that year illustrates the 21 of the 2018 regulations levy a substantial unit payment for of Waste and Pollution) Regulations, 2018, allow suspension or had posted reports covering flaring data from 2001 to 2018 but impact of the substantial increase in the flare payment rates. At noncompliance with any of the requirements imposed on oil revocation of the license in the event of continued noncompliance no information on the penalties paid. NEITI’s Oil and Gas Industry the time of writing, the DPR had not yet published data on flare producers with respect to currently flared associated gas. with seven listed requirements. No evidence of license revocation Reports from 1999 to 2019 contain flaring data and penalties paid payments. because of flaring-related offenses has been made public. by individual companies. 14. Measurement Frequency and Methods Paragraph 11 of the Petroleum Profits Tax Act, 1958 (see footnote The Flare Gas (Prevention of Waste and Pollution) Regulations, 2018, In January 2020, the NNPC created a new web page entitled EITI Support Open Data, 433 which includes data on gas utilization, G. Enabling Framework 422) provides incentives for gas separation and treatment investments by making such investments deductible against require daily log-keeping of all associated gas for flaring and re-injection, and flaring from operations with NNPC participation; revenue. The incentives were extended to nonassociated gas in venting and annual reporting of flare gas volumes. Section 3 of 20. Performance Requirements there are no data from operations that do not include NNPC 1999, and therefore they are no longer specific to associated the Guidelines for Flare Gas Measurement, Data Management and No evidence regarding performance requirements could be found participation. The data, in spreadsheet format, are uploaded gas. The Petroleum Industry Act (see footnote 428) repeals the Reporting Obligations spell out data measurement, accounting, and in the sources consulted. on the NNPC’s external website with a time lag as short as a Petroleum Profits Tax Act, 2018, for new acreages. Section 39 of the reporting requirements. They include 13 subsections and many month. Separately, in August 2015, the NNPC began publishing Companies Income Tax Act, 1990,435 provides large fiscal incentives detailed technical specifications. for gas utilization. The section offers the following benefits: 431 https://ngfcp.dpr.gov.ng/resources/guidelines/guideline-2-guidelines-for-flare-gas-measurement-data-management-and-reporting-obligations/ (accessed October 5, 2021). 432 https://ngfcp.dpr.gov.ng/media/1120/flare-gas-prevention-of-waste-and-pollution-regulations-2018-gazette-cleaner-copy-1.pdf (accessed December 29, 2021). 434 https://nnpcgroup.com/NNPC-Business/Business-Information/Pages/Monthly-Performance-Data.aspx (accessed August 25, 2021). 433 https://eiti.org/document/nigeria-open-data-policy (accessed January 20, 2022). 435 http://www.osall.org.za/docs/Nigeria%20-%20Companies%20Income%20Tax%20Act.pdf (accessed October 5, 2021). 134 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 135 Nigeria • an initial tax-free period of three years, renewable for an 24. Interplay with Midstream and Downstream additional two years, or an additional investment allowance of Regulatory Framework 35 percent The Companies Income Tax Act, 1990, provides incentives for the • accelerated capital allowance of 90 percent a year after the utilization of associated and nonassociated natural gas. Gas tax-free period and an additional capital allowance of 15 percent utilization is defined as the marketing and distribution of natural without reducing the asset value gas for commercial purposes and includes power generation, • tax-free dividends during the tax-free period if the investment is LNG, gas-to-liquid plants, fertilizer production, and gas in a foreign currency and imports are not less than 30 percent transmission and distribution pipelines. Nigeria also adopted a gas of the company’s equity share capital transportation network code438 in 2020, formalizing third-party • the deductibility of loan interest payments, provided the access to critical gas infrastructure. minister of petroleum resources approved the loans. These incentives do not apply to gas produced in fields governed by PSCs. 22. Use of Market-Based Principles The Flare Gas (Prevention of Waste and Pollution) Regulations, 2018, provides for auctions organized by the government in which third parties can bid for gas currently being flared. The NGFCP announced the first auction in November 2018. It announced the applicants deemed qualified in mid-2019,436 and the bidding round was closed at the end of June 2020.437 At the time of writing, the outcome of the first auction had not been announced. As mentioned in section 12, the Petroleum Industry Act grants the ownership of all gas produced in PSCs to the NNPC Ltd, depriving the contractors of the right and ability to commercialize associated gas and reduce flaring. Restricting the right to Photo credit: © Ed Kashi / World Bank. Used with the permission of Ed Kashi. commercialize any gas to one entity stifles competition and limits the leveraging of market principles and forces to facilitate flaring and venting reduction. 23. Negotiated Agreements between the Public and the Private Sector No evidence regarding negotiated agreements between the public and the private sector could be found in the sources consulted. 436 https://ngfcp.dpr.gov.ng/soq-successful-candidates/ (accessed August 25, 2021). 437 https://ngfcp.dpr.gov.ng/notice-to-bidders/extension-of-bid-submission-due-date/ (accessed August 25, 2021). 438 https://gacn.com/wp-content/uploads/2020/09/DPR-Nigerian-Gas-Transportation-Network-Code.pdf (accessed January 24, 2022). 136 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 137 Norway 0.15 billion cubic meters of gas flared in 2021 A. Policy and Targets The fifth commandment prohibits gas flaring on the Norwegian continental shelf except during brief periods of testing and for (total oil production 1,766 thousand barrels per day) 1. Background and the Role of Reductions safety-related reasons.441 in Meeting Environmental and Economic The government’s Environmental Policy and the State of the Objectives Environment, 2000–2001,442 prohibited gas flaring and venting to Norway has Europe’s largest hydrocarbon reserves and is the avoid wasting energy. Operators are required to have a solution Change in Flare Gas Volumes* Change in Flare Gas Intensity** in place for the gas, and the Norwegian authorities must approve world’s fifth-largest exporter of crude oil. It recorded the lowest flaring intensity of all countries under review every year between any flaring and venting for operational safety. Norwegian 2012 and 2021. Norway produced about the same amount of oil in environmental policy has historically been based on direct 2015-2021 2015-2020 2015-2021 2015-2020 2021 as Kazakhstan, and Mexico, but these countries flared 10–43 regulation of environmentally harmful emissions and discharges. -54% -63% -58% -65% times the volume flared in Norway. Between 2012 and 2021, oil The CO2 Tax Act, or Act No. 72 Relating to Tax on the Discharge of production rose slightly in Norway, but both the volume of gas CO2 in the Petroleum Activities on the Continental Shelf, 1990 (the CO2 flared and the flaring intensity declined by three-fifths (figure 16). Tax Act, 1990, hereafter)443 and the emissions cap system have had There were just 28 individual flare sites in the last flare count, a significant impact on reducing emissions. Norway aims to reduce conducted in 2019. GHG emissions to near zero by 2050, as outlined in Equinor’s 2020 * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced Sustainability Report444 and the Act Relating to Norway’s Climate In Equinor ASA (a Norwegian majority state-owned energy Targets, 2018 (the Climate Change Act, 2018 hereafter).445 company) endorsed the World Bank’s Zero Routine Flaring by Figure 16 Gas flaring volume and intensity in Norway, 2012–21 2030 initiative in 2015 (World Bank, n.d.; see footnote 3), followed 2. Targets and Limits Fl rin Int nsit Fl rin Volum by the endorsement by the government of Norway in 2016. Norway also participates in the Global Methane Initiative (n.d.; No evidence regarding targets and limits could be found in the 1 0.9 see footnote 29) and the Climate and Clean Air Coalition (n.d.; see sources consulted. footnote 30). 0.8 Norway submitted its first NDC to the UNFCCC in June 2016 and B. Legal/Regulatory Framework 0.7 The update increased the target and Contractual Rights Cubic m t rs (m³) of its update in February 2020. 439 for reducing economy-wide GHG emissions from the 1990 level of 0.6 40 percent to 50–55 percent by 2030. 3. Primary and Secondary Legislation r and Regulation s fl r d/ 0.5 Environmental and climate considerations are an integral part of s fl r d/b rr l of oil produc d Norway’s petroleum industry policies. The Norwegian petroleum Act No. 72 Relating to Petroleum Activities,1996,446 or the Norwegian billion m³ of 0.4 industry has higher local and global environmental standards than Petroleum Act, 1996, prohibits gas flaring in excess of the most other oil- and gas-producing countries. Norway has imposed quantities needed for operational safety unless approved by the 0.3 restrictions on flaring and venting since oil production began in the Norwegian Petroleum Directorate (NPD).447 The Regulations to Act early 1970s. In 1971, the government adopted the so-called 10 Oil Relating to Petroleum Activities, 1997,448 provide further details on 0.2 Commandment principles for oil-related policies (Meland 2022).440 the permit application process and the reporting of flare and vent 0.1 439 https://www4.unfccc.int/sites/NDCStaging/pages/Party.aspx?party=NOR (accessed August 21, 2021). 440 Meland, Trude (2022), https://statfjord.industriminne.no/en/2018/07/09/the-10-oil-commandments/ 441 Norwegian Ministry of Petroleum and Energy (2011), https://www.regjeringen.no/globalassets/upload/oed/petroleumsmeldingen_2011/oversettelse/2011-06_white-paper-on-petro-activities.pdf (accessed August 21, 2021). 0 0 442 https://www.regjeringen.no/contentassets/01148fce7f294d45b8ceeaddb863caab/en-gb/pdfs/stm200020010024000engpdfs.pdf (accessed August 21, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 443 https://www.npd.no/en/regulations/acts/co2-discharge-tax/ (accessed August 21, 2021). 444 https://www.equinor.com/en/how-and-why/sustainability/sustainability-reports.html (accessed August 21, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 445 https://lovdata.no/dokument/NLE/lov/2017-06-16-60 (accessed August 21, 2021). This approach is applied to all countries covered in this report in a consistent manner. 446 https://www.npd.no/en/regulations/acts/act-29-november-1996-no2.-72-relating-to-petroleum-activities/ (accessed August 21, 2021). 447 https://www.npd.no/en/ (accessed August 21, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 448 https://www.npd.no/en/regulations/regulations/petroleum-activities/#Section-6b (accessed August 21, 2021). 138 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 139 Norway volumes (see sections 10 and 13 of this chapter). The Measurement 5. Associated Gas Ownership 8. Monitoring and Enforcement in Section 21 of the supporting regulations, Regulations to Act Regulations, or the Regulations Relating to Measurement of Relating to Petroleum Activities, 1997 (see footnote 448). The plan Section 3 of the Norwegian Petroleum Act, 1996, states that the Section 81 of the Regulations to Act Relating to Petroleum Petroleum for Fiscal Purposes and for Calculation of CO2-tax, 2001,449 for development and operation should include a description of licensee obtains title to all oil and gas produced. 455 As a result, Activities, 1997 (see footnote 448) authorizes representatives detail how to measure and report flare and gas volumes. technical solutions and cover means of preventing and minimizing the licensee owns all gas that is flared or vented. This ownership from the MPE, the NPD, or other authorities as decided by the environmentally harmful discharges and emissions, such as flaring The NPD publishes guidelines to help with the compliance of these allocation is consistent with the CO2 Tax Act, 1990, Section 4 of NPD to access vessels and facilities for inspection of petroleum and venting. The development plan should also include information regulations. They cover the following: which requires the licensees to pay the CO2 tax. activities. They may also access all existing data and materials on approvals or consents that have been applied for, including necessary to perform regulatory supervision, and they have the • application for a production permit, including a flaring permit450 flaring and venting authorizations. • fiscal measurement of oil and gas451 C. Regulatory Governance right to participate in survey activities. Representatives from the authorities have the right to stay on vessels and facilities for as • plan for development and operations of petroleum activities452 and Organization long as necessary. 12. Economic Evaluation • standards relating to the measurement of petroleum.453 Section 4 of the Norwegian Petroleum Act, 1996, requires oil and 6. Regulatory Authority Section 2 of the CO2 Tax Act, 1990 (see footnote 443) imposes a D. Licensing/Process Approval gas to be produced according to prudent technical and sound The NPD under the Ministry of Petroleum Energy (MPE) is the key economic principles and avoid wasting petroleum resources. CO2 tax on flared or vented gas and CO2 separated from petroleum institution in charge of policy, regulation, and enforcement of gas 9. Flaring or Venting without Prior Approval Toward that end, the licensee should continuously evaluate the and discharged into the air at installations used to produce or flaring and venting. 456 The Norwegian Ministry of Climate and production strategy and technical approach being used and transport petroleum. The Climate Change Act, 2018 (see footnote Section 9 of the Norwegian Petroleum Act, 1996 (see footnote 446) Environment457 develops integrated climate and environmental take the necessary measures accordingly. Facts 2012– the 445) supports the implementation of Norway’s climate policy of requires oil and gas operations to be conducted in such a manner policies. Its subordinated agency, the Norwegian Environment Norwegian Petroleum Sector, 2012,461 illustrates several projects moving to a low-emission society by 2050. The law also aims to as to maintain a high level of safety. Section 4 of the law allows Agency,458 is the environmental regulator. implementing opportunities to minimize gas flaring and venting. promote a transparent and public debate on the status, direction, operators to flare associated gas in the quantities needed for An example is the Goliat Project, an oil and gas field located in the and progress of efforts toward that end. operational safety. No specific details related to when the venting 7. Regulatory Mandates and Responsibilities Barents Sea. The discovery well was drilled in 2000, and the field of associated gas would be allowed without regulatory approval Act No. 6 Concerning Protection against Pollution and Concerning went into production in 2016. Associated gas has been re-injected The NPD is responsible for general resource management could be identified in the sources consulted. Waste, 1981 454 (the Pollution Control Act, 1981) is intended to protect or transported through a pipeline to Melkøya. considerations, including reducing emissions from oil and gas the environment from pollution, reduce existing pollution, reduce activities to the air and the sea through cost-effective measures. 10. Authorized Flaring or Venting the quantity of waste, and promote better waste management. It monitors and collects data on the volumes of gas flared, as E. Measurement and Reporting It aims to ensure that pollution and waste do not damage Section 23 of the Regulations to Act Relating to Petroleum Activities, outlined in the Regulations Relating to Resource Management in human health or affect the welfare of, or damage, the natural 1997,460 requires the operator to apply to the MPE to flare or vent 13. Measurement and Reporting Requirements the Petroleum Activities, 2018.459 The Norwegian Environment environment’s productivity and self-renewal capacity. gas, with a copy of the application submitted to the NPD. Upon Agency is responsible for implementing the Pollution Control Act, Section 48 of the Regulations to Act Relating to Petroleum Activities, 1981 (see footnote 454). The Norwegian Environment Agency’s application, the MPE specifies the quantity that may be produced, 1997 (see footnote 448) requires the operator to submit information 4. Legislative Jurisdictions overall responsibilities cover managing Norway’s natural assets injected, or vented for fixed periods according to Section 4 of the to the NPD on the use, injection, flaring, and venting of natural gas. and preventing pollution. These responsibilities also entail areas Norwegian Petroleum Act, 1996. The NPD ensures compliance with Flaring and venting are matters of national jurisdiction, per Such information should be based on metering as much as possible. relevant to flaring and venting, such as the promotion of clean air these quantities. Venting is usually allowed for safety reasons, Section 1 of the Norwegian Petroleum Act, 1996 (see footnote 446). The Measurement Regulations, 2001 (see footnote 449) stipulate and a toxic-free environment and the reduction of noise pollution. start-up, or testing. functional and compliance requirements, including reporting and documentation, related to the planning, design, construction, and 11. Development Plans operation of metering systems and equipment to measure and 449 https://www.npd.no/en/regulations/regulations/measurement-of-petroleum-for-fiscal-purposes-and-for-calculation-of-co2-tax/ (accessed August 21, 2021). Section 4 of the Norwegian Petroleum Act, 1996, requires report the quantities of gas flared or vented in petroleum activities. 450 https://www.npd.no/en/regulations/reporting_and_applications/production/Information_on_production_permit_application_guidelines/ (accessed August 21, 2021). the submission of a field development plan to the MPE for The NPD approves the equipment and procedures. Section 29 of the 451 https://www.npd.no/globalassets/1-npd/regelverk/forskrifter/en/fiskal-measurement.pdf (accessed August 21, 2021). 452 https://www.npd.no/globalassets/1-npd/regelverk/forskrifter/en/pdo-and-pio.pdf (accessed August 21, 2021). approval. The plan should cover all dimensions, including Measurement Regulations, 2001, requires the reporting of CO2 tax 453 https://www.npd.no/globalassets/1-npd/regelverk/forskrifter/en/measurement-of-petroleum-for-fiscal-purposes-and-calculation-of-co2-tax.pdf (accessed August 21, 2021). 454 https://www.regjeringen.no/en/dokumenter/pollution-control-act/id171893/ (accessed August 21, 2021). economic, reservoir, technical, safety, and environmental and metering for the calculation of payment of the CO2 tax every six 455 Companies awarded a production license are obliged to enter into an agreement concerning petroleum activities. See Agreement for petroleum activities and model production licenses - regjeringen. decommissioning aspects. These requirements are detailed months (calculated per field or facility). no (accessed August 21, 2021). 456 https://www.npd.no/en/facts/news/general-news/2003/The-NPDs-responsibilities-and-tasks-after-separation-of-the-Petroleum-Safety-Authority-Norway--/ (accessed August 21, 2021). 457 https://www.regjeringen.no/en/dep/kld/id668/ (accessed August 21, 2021). 458 https://www.environmentagency.no/ (accessed August 21, 2021). 460 https://www.npd.no/en/regulations/regulations/petroleum-activities/#Section-6b (accessed August 21, 2021). 459 https://www.npd.no/en/regulations/regulations/resource-management-in-the-petroleum-activities/ (accessed August 21, 2021). 461 https://www.regjeringen.no/globalassets/upload/oed/pdf_filer_2/faktaheftet/og_facts_2012_web.pdf (accessed August 21, 2021). 140 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 141 Norway Nigeria Section 3 of the Comments to Regulations Relating to Measurement 17. Data Compilation and Publishing G. Enabling Framework 22. Use of Market-Based Principles of Petroleum for Fiscal Purposes and for Calculation of CO2 Tax, Emissions from the oil and gas sector in Norway are well CO2 emissions from the oil and gas sector are covered under the 2018,462 holds the operator of the individual field or facility 20. Performance Requirements documented. The MPE publishes data on its website. 464 The EU ETS Act No. 99 Relating to Greenhouse Gas Emission Allowance directly responsible for the duties placed with the licensees jointly Norwegian Oil and Gas Association, an industry organization, has No evidence regarding performance requirements could be found Trading and the Duty to Surrender Emission Allowances, 2004 (see pursuant to the Norwegian Petroleum Act, 1996 (see footnote 446) established a national database for reporting all releases from in the sources consulted. footnote 463), which entered into force in 2005. Norway joined the and the CO2 Tax Act, 1990 (see footnote 443) such as the design, the industry, called the EPIM Environment Hub.465 All operators EU ETS in 2008. purchase, and operation of metering systems with associated report data on emissions to air and discharges to the sea directly reporting and payment of tax. The CO2 Tax Act, 1990, authorizes 21. Fiscal and Emission Reduction Incentives the Ministry of Finance to issue additional provisions for the CO2 in the EPIM Environmental Hub. The data are published annually 23. Negotiated Agreements between the Public The main instruments for restricting GHG emissions are tax and equipment requirements for metering, measurement in the Resource Report Discoveries and Fields. 466 Statistics Norway and the Private Sector publishes statistics on air pollution from activities, including oil economic—emissions trading and the CO₂ tax; they provide methods, and documentation. financial incentives to minimize emissions. Norway was one of No evidence regarding negotiated agreements between the public and gas extraction.467 the first countries in the world to introduce a carbon tax, in 1990. and the private sector could be found in the sources consulted. 14. Measurement Frequency and Methods Sections 1, 2, and 4 of the CO2 Tax Act, 1990 (see footnote 443) Operating companies that hold flaring permits must submit F. Fines, Penalties, and Sanctions require a CO2 tax payment for flared or vented natural gas and 24. Interplay with Midstream and Downstream a report to the MPE indicating the amount of gas flared daily. any other CO2 discharged to the atmosphere during the production Regulatory Framework 18. Monetary Penalties and transportation of oil and gas unless otherwise exempted Section 8 of the Measurement Regulations, 2001 sets the Section 59 of the Regulations to Act Relating to Petroleum uncertainty limit at 5 percent by volume for flared or vented According to Section 10 of the Norwegian Petroleum Act, 1996 (see by the Storting (parliament). The operator calculates, reports, Activities, 1997 (see footnote 448) grants operators undertaking gas and lists uncertainty and repeatability limits for different footnote 446), noncompliance with an order issued pursuant to and pays the total tax amount to the NPD on behalf of all other downstream natural gas activities and eligible customers the right types of measuring instruments. According to Section 11, gas the law may result in a daily fine for each day of the violation. licensees. The operator provides the NPD with the documentation to access pipeline networks. The access is subject to the quality of composition is determined from continuous flow proportional gas Section 10 subjects a willful or negligent violation to fines or for metering petroleum and calculating the tax within a month of the gas being compatible with technical specifications or efficient chromatography or from automatic flow proportional sampling. imprisonment. As the Norwegian Petroleum Act, 1996, prohibits the expiry of each term. If the tax is not paid on time, it accrues operation of the pipeline network. The pipeline network operator flaring in excess of what is needed for safe operations, these interest. According to Section 3 of the CO2 Tax Act, 1990, the CO2 may require additional conditions after consulting with existing 15. Engineering Estimates fines apply to such excessive flaring. Separately, a carbon tax tax is not deductible from the calculation of the production fee users of the pipeline network. is imposed on all gas flared or vented, and willful or negligent (defined in Section 4 of the Norwegian Petroleum Act, 1996; (see Section 29 of the Measurement Regulations, 2001 requires submission of incorrect or incomplete documentation or any other footnote 446). documentation of engineering estimates in lieu of measurement breach of provisions or decisions contained in or issued by virtue of where measurement was not carried out for technical reasons. For 2021, the tax rate is proposed at NOK 1.27 (about US$0.2 as the CO2 Tax Act, 1990 (see footnote 443) is subject to a fine. of September 2021) per m3 of gas or per liter of oil or condensate. 16. Record Keeping For emissions of natural gas, the tax rate is NOK 8.76 (about 19. Nonmonetary Penalties US$1 as of September 2021) per m3. For combustion of natural Operators are responsible for keeping an emissions inventory, Section 10 of the Norwegian Petroleum Act, 1996, imposes gas, the rate is equivalent to NOK 543 (about US$64 as of which they are required to submit to the NPD annually. According nonmonetary penalties, including the temporary suspension of September 2021) per tCO2.468 Together with the EU ETS allowance to Chapter 4 of Act No. 99 Relating to Greenhouse Gas Emission activities, license revocation, and imprisonment of as long as costs, oil and gas companies operating in the Norwegian offshore Allowance Trading and the Duty to Surrender Emission Allowances, two years for a willful or negligent violation. Willful or negligent pay about NOK 800 (about US$94 as of September 2021) per 2004,463operators must submit a report on GHG emissions to the submission of incorrect or incomplete documentation or any tCO2.469 The Norwegian government proposes to gradually raise pollution control authorities in a given calendar year by March 1 of other breach of provisions or decisions contained in or issued by the total cost of carbon (Norwegian CO2 tax and the cost of EU the following year. No information could be found in the sources virtue of the CO2 Tax Act, 1990 may result in imprisonment of up ETS allowance) to NOK 2,000 (about US$240 as of September consulted regarding how long records are to be kept. to three months. 2021) per tCO2e by 2030. 462 https://www.npd.no/en/regulations/regulations/comments-to-regulations-relating-to-measurement-of-petroleum-for-fiscal-purposes-and-for-calculation-of-co2-tax/ (accessed August 21, 2021). 463 https://www.regjeringen.no/en/dokumenter/greenhouse-gas-emission-trading-act/id172242/ (accessed August 21, 2021). 464 https://www.norskpetroleum.no/en/environment-and-technology/emissions-to-air/ (accessed August 21, 2021). 465 https://epim.no/eeh/ (accessed August 21, 2021). 466 https://www.npd.no/globalassets/1-npd/publikasjoner/ressursrapport-2019/resource-report-2019.pdf (accessed August 21, 2021). 468 https://www.norskpetroleum.no/en/environment-and-technology/emissions-to-air/ (accessed August 22, 2021). 467 https://www.ssb.no/en/natur-og-miljo/statistikker/klimagassn/aar (accessed August 21, 2021). 469 https://www.upstreamonline.com/environment/norway-oil-sector-braced-for-huge-carbon-tax-hike-as-new-climate-plan-hatched/2-1-941509 (accessed August 22, 2021). 142 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 143 Oman Norway 2.48 billion cubic meters of gas flared in 2021 A. Policy and Targets to replace the Ministry of Environment and Climate Affairs. The Financial Affairs and Energy Resources Council, which used to (total oil production 970 thousand barrels per day) 1. Background and the Role of Reductions set domestic oil and gas prices, was abolished. Apart from these decrees, there were parallel changes in the energy sector. At the in Meeting Environmental and Economic end of 2019, a new national petroleum investment company, Objectives OQ, was formed by merging nine companies across the energy Between 2012 and 2021, oil production in Oman was fairly stable, sector. At the end of 2020, a new government company, Energy Change in Flare Gas Volumes* Change in Flare Gas Intensity** varying by no more than 5 percent from the mean. The flaring Development Oman, was established. This holding company of intensity, however, rose by 11 percent, and the volume of flared gas the PDO will focus on natural gas, renewable energy, and green increased by one-fifth (figure 17). There were 106 individual flare hydrogen.472 Flare gas management remains a priority for both the 2015-2021 2015-2020 2015-2021 2015-2020 sites in the last flare count, conducted in 2019. PDO and Energy Development Oman.473 2% 3% 3% 7% In 2016, Oman endorsed the World Bank’s Zero Routine Flaring by 2030 initiative (World Bank, n.d.; see footnote 3); in 2017, the Petroleum Development Oman (PDO) did so. Oman submitted 2. Targets and Limits There are no targets or limits on the volumes of natural gas flared its second NDC to the UNFCCC in July 2021.470 It commits the or vented. However, regulations are under development, which are * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced government to an unconditional contribution of a 3 percent expected to include targets (see footnote 471). reduction in the growth of GHG emissions by 2030 and a conditional contribution of an additional 4 percent reduction, for Figure 17 Gas flaring volume and intensity in Oman, 2012–21 a total of 7 percent. The upstream oil and gas sector targets zero B. Legal/Regulatory Framework Fl rin Int nsit Fl rin Volum emissions by 2050. One instrument for implementing this target and Contractual Rights is the 2016 endorsement of the Zero Routine Flaring initiative. 3 9 The second NDC also outlines measures that will reduce the GHG 3. Primary and Secondary Legislation 8 intensity of upstream oil and gas operations: electrification of and Regulation equipment, reliance on renewable energy for electricity, efficiency Articles 39 and 40 of Royal Decree No. 8/2011,474 known as the improvement in existing facilities, and a significant reduction 7 Oil and Gas Law, set out environmental protection principles. Cubic m t rs (m³) of in gas flaring as well as methane and other fugitive emissions. According to Article 39, operators should not dispose of Operators in Oman have used the CDM of the UNFCCC for two 2 6 gas unless necessary, and when necessary, they should use r associated gas-recovery projects. appropriate means to protect the environment. Article 39 also s fl r d/ 5 s fl r d/b rr l of oil produc d The PDO is responsible for producing about 70 percent of oil requires operators to reduce GHG emissions by using appropriate and gas in Oman. Since joining the initiative, the Ministry of Oil technology. Article 40 requires the use of international best billion m³ of 4 and Gas, now called the Ministry of Energy and Minerals, has led practices, standards, and specifications. Article 18 requires that efforts to develop flaring and venting guidelines. At the same time, concessionaires and their subcontractors comply with the terms 1 3 the PDO and other operators have implemented projects to reduce of the concession agreement and all permits and approvals issued flaring.471 The government issued 28 royal decrees in August 2020. by the MEM or other government authorities, as well as with other 2 The Ministry of Oil and Gas was renamed the Ministry of Energy laws, rules, and regulations in Oman. and Minerals (MEM), and the Environment Authority was created 1 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 470 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Oman%20Second/Second%20NDC%20Report%20Oman.pdf (accessed August 13, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 471 Agrawal (2019), https://doi.org/10.2118/197415-MS (accessed January 10, 2022). This approach is applied to all countries covered in this report in a consistent manner. 472 Business Gateways International (2020), https://businessgateways.com/news/2020/12/07/Energy-Development-Oman-set-up-Royal-Decree (accessed January 10, 2022). 473 Al Azri (2020), https://energyoman.net/news.php?slug=pdo-exploring-new-frontiers-in-sustainable-energy (accessed January 10, 2022). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 474 https://www.pdo.co.om/hseforcontractors/LegalRequirements/8-2011%20Oil%20and%20Gas%20Law.pdf (accessed August 13, 2021). 144 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 145 Oman Exploration and production-sharing agreements include health, local market, as determined by the MEM. If other gas sources meet facilities and are often conducted by specialized companies 12. Economic Evaluation safety, and environment clauses that reflect existing laws domestic market needs, the MEM and the concessionaire may approved by the Environmental Authority (see footnote 475). Oman’s new flaring and venting guidelines are expected to follow and current energy and environment policies.475 For example, agree to reduce the amount of surplus gas required to be supplied Article 6 of the Regulations for Air Pollution Control from international practices and build on the PDO’s practice of conducting exploration and production-sharing agreements ban flaring to the domestic market. Stationary Sources (see footnote 477) requires an environmental an economic evaluation of flaring and venting projects. Since 2018, without a permit except during well testing. Ministerial Decree No. permit for emissions, including from flaring in oil and gas the PDO has been managing all nonroutine flaring activities using 14/2012,476 known as the Well Test Regulatory Protocol, specifies the requirements for operators to obtain a permit. C. Regulatory Governance fields and refineries, before construction or operation. Article the concept of measures that are as low as reasonably practical.479 and Organization 8 empowers environmental inspectors from the Environmental The PDO has developed an electronic system, Flaring Waiver and Ministerial Decision No. 118/2004,477 entitled the Regulations for Authority to conduct ad hoc site inspections to check pollution- As Low as Reasonably Practical Demonstration Tool, to conduct an Air Pollution Control from Stationary Sources, outlines regulations 6. Regulatory Authority control systems and test emission levels and composition. Article economic and environmental evaluation of each nonroutine flaring for air emissions from stationary sources. Article 7 provides 9 requires that operators provide a plan if requested by inspectors. scenario.480 The PDO has tested a micro-turbine to convert flared The MEM regulates flaring and venting. It negotiates exploration the guidelines for obtaining a permit. Permits are valid for three gas into electricity at Anzauz. If replicated across Block 6, about and production-sharing agreements with investor companies. All years but can be renewed for a similar or longer period. The annex provides standards for six types of emissions from flaring at agreements are based on a template, but negotiations can lead to D. Licensing/Process Approval 500,000 m³ of gas currently flared a day could be recovered. The PDO’s Gas Directorate, through its energy management efforts, additional clauses and modifications, including flaring and venting refineries and oil and gas fields. saved 46,000 m³ of natural gas a day that was previously flared or restrictions. The Environmental Authority regulates environmental 9. Flaring or Venting without Prior Approval used as a fuel, in 2019.481 Royal Decree No. 114/2001,478 known as the Law on Conservation impacts, including from oil and gas operations. Since 2017, Oman has reportedly been considering developing of the Environment and Prevention of Pollution, requires “controls flaring and venting guidelines consistent with widely accepted At the end of 2018, the PDO issued a request for bids from for optimum exploitation” of natural resources, including oil and 7. Regulatory Mandates and Responsibilities international practices. Alignment with international practice companies with proven gas-to-power technology and experience gas. Article 19 states that “no hazardous waste or substance shall would suggest that flaring or venting without approval would be using gas being flared.482 In early 2021, Japan’s Sumitomo The MEM is responsible for reviewing and approving gas be handled, dealt with or disposed of in the Omani environment allowed during emergencies but immediately followed by reporting Corporation and an independent Omani company, ARA conservation plans and their annual updates. The plans include the without obtaining a permit from the Ministry.” Article 27 requires to the regulator of flaring or venting details (see footnote 471). Petroleum, initiated a feasibility study on a project to produce total annual volume of gas disposed of by flaring and venting. The exploration concessions to include language to ensure compliance hydrogen from associated gas from ARA’s oil field that would Environmental Authority is responsible for issuing and ensuring with provisions of the royal decree and its implementing otherwise be flared. In addition, a 20-MW solar farm will compliance with environmental permits for flaring emissions. 10. Authorized Flaring or Venting regulations. Exploration and production-sharing agreements provide electricity to a methane steam reformer for hydrogen include various environmental requirements (see footnote 475). International practices, which Oman’s new flaring and venting production. Oman has been trying to promote hydrogen, and 8. Monitoring and Enforcement guidelines are expected to follow, typically ban all routine flaring several companies have expressed interest in pursuing hydrogen but allow exceptions for flaring during well testing (permitted projects in special economic zones in Oman.483 4. Legislative Jurisdictions Article 23 of the Oil and Gas Law (see footnote 474) states within limits) and for volumes approved in the gas conservation that concession holders must allow MEM officials to inspect National laws and regulations, as implemented by national plan (see footnote 471). entities, govern flaring and venting. facilities, equipment, and extracted petroleum materials and E. Measurement and Reporting review and copy operational records. Article 3 of the Law on Conservation of the Environment and Prevention of Pollution (see 11. Development Plans 13. Measurement and Reporting Requirements 5. Associated Gas Ownership footnote 478) empowers the Environmental Authority to inspect Alignment with international practices would suggest that According to the Regulations for Air Pollution Control from According to Article 3 of the Oil and Gas Law (see footnote 474), facilities subject to the law’s provisions and relevant regulations. gas conservation plans have to consider all reasonable Stationary Sources (see footnote 477), air emissions listed in the all hydrocarbons are the property of the state and ownership Environmental inspectors have judicial powers. Article 9 requires utilization options before flaring and venting and that the MEM appendix are to be measured by instruments. Fugitive emissions cannot be transferred before extraction. PSCs grant the rights an environmental permit from the Environmental Authority for ensures compliance with the gas conservation plan during the can be estimated using mass balance equations. Flaring and to explore, develop, and exploit oil and gas, known as exploration any activity that could potentially cause pollution. Article 16 development and operation of assets (see footnote 471). venting guidelines under development since 2017 suggest that and production-sharing agreements. Article 43 requires that empowers the Environmental Authority to ask for an EIA before reporting will be required to ensure compliance with targets to be concessionaires allocate gas that is not used for operations to the issuing a permit. In practice, EIAs are routine for oil and gas established (see footnote 471). 479 Agrawal, Al Shuayli, and Salmani (2017), https://doi.org/10.2118/188748-MS (accessed January 10, 2022). 475 Figgins, Taqi, and Al-Busaidi (2021), https://uk.practicallaw.thomsonreuters.com/9-567-1725 (accessed January 10, 2022). 480 https://www.pdo.co.om/en/news/publications/Publications%20Doc%20Library/PDO%20SR%202018_EA.pdf (accessed August 13, 2021). 476 https://data.qanoon.om/ar/md/mog/2012-0014.pdf (accessed August 13, 2021). 481 https://www.pdo.co.om/en/news/publications/Publications%20Doc%20Library/Al%20Fahal%20Bilingual%20June%202020.pdf (accessed August 13, 2021). 477 https://www.pdo.co.om/hseforcontractors/LegalRequirements/MD%20118-2004-Air%20Pollution%20Regulations-Offical%20Edition.pdf (accessed August 13, 2021). 482 https://www.pdo.co.om/en/business-with-pdo/Pages/GF.aspx (accessed August 13, 2021). 478 http://www.vertic.org/media/National%20Legislation/Oman/OM_Law_Conservation_Environment_114-2001.pdf (accessed August 13, 2021). 483 https://energycentral.com/news/japans-sumitomo-ara-eye-hydrogen-project-oman# (accessed August 13, 2021). 146 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 147 Oman 14. Measurement Frequency and Methods Article 31 of the Law on Conservation of the Environment and 21. Fiscal and Emission Reduction Incentives involving the PDO are public-private partnerships, including Prevention of Pollution (see footnote 478) deals with monetary efforts to reduce flaring (see section 12 of this chapter). In 2019, all PDO flare stacks were mapped to identify any Chapter 7 of the Oil and Gas Law (see footnote 474) provides penalties for violating certain articles of the law, including the need unmetered or unreported streams. The PDO also established a several provisions with respect to natural gas. Article 41 requires The government issued the Public Private Partnership Law as Royal to obtain a permit and the prohibition on emitting more than the dashboard to make flaring data available and more visible across the concessionaire to preserve natural gas and allows its Decree No. 52/2019487 in 2019 and its implementing regulations limits in the permit. The fine is set at RO 200–RO 2,000 (about the company.484 exploitation, with MEM approval, to enhance oil recovery, store it in 2020. The law does not specify or restrict types of projects US$520–US$5,200 as of September 2021), with an increase of 10 underground, commercialize it, or use it for any other purposes as if they improve public services and align with Oman’s economic percent a day starting four days after notification of the violation. 15. Engineering Estimates decided by the MEM. Article 42 provides for “features, incentives development strategy. The law was partially motivated to relieve Article 36 provides for a fine of up to RO 500 (about US$1,300 and facilities to encourage gas exploitation” to be stipulated in the pressure on the government’s budget. The same rationale also See section 13. No additional details on engineering estimates as of September 2021) if environmental inspectors are prevented concession agreement. For example, the concessionaire is allowed induced the creation of Energy Development Oman, in late 2020. could be found in the sources consulted. from exercising their powers. Article 40 sets a fine of between to recover gas discovery expenses if the MEM decides to postpone The law offers another avenue for the efforts of the PDO and RO 1,000 and RO 5,000 (about US$2,600–US$13,000 as of production to meet future domestic market demand. other companies to reduce flaring and meet Oman’s growing September 2021) in case of failure to comply with Article 27, which 16. Record Keeping gas demand. The MEM, together with operators, may pursue calls on operators to establish “controls for optimum exploitation” No evidence regarding record-keeping requirements could be 22. Use of Market-Based Principles the aggregation of associated gas from different locations to of natural resources, including oil and gas (see section 3 of this found in the sources consulted. However, the Oil and Gas Law (see achieve the economies of scale needed to make utilization projects chapter). The penalty is doubled for a repeat violation. Oman has two associated gas recovery and utilization projects footnote 474) and the Law on Conservation of the Environment and financially viable. under the CDM, both operated by Occidental of Oman and Prevention of Pollution (see footnote 478) empower the inspectors 19. Nonmonetary Penalties hosted by the MEM, representing the government. The first to access records to ensure compliance with laws, regulations, and project, at Block 9, was registered in December 2012.485 The 24. Interplay with Midstream and Downstream permits (see section 8 of this chapter). According to Article 31 of the Law on Conservation of the Regulatory Framework recovery of associated gas that would otherwise have been Environment and Prevention of Pollution, the suspension of activity flared or vented started in 2010. Over the crediting period Natural gas consumption has been increasing in Oman, primarily is possible if a violator does not correct the offense within a 17. Data Compilation and Publishing (December 31, 2013–December 30, 2020), about 2.1 bcm to generate electricity and run desalination plants but also for month. According to Article 32, the use of falsified data or No evidence regarding data compilation and publishing could be of associated gas was recovered, with an average methane use in downstream refining and petrochemicals facilities. Oman statements to obtain an environmental permit is punishable by found in the sources consulted. However, the PDO reports flaring content of about 70 percent. The project had reduced emissions is a significant exporter of LNG, but it also imports pipeline gas up to six months in prison, a fine of up to 5 percent of the invested data from its operations in its annual Sustainability Reports. Two by about 4.2 million tCO2e by the end of 2020. The second from Qatar to balance domestic demand with export obligations. capital, or both. The permit may even be canceled, in which case blocks operated by Occidental Oman use the CDM mechanism (see project, at the Khamilah oil field area in Block 27, was registered However, with increased investment in gas fields and, to a lesser the activity must cease. Article 36 allows for prison time of up section 22 of this chapter). CDM monitoring reports include data in August 2020.486 Over the crediting period (August 3, 2020– extent, more aggressive policies toward capturing associated gas, to three months if environmental inspectors are prevented from on recovered volumes of associated gas that would otherwise have August 2, 2030), about 2 bcm of associated gas is estimated to Oman intends to phase out imports and expand domestic pipeline exercising their powers. This imprisonment can be in addition to a been flared or vented. have been recovered, with an average methane content of about infrastructure. fine. The court may also shut down the facility for up to a month. 78 percent. The project is expected to reduce emissions by about Low domestic gas prices have presented a challenge to achieving 0.43 million tCO2e annually. F. Fines, Penalties, and Sanctions G. Enabling Framework the goal of supplying gas for domestic purposes from domestic sources. The MEM and the Oman Gas Company have supplied 18. Monetary Penalties 23. Negotiated Agreements between the Public 20. Performance Requirements gas to industrial and power generation plants at prices set by a and the Private Sector gas allocation committee, which includes representatives of the Chapter 8 of the Oil and Gas Law (see footnote 474) does not The PDO has followed the practice of minimizing routine flaring in The Minister of Energy and Minerals is also the chairman of the MEM and the Ministry of Commerce, Industry, and Investment specify any penalties for violations of Article 39, which sets new installations and the principle of reducing flaring and venting board of directors of the PDO. The board also includes other Promotion (the Financial Affairs and Energy Resources Council environmental requirements with respect to gas or violations to as low a level as reasonably practicable. The Regulations on representatives from the MEM as well as representatives from before August 2020). These prices, as well as the price of of Articles 41–43, which outline provisions regarding gas use. Air Pollution Control from Stationary Sources (see footnote 477) the Ministry of Finance. The government’s stake in the PDO is 60 electricity (which is almost exclusively generated by gas-fired However, Article 51 of Chapter 8 allows the minister of energy and set limits on six pollutants that can be emitted from flaring percent; private companies own the remainder, with Royal Dutch power plants), have been below cost. The government of Oman minerals to determine penalties for violations of articles of the law in petroleum fields and refineries. They also state that any Shell holding the largest share (34 percent). In essence, all projects raised natural gas prices to industry and power generation plants, not specified in the chapter. combustion cannot emit smoke darker than “shade 1 on the Ringlemann Scale (20 percent opacity).” 485 https://cdm.unfccc.int/Projects/DB/BVQI1343120764.64/view (accessed August 13, 2021). 486 https://cdm.unfccc.int/Projects/DB/CTI1596441167.27/view (accessed August 13, 2021). 484 https://www.pdo.co.om/en/news/publications/Publications%20Doc%20Library/2019%20Sustainability%20Report.pdf (accessed August 13, 2021). 487 https://mola.gov.om/Download.aspx?Path=royal/2019-0052%20Formatted.pdf (accessed August 13, 2021). 148 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 149 Oman but low oil prices after 2016, especially in 2020, stressed the government’s budget and slowed further price reforms. The Energy Development Oman was created as a company that could raise capital at a lower cost than the government and undertake major energy transition projects (see footnote 472). The Oman Gas Company, along with eight other state-owned companies across the oil and gas value chain, is now part of OQ, created in 2019. The newly integrated company is fully government-owned, but a partial public offering of shares is under consideration, as the government continues to focus on its budget deficit. The net effect of the changes cited in this section on domestic gas consumption, the development of new gas pipelines, and associated gas utilization will become apparent over the coming years. Photo credit: © Nico Traut / Shutterstock. 150 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 151 Russian Federation 25.41 billion cubic meters of gas flared in 2021 A. Policy and Targets 2021492 requires high emitters (those above 150,000 tCO2 by 2023 and above 50,000 tCO2 by 2024) to comply with carbon (total oil production 10,110 thousand barrels per day) 1. Background and the Role of Reductions reporting requirements, which have not yet been fully defined. The stated purpose of this new legislation is to “create conditions for in Meeting Environmental and Economic sustainable and balanced development of the economy.” As such, Objectives it is in line with the general trend toward decarbonization of the oil The Russian Federation was the world’s largest contributor and gas value chain. Change in Flare Gas Volumes* Change in Flare Gas Intensity** by volume to gas flaring in 2021 (figure 18). The traditional oil-producing regions of West and East Siberia, as well as the 2. Targets and Limits Khanty-Mansiysk Autonomous Okrug district, have been the key 2015-2021 2015-2020 2015-2021 2015-2020 contributors. The flaring intensity has been increasing since 2017, Federal Decree No. 1148, 2012, limits flaring or venting to 5 percent 30% 23% 31% 28% reaching the highest level since 2012 in 2021. There were 1,086 of the total volume of associated gas produced. This target was individual flare sites in the last flare count, conducted in 2019. first mentioned in the Energy Strategy for Russia for the Period up to 2030 (approved by Federal Decree No. 1715-r, 2009). Russia endorsed the World Bank’s Zero Routine Flaring by 2030 initiative in 2016 (World Bank, n.d.; see footnote 3); two of its major * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced national oil companies, Gazprom and Lukoil, did so in 2018. Russia B. Legal/Regulatory Framework also participates in the Global Methane Initiative (n.d.; see footnote and Contractual Rights 29) and the Climate and Clean Air Coalition (n.d.; see footnote 30). Figure 18 Gas flaring volume and intensity in the Russian Federation, 2012–21 Russia’s first NDC, submitted to the UNFCCC in November 2020, 3. Primary and Secondary Legislation Fl rin Int nsit Fl rin Volum targets a reduction in GHG emissions to 70 percent of the 1990 level and Regulation but does not mention gas flaring and venting.488 Federal Law No. 2395-1 on Subsoil, 1992,493 is the central piece of 30 8 legislation for the use of subsurface resources and related matters Starting in 2007, with the President’s State of the Nation Address, (Article 1). Article 23 requires rational use of subsurface resources. 7 increasing the efficient use of associated gas and reducing flaring 25 became national priorities. One of the targets of the Energy Article 1 of Federal Law No. 7-FZ on Environmental Protection, Cubic m t rs (m³) of 6 Strategy for Russia for the Period Up to 2030 (Ministry of Energy 2001,494 states that one of its overarching goals is to prevent of the Russian Federation 2010)489 is the utilization of 95 percent of adverse impacts on the natural environment from economic or 20 associated gas. To help achieve it, Russia passed, key legislation, other activities. Article 16 states that fees will be levied for the r 5 with amendments introducing a mix of fees and commercial emission of pollutants and specifies the procedures for calculating s fl r d/ s fl r d/b rr l of oil produc d incentives. Examples include Federal Decree No. 1148, 2012,490 and the fees for gas flaring and venting. 15 4 the Federal Law on Environmental Protection, 2001. 491 Early progress billion m³ of Federal Decree No. 1148, 2012 (see footnote 490) defines the was made—such as replacing diesel with associated gas in 3 formulas applicable to calculate the fees for flaring and venting electricity generation in the Yuzhno-Priobskoye oil field—but the 10 (Sections 3 and 10). Federal Decree No. 913, 2016,495 defines initial success did not last long and was soon followed by rising the inputs per emission pollutant (Appendix 1) and other 2 levels of flaring and venting. environmental factors (Appendix 2) to be used in the calculation 5 Federal Law No. 296 FZ on Limiting Greenhouse Gas Emissions, formula for the fee. Federal Decree No. 255, 2017,496 establishes the 1 488 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Russian%20Federation%20First/NDC_RF_eng.pdf (Accessed on August 24, 2021). 489 http://www.energystrategy.ru/projects/docs/ES-2030_(Eng).pdf (accessed August 24, 2021). 0 0 490 http://government.ru/docs/all/84853/ (accessed August 24, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 491 http://extwprlegs1.fao.org/docs/pdf/rus52751E.pdf (accessed August 24, 2021). 492 http://extwprlegs1.fao.org/docs/pdf/rus203840.pdf (accessed August 24, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 493 http://www.fao.org/faolex/results/details/ru/c/LEX-FAOC053503/ (accessed August 25, 2021). This approach is applied to all countries covered in this report in a consistent manner. 494 http://extwprlegs1.fao.org/docs/pdf/rus52751E.pdf (accessed August 25, 2021). 495 http://government.ru/docs/all/108250/ (accessed August 25, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 496 http://government.ru/docs/all/110668/ (accessed August 25, 2021). 152 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 153 Russian Federation payment process for these fees (Sections 1 and 4). C. Regulatory Governance level of fees paid for flaring and venting (see sections 15 and 18 of 493) requires the oil and gas producer to submit to the Federal this chapter). Geological Information Fund reliable information on volumes Articles 1 and 4 of Federal Law No. 69-FZ on Gas Supply, 1999,497 and Organization explored and produced. To ensure the uniformity of measurements, require the rational use of gas. They are intended to ensure 6. Regulatory Authority 8. Monitoring and Enforcement meters must meet the metrological and technical requirements that the country’s need for energy resources is met. Article 27, as defined by a normative guideline issued by the Federal Ministry in combination with the amendments in Federal Law No. 241- Overall responsibility for overseeing subsoil resources, including Federal Law No. 7-FZ on Environmental Protection, 2001, in of Energy. Section 3 of Federal Decree No. 1148, 2012 (see footnote FZ, 2012,498 requires owners and operators of transmission and policies for flaring and venting of associated gas, lies with the combination with Federal Decree No. 1148, 2012 (see footnote 490), 490) requires oil producers to report their “flaring rate”—the distribution facilities to give preferential access to free capacities Federal Ministry of Natural Resources and the Environment.501 assigns monitoring and enforcement powers to the Federal Service percentage of associated gas that is flared and vented (see section in the “Unified Gas Supply System” to associated gas. Federal Law Federal Law No. 7-FZ on Environmental Protection, 2001 (see for Supervision of Natural Resources (see sections 3, 6, and 7 of 18 of this chapter). No. 35-FZ on the Electric Power Industry, 2003,499 gives electricity footnote 494) established a specialized authority. This law assigns this chapter). produced from associated gas priority access to the wholesale responsibility for oversight of compliance with energy regulation 14. Measurement Frequency and Methods market, second only to the electricity produced from system to the Federal Service for Supervision of Natural Resources.502 D. Licensing/Process Approval Section 3 of Federal Decree No. 1148, 2012, requires oil producers to securing capacity. Federal Law No. 225-FZ on Production Sharing Article 3 of Federal Law No. 2395-1 on Subsoil, 1992 (see footnote Agreements, 1995, 500 links renewals of PSCs to the rational use of 493) establishes the Federal Agency for Mineral Resources503 as 9. Flaring or Venting without Prior Approval report the flaring rate quarterly. Reporting requirements for well subsurface resources. the central administrative agency for subsurface resources. It has data other than flaring and venting can be more frequent. No evidence regarding flaring or venting without prior approval no direct responsibilities regarding flaring and venting. could be found in the sources consulted. 4. Legislative Jurisdictions 15. Engineering Estimates Gas flaring and venting are matters of federal jurisdiction. 7. Regulatory Mandates and Responsibilities 10. Authorized Flaring or Venting There is no mention of acceptable alternatives to metering. However, Article 1 of Federal Law No. 2395-1 on Subsoil, 1992, grants In line with the clear separation between policy making, regulatory Section 5 of Federal Decree No. 1148, 2012, increases the fee for Federal Law No. 7-FZ on Environmental Protection, 2001 (see footnote local governments the right to further regulate flaring and venting and compliance monitoring, and service provision, federal flaring and venting if no metering system is in place or the system 494) requires that an environmental impact declaration (Article within the limits of the relevant federal laws. ministries make policies and issue regulations. As part of its used does not meet the Federal Ministry of Energy’s requirements. 31) and an EIA (Article 32) be carried out on economic or other overall responsibility to oversee subsoil usage, the Federal Ministry activities that may directly or indirectly affect the environment. 5. Associated Gas Ownership of Natural Resources and the Environment has issued associated 16. Record Keeping gas regulation for flaring and venting in its regulatory capacity. Article 1 of Federal Law No. 2395-1 on Subsoil, 1992, states that 11. Development Plans Operators must maintain measurement instrument readings and subsurface natural resources in Russia are property of the state. other technical equipment records, but there is no specific mention Federal services are executive authorities vested with Article 46 of Federal Law No. 7-FZ on Environmental Protection, In line with the principles applicable to concession systems, title of flaring and venting. permitting, inspection, and administrative enforcement 2001 requires oil and gas facilities to be designed and operated to resources once extracted is transferred to the producer. Based functions. Federal agencies provide public services, manage in a manner that is not harmful to the environment. Article 3 of on the requirement to pay an emission pollution fee, as stated in state property, and maintain various types of registers. Flaring- 17. Data Compilation and Publishing Federal Law No. 2395-1 on Subsoil, 1992 (see footnote 493) gives Federal Law No. 7-FZ on Environmental Protection, 2001, and the specific responsibilities are covered in Federal Law No. 7-FZ on the Federal Agency for Mineral Resources the powers to review No evidence regarding data compilation and publishing could be related federal decrees, ownership of associated gas remains Environmental Protection, 2001, which entrusts the Federal Service and approve development plans and PSCs. These powers allow found in the sources consulted. with the producer. In a limited number of instances, PSCs have for Supervision of Natural Resources with execution of those the agency to influence the use of associated gas in future oil been concluded. According to Article 9 of the Federal Law No. responsibilities. Section 4 of Federal Decree No. 255, 2017 (see 225-FZ on Production Sharing Agreements, 1995, title to a part of footnote 496) assigns responsibility for calculating and collecting production. F. Fines, Penalties, and Sanctions the production is transferred to the contractor under the terms fees for pollutant emissions to this federal service. However, of the PSC. 12. Economic Evaluation 18. Monetary Penalties because of its authority in assessing the adequacy of the metering systems and establishing accounting procedures for associated No evidence regarding economic evaluations could be found in the Article 16 of Federal Law No. 7-FZ on Environmental Protection, gas, the Federal Ministry of Energy can indirectly influence the sources consulted. 2001 (see footnote 494) specifies the procedures for calculating associated gas flaring or venting fees. Sections 1– 7 of Federal 497 http://www.fao.org/faolex/results/details/en/c/LEX-FAOC045066/ (accessed August 25, 2021). 498 http://www.fao.org/faolex/results/details/en/c/LEX-FAOC118321/ (accessed August 25, 2021). E. Measurement and Reporting Decree No. 1148, 2012 (see footnote 490) defines the key principles applicable to calculating these fees: 499 http://extwprlegs1.fao.org/docs/pdf/rus41857E.pdf (accessed August 25, 2021). 500 https://www.wto.org/english/thewto_e/acc_e/rus_e/WTACCRUS48_LEG_76.pdf (accessed August 25, 2021). 501 http://government.ru/en/department/48/events/ (accessed August 25, 2021). 13. Measurement and Reporting Requirements • The maximum admissible limit value for flaring and venting 502 http://government.ru/en/department/50/ (accessed August 25, 2021). 503 http://government.ru/en/department/53/ (accessed August 25, 2021). Article 22 of Federal Law No. 2395-1 on Subsoil, 1992 (see footnote combined should be no more than 5 percent of the total 154 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 155 Russian Federation associated gas volume, calculated by the flaring rate (Z), G. Enabling Framework Z = S/V x 100%, where S is the amount of associated gas flared and vented and V is the volume of associated gas produced. 20. Performance Requirements Volumes flared during scheduled shutdowns are excluded from No evidence regarding performance requirements could be found the calculations. in the sources consulted. • Below the maximum admissible limit value, the fee calculation (using emission pollutants and environmental factors) as quoted 21. Fiscal and Emission Reduction Incentives in Federal Decree No. 913, 2016 (see footnote 495) applies without any additional multiplier uplift. Fees related to gas flaring and venting are not tax-deductible. • Above the maximum admissible limit value, a multiplier However, legal entities participating in several oil and gas projects (k-factor) of 25 applies to the calculated fee, up from the across the value chain could benefit from fiscal consolidation, previous k-factor of 12, which was applicable until 2014. allowing them to offset profits from one project against losses from another. Depending on how profitable the other operations • An additional k-factor of 120 applies if there is no metering are, doing so could enable the utilization of associated gas, which system that meets the Federal Ministry of Energy requirements would otherwise be flared or vented. in place. • Efforts to increase associated gas use are captured in a cost 22. Use of Market-Based Principles coverage indicator, which reduces the overall fee. No evidence regarding the use of market-based principles to • Production of less than 5 million m3 a year and production with reduce flaring, venting, or associated emissions could be found in a hydrocarbon saturation of less than 50 percent can be exempt the sources consulted. from additional fees. Federal Decree No. 255, 2017 (see footnote 496) requires these 23. Negotiated Agreements between the Public fees to be paid in quarterly advance payments (except for the and the Private Sector fourth quarter). Sections 1 and 3 empower the Federal Service for No evidence regarding negotiated agreements between the public Supervision of Natural Resources to verify the fee calculations and and the private sector could be found in the sources consulted. collect the fees, which are not tax-deductible. 24. Interplay with Midstream and Downstream 19. Nonmonetary Penalties Regulatory Framework Article 20 of Federal Law No. 2395-1 on Subsoil, 1992 (see footnote Article 27 of Federal Law No. 69-FZ on Gas Supply, 1999 (see 493) allows the Federal Agency for Mineral Resources to terminate Photo credit: © Gribov Andrei Aleksandrovich / Shutterstock. footnote 497) requires owners and operators of transmission and upstream licenses if established or license-specific rules are distribution facilities to give associated gas preferential access to violated. Federal Law No. 225-FZ on Production Sharing Agreements, free capacities. Article 32 of Federal Law No. 35-FZ on the Electric 1995 (see footnote 500) links PSC renewal to the rational use of Power Industry, 2003 (see footnote 499) gives electricity produced subsurface resources (Article 5) and allows for early termination of from associated gas preferential access to the wholesale market. PSCs in case of noncompliance with federal legislation (Article 21). 156 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 157 United Kingdom 0.85 billion cubic meters of gas flared in 2021 A. Policy and Targets including the issuance of consents for flaring and venting, to the Oil and Gas Authority (OGA),509 which was formed in 2015 within (total oil production 808 thousand barrels per day) 1. Background and the Role of Reductions the Department of Energy and Climate Change. With the passage in Meeting Environmental and Economic of the Energy Act, the OGA became an independent regulator. It is Objectives a government company, limited by shares under the Companies Act 2006, with the secretary of state for business, energy, and Between 2012 and 2021, oil production in the United Kingdom Change in Flare Gas Volumes* Change in Flare Gas Intensity** industrial strategy the sole shareholder. fluctuated by about 15 percent from the mean, ending slightly lower in 2021 than in 2012. The volume of gas flared and the Since its creation, the main objective of the OGA—its so-called flaring intensity in the United Kingdom fell by about one-third Central Obligation—has been maximizing the economic recovery 2015-2021 2015-2020 2015-2021 2015-2020 during this period (figure 19). The total volume flared remained of oil and gas resources on the UK continental shelf (UKCS). This -35% -19% -29% -24% largely steady from 2012 to 2017, after which it began to fall. The objective, known as MER UK, was established as a government flaring intensity was on a declining trend since 2014. There were priority in 2015 and was the driver for creating the OGA. MER UK 76 individual flare sites in the last flare count, conducted in 2019. became legally binding with the Infrastructure Act, 2015.510 The Energy Act, 2016, charged the OGA with pursuing MER UK. The United Kingdom endorsed the World Bank’s Zero Routine * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced Flaring by 2030 initiative in 2020 (World Bank, n.d.; see footnote In February 2021, after a review by Parliament, the OGA’s new 3). It also participates in the Global Methane Initiative (n.d.; see strategy became legally binding for oil and gas companies licensed footnote 29) and the Climate and Clean Air Coalition (n.d.; see to operate in the United Kingdom.511 The new strategy expands the Figure 19 Gas flaring volume and intensity in the United Kingdom, 2012–21 footnote 30). In December 2020, the United Kingdom submitted OGA’s Central Obligation and adds assistance to the secretary of Fl rin Int nsit Fl rin Volum an updated NDC to the UNFCCC, in which the government state in meeting the net-zero target by reducing GHG emissions as committed to reducing economy-wide GHG emissions from the far as possible from sources that include flaring and venting. 2 5.0 1990 level by at least 68 percent by 2030. 504 In June 2019, the The North Sea Transition Deal, published in March 2021, illustrates government amended the Climate Change Act, 2008, to increase 4.5 how the OGA’s 2021 strategy is guiding the offshore oil and the reduction in the “net UK carbon account” below the 1990 gas sector.512 One of the pillars of this deal is decarbonization 4.0 baseline by 2050 from 80 percent to at least 100 percent.505 The targeting a 50 percent reduction in GHG emissions from oil and Cubic m t rs (m³) of updated NDC is intended to be consistent with the government’s gas production by 2030. This White Paper, a co-product of the 3.5 new net-zero policy.506 “tripartite partnership” (government, the OGA, and industry), is r 3.0 Flaring and venting have been subject to the secretary of state’s not legally binding. s fl r d/ consent for decades, per Section 12 of the Energy Act, 1976.507 Over The compatibility of the original and the new components of s fl r d/b rr l of oil produc d 1 2.5 the years, other legislation has been enacted that also covers the OGA’s new Central Obligation—maximization of oil and gas billion m³ of flaring or venting. Between 2008 and 2016, the Department of 2.0 production and decarbonization—is not readily apparent. However, Energy and Climate Change (now the Department of Business, an analysis by the Committee on Climate Change513 identified 1.5 Energy, and Industrial Strategy) provided flaring and venting reducing flaring and venting as well as methane leakage by means consents on behalf of the secretary of state. The Energy Act, of better leak detection and repair as the lowest-cost options 1.0 2016,508 transferred certain powers from the secretary of state, 0.5 504 UK Government (2020), https://www.gov.uk/government/publications/the-uks-nationally-determined-contribution-communication-to-the-unfccc (accessed January 12, 2022). 505 https://www.legislation.gov.uk/ukpga/2008/27/section/1 (accessed January 12, 2022). 506 https://www.theccc.org.uk/publication/letter-advice-on-the-uks-2030-nationally-determined-contribution-ndc/ (accessed August 13, 2021). 0 0 507 https://www.legislation.gov.uk/ukpga/1976/76/section/12 (accessed August 13, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 508 https://www.legislation.gov.uk/ukpga/2016/20/contents (accessed January 12, 2022). 509 https://www.ogauthority.co.uk/licensing-consents/consents/flaring-and-venting/ (accessed August 13, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 510 https://www.legislation.gov.uk/ukpga/2015/7/contents/enacted (accessed August 13, 2021). This approach is applied to all countries covered in this report in a consistent manner. 511 https://www.ogauthority.co.uk/news-publications/publications/2020/the-oga-strategy/ (accessed August 13, 2021). 512 UK Department for Business, Energy, and Industrial Strategy (2021), https://www.gov.uk/government/publications/north-sea-transition-deal (accessed January 12, 2022). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 513 https://www.theccc.org.uk/ (accessed August 13, 2021). 158 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 159 United Kingdom for reducing GHG emissions within the oil and gas industry.514 day or vent levels less than 4 tonnes a day from a single facility Most relevant for flaring is OPRED’s responsibility in overseeing 5. Associated Gas Ownership Historically, although flaring and venting have accounted for less during production.519 According to the new guidance, the OGA will the compliance of the oil and gas industry with Greenhouse Gas Oil and gas resources are owned by the Crown and offered to than 1 percent of total GHG emissions in the United Kingdom, consider in detail all consent requests regardless of quantity. Emissions Trading System Regulations, 2012.524 These regulations— companies under a concession regime with taxes but no royalty. they have accounted for nearly 25 percent of oil and gas industry which follow from the Climate Change Act, 2008 (see footnote In response to assisting the government with its net-zero Operators the OGA licenses to explore, develop, and produce emissions, mostly from flaring. The rest of the emissions in the oil 505) and the EU ETS Directive 2003/87/EC, 2003525—establish the emissions target, including zero routine flaring by or before petroleum onshore and offshore own all the oil and gas they extract. and gas industry are primarily from captive generation of electricity trading of GHG emissions allowances that affect flaring because 2030, the primary industry association, Oil & Gas UK, released for the industry’s own use. The OGA’s data suggest that the flaring of associated CO2 emissions. The UK ETS replaced the EU ETS intensity is high for a relatively small group of facilities. This decarbonization targets, which the OGA incorporated in its tracking of flaring and venting. The current industry methane following the United Kingdom’s exit from the European Union, C. Regulatory Governance information is used in benchmarking to improve their performance. intensity commitment is 0.25 percent by 2025, with an ambition but the UK ETS follows the same approach as EU ETS Phase IV, and Organization which the United Kingdom played an important role in developing. The North Sea Transition Deal commits to developing a methane to reduce it to 0.20 percent (North Sea Transition Deal 2021). Net Greenhouse Gas Trading Scheme Order 2020526 supplemented the 6. Regulatory Authority action plan. The Methane Action Plan 2021 was subsequently Zero Stewardship Expectation 11 states that “zero routine flaring 2012 regulations to reflect the net-zero target of the government published.515 It has six actions, the fourth of which aims to meet and venting and the use of the lowest-GHG-emission fuels should The OGA issues consents for flaring and venting under the Energy better.527 The Offshore Combustion Installations (Pollution Prevention the goal of the World Bank’s Zero Routine Flaring before 2030 be the base case for power generation and GHG emissions targets.” Act, 2016 (see footnote 508). Environmental regulation of the oil and Control) Regulations, 2018,528 amended the 2013 version to initiative with individual assets seeking to accelerate compliance and gas industry, including compliance with flaring and venting introduce consistency with EU Directive 2015/2193/EU.529 consents, remains with OPRED for offshore operations and the where possible before 2030. The action includes a commitment to comply with zero routine flaring and include gas recovery B. Legal/Regulatory Framework For venting, the National Emission Ceilings Regulations, 2018, 530 which Environment Agency for onshore operations.533 The Scottish in all newly built facilities installed on the UKCS after 2025. In and Contractual Rights implement EC Directive 2016/2284,531 have a bearing, because the Environment Protection Agency; Natural Resources Wales; the March 2021, the OGA released Net Zero Stewardship Expectation OGA considers both inert gases and hydrocarbons produced in Northern Ireland Environment Agency within the Department of 3. Primary and Secondary Legislation 11, 516 reflecting these and other priorities. In June 2021, the OGA the licensed area in consenting to vent under the Energy Act, 1976. Agriculture, Environment and Rural Affairs; and the Environment and Regulation Agency regulate GHG emissions from flaring at onshore oil and released updated guidance on flaring and venting, consolidating Vented gas may contain nitrogen, carbon dioxide, water vapor, and replacing previous guidance, tightening rules for issuing and The Energy Act, 2016 (see footnote 508) amends both the Energy hydrocarbons, and possibly traces of sulfur compounds in the gas facilities. Each agency manages and monitors the GHG monitoring consents, and aligning source categories with the Zero Act, 1976 (see footnote 507) and the Petroleum Act, 1998, 520 and consent application to the OGA (see footnote 519). permits and emissions plans of industrial facilities and aviation Routine Flaring by 2030 initiative. 517 empowers the OGA to provide consent for flaring and venting. covered under the UK ETS in its jurisdiction. The Health and Safety Building on the Petroleum Act, Petroleum (Current Model Clauses) 4. Legislative Jurisdictions Executive remains the safety regulator and takes the lead on 2. Targets and Limits Order 1999 was issued, outlining the restrictions on flaring and offshore gas leaks. National laws and regulations govern flaring and venting. However, conditions when applying for consent to flare or vent. 521 These The OGA Flaring and Venting Guidance, 2021,518 requires that environmental agencies in Scotland, Wales, and Northern Ireland clauses are included in offshore licensing regulations. 522 7. Regulatory Mandates and Responsibilities flaring and venting be reduced to the lowest possible level play regulatory roles, especially with respect to GHG emissions. under the circumstances, mirroring the previous criteria of a The environmental regulation relating to UKCS oil and gas These agencies oversaw compliance with the EU ETS. To ensure a Section 12A of the Energy Act, 1976 (see footnote 507) as technically and economically justified minimum for safe and activities is under the purview of the Offshore Petroleum Regulator smooth transition, the UK ETS follows EU ETS practices closely; a amended by the Energy Act, 2016, outlines the OGA’s functions efficient commissioning and operations. The new guidance also for Environment and Decommissioning (OPRED), which is part link between the two is desirable to many entities covered under and states that the OGA’s consent is required for flaring and requires that existing facilities engage in zero routine flaring and of the Department for Business, Energy and Industrial Strategy. the UK ETS.532 The same regulators oversee compliance with the venting. Historically, the OGA’s primary responsibility has been venting by 2030 and that all new developments be based on OPRED has enforcement powers for all relevant environmental UK ETS. MER UK. Following the government’s announcement in June 2019 zero routine flaring and venting. Earlier guidance stated that the regulations, 523 including those that apply to flaring and venting of a net-zero target, the OGA increased its focus on flaring and OGA would not examine in detail applications for consents with (see section 8 of this chapter). venting among the material sources of GHG emissions. Its 2021 flare levels less than 40 tonnes (1.6 million cubic feet [mmcf]) a strategy does not clarify how much GHG emissions from oil and 524 https://www.gov.uk/guidance/oil-and-gas-offshore-environmental-legislation#greenhouse-gases-emissions-trading-scheme-ets (accessed August 13, 2021). 514 https://www.theccc.org.uk/publication/assessment-of-options-to-reduce-emissions-from-fossil-fuel-production-and-fugitive-emissions/ (accessed August 13, 2021). 525 https://eur-lex.europa.eu/eli/dir/2003/87/2020-01-01 (accessed August 13, 2021) 515 https://oguk.org.uk/wp-content/uploads/2021/06/OGUK-Methane-Action-Plan.pdf (accessed August 13, 2021). 526 https://www.legislation.gov.uk/uksi/2020/1265/contents/made (accessed October 6, 2021). 516 https://www.ogauthority.co.uk/news-publications/publications/2021/stewardship-expectation-11-net-zero/ (accessed August 13, 2021). 527 https://www.legislation.gov.uk/uksi/2020/1265/contents/made (accessed August 13, 2021). 517 https://www.ogauthority.co.uk/media/7647/flaring-and-venting-guidance_june-2021-final.pdf (accessed August 13, 2021). 528 https://www.legislation.gov.uk/uksi/2018/798/made (accessed August 13, 2021). 518 https://www.ogauthority.co.uk/news-publications/publications/2021/flaring-and-venting-guidance/ (accessed August 13, 2021). 529 https://www.legislation.gov.uk/eudr/2015/2193/contents (accessed August 13, 2021). 519 https://www.ogauthority.co.uk/media/2467/flaring-and-venting-during-the-production-phase-1016.pdf (accessed August 13, 2021). 530 https://www.legislation.gov.uk/uksi/2018/129/contents/made (accessed August 13, 2021). 520 https://www.legislation.gov.uk/ukpga/1998/17/contents (accessed August 13, 2021). 531 https://eur-lex.europa.eu/eli/dir/2016/2284/oj (accessed August 13, 2021). 521 https://www.legislation.gov.uk/uksi/1999/160/schedule/2/paragraph/21/made (accessed August 13, 2021). 532 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/889037/Government_Response_to_Consultation_on_Future_of_UK_Carbon_Pricing.pdf 522 https://www.legislation.gov.uk/uksi/2008/225/schedule/paragraph/23/made (accessed August 13, 2021). (accessed August 13, 2021). 523 https://www.gov.uk/guidance/oil-and-gas-offshore-environmental-legislation (accessed August 13, 2021). 533 https://www.gov.uk/guidance/onshore-oil-and-gas-sector-guidance/8-flares-at-onshore-oil-and-gas-sites (accessed August 13, 2021). 160 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 161 United Kingdom gas operations must be reduced, instead referring to of reducing The procedure for commissioning new facilities is summarized as consent or may be added to the existing consent via a new upstream operations “as far as reasonable in the circumstances.” GHG emissions “as far as reasonable in the circumstances.” The follows: application. Development plans for greenfield projects need to demonstrate OGA Flaring and Venting Guidance, 2021 (see footnote 518) uses the • Possible breaches must be reported to the OGA promptly, and a “consideration and economic assessment of GHG Emissions • The OGA issues flaring or venting consents valid for about one same language but also targets zero routine flaring and venting in technical case must be made if a revision is required. Reduction Action Plans.” These plans include “zero routine month (up to three months) during the commissioning of new all new facilities and all existing facilities by 2030. non-safety-related flaring/venting” and “gas recovery facilities. Commissioning consent documentation may differ depending on systems” in addition to low-carbon electricity options, better • The amount of gas flared and vented is fixed and subject to an the facility size and complexity. At a minimum it should include 8. Monitoring and Enforcement GHG measurements, new technologies to reduce emissions, auditable program and should be at the lowest level possible for the following: and coordination with others to create energy hubs to avoid The OGA is authorized to sanction operators for failing to comply safe and efficient commissioning. • a brief overview of the field and associated main facilities duplication of infrastructure. The OGA Flaring and Venting Guidance, with any of the licenses under Chapter 5 of the Energy Act, 2016 • Consents are not issued until the OGA is satisfied that the gas- • a detailed description of the plant commissioning philosophy 2021, requires a Flaring and Venting Management Plan, which can (see footnote 508). However, the OGA does not inspect facilities processing plant is ready to receive gas (construction complete, and procedure, including gas export line commissioning, should be incorporated in the GHG Emissions Reduction Action Plan. for compliance with flaring or venting consents. In the past, fully tested). inspectors from the Offshore Environmental Inspectorate, a it be applicable • If the gas-processing plant cannot handle all gas within two • the commissioning schedule 12. Economic Evaluation department of the OGA’s predecessor, the Department of Energy weeks of first oil, the OGA may limit production. and Climate Change, could conduct inspections, routine or as • a summary of the main flaring and venting assumptions and Net Zero Stewardship Expectation 11 lists various expectations needed, of facilities for any licensed operation, including flaring • Supporting documentation should be submitted to the OGA six as applicable across the exploration, appraisal, development, GHG profiles under different commissioning strategies and venting. The Offshore Environmental Inspectorate has since months before the expected start-up. production, late-life, and decommissioning phases of an oil and • forecasts of daily and total quantities of gas flared or vented been moved to OPRED and carries out inspections. • A formal written application should be made about two weeks gas asset. Opportunities to reduce GHG emissions, including • sketches and figures containing a high-level field layout, process before first oil. 535 from flaring and venting, include improved measuring, reporting, flow diagram, and systems for gas compression, dehydration, D. Licensing/Process Approval The procedure for production is as follows: gas export, and fuel gas. tracking, and incorporating of net-zero targets in corporate decision making across all lifecycle phases of an asset. • Consents for flaring or venting during production operations The OGA Flaring and Venting Guidance, 2021, also covers flaring 9. Flaring or Venting without Prior Approval Some design considerations for greenfield projects are relevant are issued after commissioning of the gas-processing plant is and venting at terminals and other onshore facilities that serve The Energy Act, 2016 (see footnote 508) amended the Energy Act, completed. to flaring and venting (see the previous section). Both Net Zero offshore operations. However, consent applications for onshore 1976 (see footnote 507). Under its Section 12A, approval for flaring Stewardship Expectation 11 and the North Sea Transition Deal call • Consents are annual, and leftover allowances cannot be carried facilities are submitted via email and not through the Energy or venting is not required if it is necessary to reduce or avoid the for a sharper focus on energy hubs, the sharing of facilities, and forward. Portal. risk of personal injury, the risk could not reasonably have been long-term planning for infrastructure repurposing. • The operator must submit a new application every year foreseen in time to reduce or avoid it other than by flaring or (usually in October). One objective of the OGA is to use these 11. Development Plans Improved measurement and tracking of emissions are key venting, or it was not reasonably practicable to obtain consent in applications to develop a realistic forecast against which to The OGA guidance on offshore field development plans must requirements for better economic assessment by operators the time available. track performance. “demonstrate a commitment to preventing the unnecessary and the OGA asks to develop reduction strategies for flaring and • The OGA may issue consents of shorter duration if, for wasteful flaring of associated gas and carrying out commissioning venting. The OGA benchmarking analysis for flaring shows that 10. Authorized Flaring or Venting example, the level of flaring or venting raises concerns o more operations in an efficient and timely manner.”536 Paragraphs 49–51 some facilities have much lower flaring intensities than others. Under Section 12A of the amended Energy Act, 1976, consent from investigation or data are necessary. More accurate and detailed data are expected to improve the of the OGA requirements for UKCS field development plans ask for the OGA is required to flare or vent gas from upstream oil or gas understanding of the lowest-cost approaches to reducing volumes • Flare (vent) consents are for a field, which may have multiple “a detailed technical and economic assessment” to justify flaring. and processing facilities. Operators must apply for these consents of flared gas. The OGA is also developing a database for methane installations that flare (vent). Licensees are also required to design facilities for “less wasteful via the UK Energy Portal. 534 The OGA used to provide separate emissions, in order to replicate the benchmarking exercise for • Composite or group consents can be issued for several fields alternatives should the economic or technical circumstances guidance with regard to applications for flaring or venting venting. tied to common facilities when equity partners are the same change.”537 Onshore guidance reflects the same principle of consents during commissioning and production. The OGA Flaring or operators of fields and common facilities submit their avoiding “unnecessary wastage” via flaring and venting.538 The OGA Flaring and Venting Guidance, 2021, formalizes these and Venting Guidance, 2021 (see footnote 518) replaced these two agreement for a group consent. Net Zero Stewardship Expectation 11 asks the oil and gas expectations. Operators are expected to demonstrate that they guidance documents, but most requirements for authorization of • A new field connecting to an existing facility may obtain a new industry to reduce GHG emissions from all aspects of its evaluated all options to reduce flaring and venting when applying flaring and venting remained the same. 536 https://www.ogauthority.co.uk/media/4868/fdp-guidance-may-2018.pdf (accessed August 13, 2021). 534 https://itportal.ogauthority.co.uk/eng/fox/oga/OGA_LOGIN/login/ (accessed August 13, 2021). 537 https://www.ogauthority.co.uk/media/6099/fdp_guidance_requirements-document-oct_update-2019v2.pdf (accessed August 13, 2021). 535 https://oilandgasukenvironmentallegislation.co.uk/contents/topic_files/offshore/flaring.html (accessed August 13, 2021). 538 https://www.ogauthority.co.uk/media/4959/29112017_consolidated-onshore-guidance-compendium_vfinal-002.pdf (accessed August 13, 2021). 162 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 163 United Kingdom for consents and when developing credible plans to reach zero System, the environmental database of the UK oil and gas facilities than those based on the standard factors used by the report, 0.05 percent of all produced gas in 2019 was vented, about routine flaring and venting. industry maintained by OPRED.539 Environmental and Emissions Monitoring System. 3 percent was flared, about 88 percent was exported, and the rest was used in operations, mainly for power generation. These shares 14. Measurement Frequency and Methods The mass units used in reporting are usually tonnes, following E. Measurement and Reporting guidance in the Atmospheric Emissions Calculations document remained fairly constant through the 2010s. About 60 percent of flare volumes were from baseloads, 30 percent from operational The OGA collects monthly data from onshore and offshore (see footnote 541). GHG emissions associated with flaring 13. Measurement and Reporting Requirements operators for fields and terminals via the Petroleum Production changes, and 10 percent from emergency shutdowns (see section are calculated using emissions factors, gas composition, and 10 of this chapter). Separately, the OGA is expected to publish an According to the OGA Flaring and Venting Guidance, 2021 (see Reporting System. In July 2017, it started requiring data on combustion efficiency assumptions from EU Regulation No. annual flaring and venting benchmarking report. footnote 518), the flaring or venting consent granted during associated gas, including flared and vented volumes. It uses the 601/2012.542 The EU ETS regulations require all operators subject commissioning is intended to cover the period from first oil data to track compliance with flaring and venting consents. to the directive to submit monitoring plans to regulators for production to the achievement of stable operations (one to three There is currently no specific metering requirement. According approval. Historically, there has been an uncertainty range of ±7.5 F. Fines, Penalties, and Sanctions months). The operator must provide weekly reports to the OGA percent for flare measurements submitted to regulators under the to the OGA’s first UKCS Flaring & Venting Report, “metering of 18. Monetary Penalties detailing the activities from the previous week, including daily EU ETS scheme.543 In 2021, the UK ETS replaced the EU ETS, but flaring poses challenges due to the large range of operating rates of oil and gas production and gas exported, flared, vented, in many respects, including measurements, the UK ETS mirrors The OGA is authorized to sanction operators for noncompliance conditions associated with the process.” The metering of vented or used as a fuel; cumulative plots of production, flaring, and Phase IV of the EU ETS to ensure a smooth transition. with any of the licenses it issues, including consents for flaring gas volumes is extremely rare. The report uses “operators’ best venting compared with consented quantities and of associated and venting. Chapter 5 of the Energy Act, 2016 (see footnote 508) estimates” of flared and vented gas volumes, as reported to the emissions; and the status of gas compressors and gas- Petroleum Production Reporting System and Environmental and 16. Record Keeping on sanctions, details OGA’s disciplinary powers. Sanction notices processing plants, highlighting anything that affected equipment can cover enforcement of “petroleum-related requirements,” Emissions Monitoring System and associated GHG emissions No explicit record-keeping requirement was identified from the or plant performance. financial penalties, revocation of licenses, and operator removal. based on the latter system’s and ETS guidance (see next section). sources consulted. The OGA strategy is to “influence” operator Section 42 of Chapter 5 defines petroleum-related requirements, During production, unless specified otherwise in the consent, In the future, as highlighted in the OGA Flaring and Venting action through performance benchmarking and collaboration.544 which include responsibilities imposed under Section 9C and 9A of flaring volumes are included in routine reporting via the OGA Guidance, 2021, the OGA expects operators to “meter, monitor Operators are urged to provide data on various aspects of their the Petroleum Act, 1998 (see footnote 520), requirements under the Petroleum Production Reporting System via the Energy Portal (see and manage their flare gas composition and flare combustion operations, as outlined in the OGA Stewardship Expectations,545 Energy Act, 2016 (including flaring and venting consents issued by footnote 534). Under the Petroleum Act, 1998 (see footnote 520), efficiency” and to use “best available technology to quantify, a series of documents developed in consultation with the the OGA), and any term of offshore licenses issued by the OGA. only the gas flared from the licensed area requires consent, but measure and monitor vent gas.” industry.546 The OGA collects the data through the Petroleum the OGA requires that the content of inert gases in the flare be Production Reporting System. Operators may opt to maintain According to Sections 44–46 of Chapter 5, financial penalties are provided for information. 15. Engineering Estimates data, including data on flaring and venting volumes, in-house limited to £1 million (about US$1,400,000 as of October 2021), The OGA Flaring and Venting Guidance, 2021, requires flare and vent to assess economically viable options to reduce flaring and although the secretary of state can increase them up to £5 The OGA Flaring and Venting Guidance, 2021, lists several reporting volumes to be reported in mass units. OPRED’s Environmental venting to match the best performers identified in the OGA’s million (about US$ 6,800,000 as of October 2021). If a financial requirements. Flaring and venting must be allocated by source and Emissions Monitoring System requires operators to report benchmarking exercise. penalty notice is given to two or more parties, they are jointly category. New in the OGA Flaring and Venting Guidance, 2021, all emissions from all facilities involved in offshore oil and gas and severally liable. The payment is recoverable as a civil debt source categories are made consistent with the World Bank’s Zero production in mass units. 540 There are two main options: 17. Data Compilation and Publishing if it is not paid before the deadline in the notice. Penalties must Routine Flaring by 2030 initiative. They include the following: be paid into the Consolidated Fund. However, exact penalties 1. Report total masses of emissions without component A large amount of data can be downloaded from the OGA’s • Category A: Routine flares under normal safe and efficient must be defined in the guidance to be issued by the OGA. The breakdown. The Environmental and Emissions Monitoring Open Data service.547 In September 2020, the OGA published operating conditions most recent guidance from the OGA provides principles of best System then uses standard default factors to calculate the UKCS Flaring and Venting Report,548 its first benchmarking • Category B: Nonroutine flares that occur during normal regulatory practices based on other regulators.549 Given its lack of emission gases and halogenated compounds.541 report on flaring and venting using data submitted by oil and gas operations beyond optimal levels for the facility experience with assigning financial penalties, the OGA will assess companies via the Petroleum Production Reporting System and 2. Report total and component emissions data from in-house penalties for each violation according to the principles outlined in • Category C: Safety flaring during emergency conditions. Environmental and Emissions Monitoring System. According to the systems (approved by the Department of Energy and Climate Change and, since 2016, by the OGA). This option enables 542 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32012R0601 (accessed August 13, 2021). Operators also report flaring and venting data and emissions from 543 Email correspondence with the OGA. operators to report data that are more representative of their these activities via the Environmental and Emissions Monitoring 544 https://www.ogauthority.co.uk/about-us/what-we-do/ (accessed August 13, 2021). 545 https://www.ogauthority.co.uk/exploration-production/asset-stewardship/expectations/ (accessed October 6, 2021). 546 https://www.ogauthority.co.uk/exploration-production/asset-stewardship/expectations/ (accessed August 13, 2021). 539 https://www.gov.uk/guidance/oil-and-gas-eems-database (accessed August 13, 2021). 547 https://data-ogauthority.opendata.arcgis.com/ (accessed August 13, 2021). 540 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/136470/atmos.pdf (accessed August 13, 2021). 548 https://www.ogauthority.co.uk/news-publications/publications/2020/flaring-and-venting-benchmarking-report/ (accessed August 13, 2021). 541 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/136461/atmos-calcs.pdf (accessed August 13, 2021). 549 https://www.ogauthority.co.uk/media/3488/420387-oga-financial-penalty-guidance-28.pdf (accessed August 13, 2021). 164 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 165 United Kingdom its guidance. It has not sanctioned any operator for violations of Guidance, 2021 (see footnote 518) suggests a more stringent There is a climate change levy on electricity, gas, LPG, and other 23. Negotiated Agreements between the Public flaring or venting consents.550 approach than in the past to sanctions in case of failure to comply energy sources derived from fossil fuels at the end-user level.557 and the Private Sector with flare or vent consents. Civil penalties for flaring or venting range from £500 to £50,000 In 2016, the Petroleum Revenue Tax was permanently eliminated; The 2021 North Sea Transition Deal is the most recent (about US$680–US$68,000 as of October 2021) and can be OPRED also has enforcement powers associated with its before the reform, it had been 50 percent. The supplementary demonstration of the “tripartite partnership” between the issued by OPRED under the Offshore Environmental Civil Sanctions environmental regulation of offshore oil and gas operations. charge was reduced to 10 percent, down from 20 percent government, the OGA, and the offshore oil and gas industry (as Regulations 2018.551 In addition, OPRED, the Environment Agency, Although the specifics may change according to individual under the Corporation Tax Act, 2010. These fiscal reforms were represented by Oil & Gas UK). This public-private partnership has the Scottish Environment Protection Agency, and the Scottish regulations, inspectors from the Offshore Environmental intended to facilitate MER UK. Despite industry expectations, the been gaining prominence since MER UK became a legal objective Environment Protection Agency can impose civil penalties for Inspectorate can board offshore installations with any equipment government did not offer any fiscal incentives for investments to of the UK government in 2015 and the net-zero target became a breaches of the UK ETS under the Greenhouse Gas Trading Scheme necessary to conduct investigations into compliance, interview mitigate environmental impacts, including flaring and venting. legal obligation in 2019. Although not legally binding, the North Order 2020.552 This last penalty has become more pertinent, as staff, and collect relevant data. If inspectors find noncompliance, Sea Transition Deal aims to develop strategies for making the flaring is no longer eligible for free allowances under the EU ETS enforcement actions can range from written notices to operators 22. Use of Market-Based Principles offshore oil and gas industry net-zero carbon by 2050, in line with Phase IV, which started in 2021. The UK ETS is expected to align to ensure compliance for relatively minor violations to civil the government target. Although GHG emissions from flaring All UKCS oil and gas facilities have been subject to EU ETS with the EU ETS Phase IV. sanctions, revocation of permits, and prosecution for more serious and venting account for only about a quarter of UKCS Scope 1 requirements. Following Annex I of the EU ETS Directive 2003/87/ or persistent noncompliance. Enforcement must be proportional emissions, the deal targets them as part of a holistic approach to EC, 2003 (see footnote 525), these requirements cover offshore 19. Nonmonetary Penalties to the violation, related to specific violations, consistent, reducing emissions. installations that emit CO2 from combustion installations with transparent, and accountable.555 Under Chapter 5 of the Energy Act, 2016 (see footnote 509), a maximum thermal input exceeding 20 MW, including flares. nonmonetary penalties can increase in severity as follows: Operations were provided free allocations if their compliance 24. Interplay with Midstream and Downstream • an enforcement notice informs an operator of its failure to G. Enabling Framework with the EU ETS put them at a competitive disadvantage in the Regulatory Framework global market (that is, if they were not able to reflect the cost Liberalization of the UK natural gas market began in the mid- comply with a petroleum-related requirement and may include 20. Performance Requirements of compliance in the price of their goods and services and lost 1980s. There is wholesale and retail competition in this highly directions for compliance (Section 43). Specific performance requirements on flaring or venting could market share as a result), a situation known as carbon leakage. liquid market. Natural gas suppliers have regulated open • a revocation notice declares that the license will be revoked by not be identified in the official documents reviewed. The OGA As such, the EU ETS did not affect GHG emissions from flaring or access to midstream and downstream infrastructure. Timely a certain date for failure to comply with a license requirement implemented a benchmarking process based on the flaring and most other oil and gas industry activities until recently. development of this infrastructure is necessary to avoid delays (Section 47). venting data it started collecting in July 2017. The data can be in upstream production or flaring. If there is a need for new • an operator removal notice announces the date of removal of an In 2021, Phase IV of the EU ETS started. The changes in used to identify facilities that are performing worse than the capacity, suppliers can develop new infrastructure or transact operator that had failed to comply with a license requirement Phase IV exclude installations associated with gas extraction, industry average. The OGA anticipates that this benchmarking with independent midstream companies to develop the needed (Section 48). including flaring, from the carbon leakage list. Accordingly, exercise will allow operators to learn best practices from others infrastructure. Companies operating in the natural gas midstream flare installations will receive only 30 percent of their emissions The OGA follows a “measured escalation” process before deciding and to help them reduce their flaring and venting at the least and downstream need a license from the independent regulator allocations free until 2026, after which the free allocation will whether to pursue sanctions.553 Before pursuing sanctions for cost. The OGA has had success with benchmarking in raising Ofgem.558 decline to 0 percent by 2030. The United Kingdom played an violations, the OGA may require regulatory-compliance plans and performance levels in production efficiency, unit operating costs, integral role in the development of Phase IV, and the UK ETS Offshore producers need to develop infrastructure to deliver their more frequent reporting of, for example, volumes of gas flared. The recovery factor, and decommissioning.556 is expected to follow the EU ETS closely. However, the cap is associated gas to the national gas system. This infrastructure OGA requires that operators conduct ”lessons learned exercises” 5 percent lower than the United Kingdom’s share of Phase IV includes pipelines, terminals, processing plants, and storage following consent breaches to avoid similar breaches in the future. 21. Fiscal and Emission Reduction Incentives cap to support the net-zero target of the government. It is also facilities, some of which are located onshore. If relevant, the As part of the OGA’s progressively more proactive approach to There is no carbon tax on GHG emissions associated with oil and possible that the two trading schemes will be linked in the future, OGA issues flaring and venting consents for these facilities. using its powers in the future,554 the OGA Flaring and Venting gas activities, but emissions are covered under the UK ETS regime. although changes to the way the United Kingdom implements Environmental regulators have jurisdiction over these facilities as the ETS are possible. well as the rest of the national gas system. 550 Email correspondence with the OGA confirms that no formal sanctions had been imposed for violations of flare or vent consents as of the date of this annex chapter (mid-2021). 551 https://www.legislation.gov.uk/uksi/2018/800/made (accessed August 13, 2021). 552 https://www.legislation.gov.uk/uksi/2020/1265/contents/made. A list of recent civil penalties for failure to comply with ETS regulations in Scotland (including onshore oil and gas operations) can be found at https://www.sepa.org.uk/regulations/climate-change/eu-emissions-trading-system/. 553 https://www.ogauthority.co.uk/regulatory-framework/disputes-and-sanctions/ (accessed August 13, 2021). 554 https://www.ogauthority.co.uk/news-publications/publications/2020/the-oga-s-final-report-on-its-thematic-review/ (accessed August 13, 2021). 555 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/857913/OPRED_ENFORCEMENT_POLICY_revised_-_03_Jan_2020.pdf (accessed August 13, 2021). 557 https://www.gov.uk/guidance/climate-change-levy-rates (accessed August 13, 2021). 556 https://www.ogauthority.co.uk/data-centre/benchmarking/ (accessed August 13, 2021). 558 https://www.ofgem.gov.uk/ (accessed October 22, 2021). 166 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 167 United States United States: Federal Offshore 8.78 billion cubic meters of gas flared in 2021 A. Policy and Targets federal offshore gas in total gas production was about one-fifth throughout the 1980s and 1990s but started to decline in the (total oil production 11,187 thousand barrels per day) 1. Background and the Role of Reductions early 2000s and fell below 3 percent in 2019. in Meeting Environmental and Economic In the 2010s, about 1.25 percent of the total OCS gas production Objectives was flared or vented, of which 70–80 percent was associated gas Crude oil production in the United States increased by about from oil wells. Of the gas flared and vented, 60–70 percent was Change in Flare Gas Volumes* Change in Flare Gas Intensity** three-quarters between 2012 and 2021, while the volume of gas flared, and the remainder was vented (see footnote 561). With flared decreased from 9.5 bcm to 8.8 bcm (figure 20). This gradual limited exceptions, flaring and venting have been prohibited in decrease was interrupted by spikes in 2018 and 2019. Changes in federal onshore and offshore oil and gas operations since the late 2015-2021 2015-2020 2015-2021 2015-2020 the flaring intensity were also uneven: After falling during 2016 1970s, but several assessments by the Government Accountability -26% 0% -37% -17% and 2017, the intensity rose sharply in 2018 and 2019 before Office (GAO) and the Department of the Interior and its offshore falling to its lowest level since 2012 in 2021. Compared with 2012, regulators over the years have found shortcomings in regulatory the flaring intensity was about 45 percent lower in 2020. There practice and technology implementation that may have prevented were 2,655 individual flare sites in the last flare count, conducted maximum possible reduction in the volumes flared or vented. For in 2019. example, a 2010 GAO report562 found a large discrepancy between * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced offshore operators, which reported flared and vented gas at 0.5 The United States endorsed the World Bank’s Zero Routine percent of gas production, and the Environmental Protection Flaring by 2030 initiative in 2016 (World Bank, n.d.; see footnote Agency (EPA), which estimated the share of flared and vented Figure 20 Gas flaring volume and intensity in the United States, 2012–21 3). It also participates in the Global Methane Initiative (n.d.; volumes at 2.3 percent. The GAO made several recommendations Fl rin Int nsit Fl rin Volum see footnote 29) and the Climate and Clean Air Coalition (n.d.; to the regulator to consider reducing the volumes flared or vented, see footnote 30). In 2021, the United States rejoined the Paris 20 5.0 including adoption of the best available technologies. Agreement and submitted a revised NDC report to the UNFCCC,559 setting a target for reducing its net economy-wide GHG emissions In 2011, the offshore regulator, Minerals Management Service, 4.5 by 50–52 percent below 2005 levels by 2030. The NDC does was separated into the Bureau of Ocean Energy Management 4.0 not mention flaring or venting, but reducing methane emissions (BOEM),563 to assess and manage offshore energy resources; the Cubic m t rs (m³) of 15 from wells and natural gas pipeline systems is cited among the Bureau of Safety and Environmental Enforcement (BSEE),564 3.5 important actions the United States plans to take to control non– to regulate safety and environmental impacts; and the Office CO2 GHG emissions. of Natural Resources Revenue (ONRR),565 to manage royalty r 3.0 revenues. The GAO recommendations were addressed mainly s fl r d/ The Federal Outer Continental Shelf (OCS)560 includes the Alaskan, s fl r d/b rr l of oil produc d by BSEE and BOEM. BSEE continues to pursue regulatory and 10 2.5 Atlantic, Gulf of Mexico, and Pacific regions. The western (beyond technological options to reduce flaring and venting further while billion m³ of nine nautical miles of Texas waters) and the central (beyond 2.0 collaborating with BOEM on the economic viability of options. three nautical miles of Louisiana, Mississippi, and Alabama BSEE is responsible for regulating air emissions in offshore oil and waters) planning areas of the Gulf of Mexico produce about 97 1.5 gas facilities in the Gulf of Mexico. 5 percent of all OCS oil and gas production.561 The share of federal 1.0 offshore oil in total US production peaked at about 30 percent in In 2014, the President’s Climate Action Plan set a goal of cutting 2009 and declined to less than 15 percent by 2020. The share of methane emissions from oil and gas operations by 40–45 percent 0.5 0 0 559 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/United%20States%20of%20America%20First/United%20States%20NDC%20April%2021%202021%20Final.pdf (accessed August 31, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 560 https://www.boem.gov/oil-gas-energy/leasing/outer-continental-shelf (accessed August 15, 2021). 561 https://www.energy.gov/sites/prod/files/2020/06/f75/U.S.%20Federal%20Offshore%20Gas%20Flaring%20and%20Venting%20Regulations%20Fact%20Sheet.pdf (accessed August 15, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 562 GAO (2010), https://www.gao.gov/products/gao-11-34 (accessed January 13, 2022). This approach is applied to all countries covered in this report in a consistent manner. 563 https://www.boem.gov/ (accessed August 15, 2021). 564 https://www.bsee.gov/ (accessed August 15, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 565 https://www.onrr.gov/ (accessed August 15, 2021). 168 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 169 United States: Federal Offshore from the 2012 level by 2025.566 In June 2016, the United States, 2. Targets and Limits regulation in other federal waters under various programs of the within the same agency. Several reports by the Department Mexico, and Canada committed to reducing methane emissions Clean Air Act, 1990. The NSPS are issued and updated by the EPA of Interior’s Inspector General detail the close relationship Title 30 Code of Federal Regulations (CFR) § 250.1160(a)574 defines from the oil and gas sector by 40–45 percent by 2025. 567 Also in under section 111 579 of the Clean Air Act. The 2016 NSPS developed between members of the royalty-in-kind program of the Minerals limits within which gas can be flared or vented. For example, the 2016, the EPA issued the New Source Performance Standards by the EPA allowed for regulating emissions of methane and Management Service (terminated in 2010) and operators’ amount is limited to what is necessary for its intended purpose, or (NSPS) for new stationary sources of air pollution, including other GHGs in addition to volatile organic compounds. Significant employees, the lack of resources limiting the ability of the Minerals an average of 50,000 cubic feet (mcf) a day in any calendar month. methane emissions from upstream and midstream oil and gas portions of the 2016 NSPS were rescinded in 2020; they may be Management Service to inspect an increasing number of offshore operations. 568 reinstated (see section 1 of this chapter). operations, and the industry’s practice of opposing potential President Trump reversed some of these regulatory reforms with B. Legal/Regulatory Framework Minerals Management Service regulations deemed uneconomic.581 Executive Order 13783, Promoting Energy Independence and Economic and Contractual Rights 4. Legislative Jurisdictions The BSEE is an independent regulator focusing on the safety and Growth, 2017,569 which called for federal agencies to review and, Federal laws govern flaring and venting in federal offshore fields, environmental aspects of offshore oil and gas operations, including 3. Primary and Secondary Legislation as appropriate, revise or annul existing regulations that could and national regulators regulate these practices. In state waters flaring and venting. The BSEE, often working in coordination and Regulation (nine nautical miles in Texas and three nautical miles elsewhere), burden the development of domestic resources. In 2020, the with BOEM, is also responsible for regulating air emissions from EPA rescinded significant portions of the 2016 NSPS, including The Outer Continental Shelf Lands Act, 1953, 575 is the overarching state law regulated flaring and venting, and state entities regulate offshore oil and gas operations in the western and central Gulf methane emissions from oil and gas operations.570 legislation governing offshore oil and gas activities and defining them. of Mexico and the Alaska OCS Chukchi and Beaufort Seas. The the federal role in regulating them. Title 43 U.S. Code § 1334(i) has BSEE’s Environmental Compliance Program ensures compliance In early 2021, President Biden issued Executive Order 13990 on prohibited flaring since September 18, 1978, unless the secretary 5. Associated Gas Ownership with air emissions laws and regulations. BOEM requires air Protecting Public Health and the Environment and Restoring Science of the interior finds that gas capture is not practicable or that emissions monitoring and reporting plans. The Environmental to Tackle the Climate Crisis, 2021.571 It directs all federal agencies The federal government owns all oil and gas in the federal OCS.580 flaring is necessary to alleviate an emergency or conduct testing Compliance Program also ensures compliance with those plans to review all legal and regulatory rules issued by the previous Energy firms access oil and gas in the OCS through concessions or work-over operations. 576 Title 30 CFR § 250.1160(a) (see footnote (see footnote 578). The EPA regulates air emissions in all other administration and rescind or revise any that are inconsistent (leases) from BOEM (see footnote 560). The concession grants the 574) defines limited conditions under which BSEE can approve federal waters. with the policy stated in this order. In particular, it tasked the right to explore for and, if a commercial discovery is made, own, flaring or venting. It issues guidance, primarily in the form of EPA with rescinding 2020 amendments to the NSPS rule and develop, and produce the oil and gas. Royalties are not paid on Notices to Lessees (NTLs), to clarify procedures and requirements unavoidably lost gas, which includes flared and vented volumes 8. Monitoring and Enforcement developing new guidelines for methane emissions across the oil for these approvals. and gas industry by September 2021. On November 15, 2021, the under certain conditions (see section 21 of this chapter). The BSEE can conduct inspections and audits. Inspection EPA released the proposed rule on Standards of Performance for The Outer Continental Shelf Lands Act, 1953, directs the procedures are intended to ensure compliance with Sections 1160 New, Reconstructed, and Modified Sources and Emissions Guidelines Department of Interior to administer regulations for compliance C. Regulatory Governance and 1163 of Title 30 CFR § 250 (see footnote 572). In 2015, the for Existing Sources: Oil and Natural Gas Sector Climate Review. 572 with the National Ambient Air Quality Standards set in the Clean Air BSEE issued additional guidance on inspection procedures and In parallel, the United States, together with the European Act, 1970, 577 which were amended in 1977 and 1990, to prevent and Organization the flaring or venting of low-volume flash gas from low-pressure Commission, also launched the Global Methane Pledge, 573 a significant damage to the air quality of any state as a result equipment.582 Inspectors must verify operator calculations 6. Regulatory Authority voluntary commitment to reduce global methane emissions by at of offshore activities approved by the Department of Interior’s of flared and vented volumes, proper recording, and record least 30 percent from 2020 levels by 2030. offshore regulator. 578 The BSEE is responsible for ensuring The BSEE has the authority to regulate flaring and venting, maintenance according to standard operating procedures for compliance with the National Ambient Air Quality Standards in the including air emissions from them. The EPA has jurisdiction over measurement inspections. The BSEE requires inspectors to Gulf of Mexico and Alaska. The EPA is responsible for air quality offshore emissions as well. witness 10 percent of the accuracy tests for oil sales meters and 5 percent of the accuracy tests for gas meters. 566 White House (2014), https://obamawhitehouse.archives.gov/sites/default/files/strategy_to_reduce_methane_emissions_2014-03-28_final.pdf (accessed January 13, 2022). 7. Regulatory Mandates and Responsibilities 567 https://obamawhitehouse.archives.gov/the-press-office/2016/06/29/leaders-statement-north-american-climate-clean-energy-and-environment (accessed August 15, 2021). The BSEE’s inspectors issue a document for an incident of 568 https://www.epa.gov/controlling-air-pollution-oil-and-natural-gas-industry/new-source-performance-standards-and (accessed August 15, 2021). The Minerals Management Service was reorganized into BOEM, noncompliance if an operator fails to prepare and maintain 569 https://www.federalregister.gov/documents/2017/03/31/2017-06576/promoting-energy-independence-and-economic-growth (accessed August 15, 2021). 570 https://www.epa.gov/controlling-air-pollution-oil-and-natural-gas-industry/epa-issues-final-policy-and-technical (accessed August 15, 2021). the BSEE, and the ONNR primarily to eliminate conflicts between records for all gas flared or vented. Prompt notification is 571 https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-protecting-public-health-and-environment-and-restoring-science-to-tackle-climate-crisis/ (accessed August 15, 2021). managing revenues from oil and gas leasing and regulating safety required if the inspector observes that the gas volume routinely 572 https://www.federalregister.gov/documents/2021/11/15/2021-24202/standards-of-performance-for-new-reconstructed-and-modified-sources-and-emissions-guidelines-for (accessed March 04, 2021). and environmental aspects of offshore oil and gas operations flared or vented at a facility exceeds 50 mcf a day and the 573 https://www.globalmethanepledge.org/ (accessed March 04, 2021). 574 https://www.govinfo.gov/content/pkg/CFR-2017-title30-vol2/xml/CFR-2017-title30-vol2-part250.xml#seqnum250.1160 (accessed August 15, 2021). 579 https://www.law.cornell.edu/uscode/text/42/7411 (accessed August 15, 2021). 575 https://www.boem.gov/sites/default/files/oil-and-gas-energy-program/Leasing/Outer-Continental-Shelf/Lands-Act-History/Outer-Continental-Shelf-Lands-Act.pdf (accessed August 15, 2021). 580 https://revenuedata.doi.gov/how-it-works/ownership/ (accessed August 15, 2021). 576 https://www.law.cornell.edu/uscode/text/43/1334 (accessed August 15, 2021). 581 https://www.govinfo.gov/content/pkg/GPO-OILCOMMISSION/pdf/GPO-OILCOMMISSION.pdf (accessed August 15, 2021). 577 https://www.epa.gov/laws-regulations/summary-clean-air-act (accessed August 15, 2021). 582 BID-2015-G069, Guidance and Inspection Procedures RE Documentation Requirements for Flaring or Venting of Low-Volume Flash Gas; BID-2015-P015, Procedures Regarding Production 578 https://www.bsee.gov/what-we-do/environmental-compliance/environmental-programs/air-quality-program (accessed August 15, 2021). Management, Site Security, and Gas Flaring Inspections; BID2015-G096, Standard Operating Procedures for Performing Measurement Inspections, MIU, MAES. 170 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 171 United States: Federal Offshore operator is unable to verify approval. The BSEE’s personnel on a case-by-case basis, with the following exceptions: Offshore Activity Database System. They concluded that “flaring In reports, operators may classify gas used to operate lease for the Environmental Compliance Program can conduct risk- currently vented methane and replacing high-bleed pneumatic equipment as lease-use gas. Where required, the amounts of gas • The exception is in the national interest, such as when a major based offshore inspections to test that equipment that emit air controllers with zero- or low-bleed pneumatic controllers would flared and vented at each facility must be reported separately hurricane causes infrastructure damage. Bureau Interim pollutants is working correctly and that emissions levels comply likely provide the greatest opportunities for meaningful and cost- from that of facilities that do not require meters and separately Directive 2015-G070584 requires that top BSEE management with the National Ambient Air Quality Standards (see footnote 577 effective emission reductions.” from other facilities with meters. Flaring and venting from grant this exception.585 and 578). multiple facilities on a single lease or unit may be reported • The operator claims that production from the well completion According to NTL No. 2020-N04, the BSEE does not consider the together. would likely be permanently lost if the well were to be shut in. avoidance of lost revenue as a justification for approving flaring D. Licensing/Process Approval According to Bureau Interim Directive 2015-G070, the BSEE’s or venting. For example, if gas production or transportation 14. Measurement Frequency and Methods resource conservation personnel must analyze necessary data infrastructure needs to be repaired and a well must be shut in 9. Flaring or Venting without Prior Approval from wells to confirm all such claims. during repairs, the BSEE will not allow operators to flare or vent According to Title 30 CFR § 1210.102, all operators must file Form Flaring or venting are permitted without BSEE’s approval under • The operator claims that short-term flaring or venting would gas to avoid shutting in the well and maintain the same pace of ONRR-4054 for each well for each calendar month, beginning a limited number of circumstances, listed in Title 30 CFR § likely yield a smaller volume of lost natural gas than if the oil sales. Violations can result in civil or criminal penalties (see with the month in which drilling is completed, unless the well is 250.1160(a) (see footnote 574). facility were shut in and restarted later. According to Bureau sections 18 and 19 of this chapter). for test production only or the ONRR grants written exemption. Interim Directive 2015-G070, the BSEE’s resource conservation If any flaring or venting of gas required approval, operators • when natural gas is used to operate production facilities or as must report to the BSEE regional supervisor the location, dates, an additive to burn waste products personnel must analyze necessary data from wells to confirm all E. Measurement and Reporting number of hours, and volumes of gas flared, gas vented, and liquid such claims. • during the restart of a facility that had been shut in because of hydrocarbons burned under the approval. 13. Measurement and Reporting Requirements weather conditions, such as a hurricane According to Title 30 CFR § 250.1161 (see footnote 574), approval According to Title 30 CFR § 250.1163,587 offshore facilities • during the blow-down of transportation pipelines downstream for an extended period is possible but cannot exceed one year. The 15. Engineering Estimates of the royalty meter processing more than an average of 2,000 barrels of oil a day BSEE may approve requests for extended periods of flaring if the must install flare or vent meters. NTL No. 2012-N03 provides According to Title 30 CFR § 250.1163, offshore facilities processing • during the unloading or cleaning of a well, drill-stem testing, operator can demonstrate actions that will eliminate flaring and guidance on the BSEE procedures and requirements for installing less than an average of 2,000 barrels of oil a day do not have production testing, other well-evaluation testing, or the blow- venting or demonstrates that lease economics do not support meters.588 Measurements must be within 5 percent accuracy. to install meters. Where meters are not required, gas flared and down necessary to perform these procedures investment in eliminating flaring or venting. Operators must use and maintain meters for the facility’s vented may be reported on a lease or unit basis. The BSEE does • when equipment fails to work correctly during equipment life. Meters must be calibrated regularly according to the not prescribe estimation methodologies, but according to Title 30 maintenance and repair or when system pressure must be 11. Development Plans CFR § 250.1203,592 the estimation method of gas lost or lease-use manufacturer’s recommendation, or at least once every year, relieved According to Title 30 CFR § 250.1160(b) (see footnote 574), whichever is more frequent. gas must be documented along with the data used. • when the equipment works properly but there is a temporary regardless of the exceptions, operators must not exceed the All hydrocarbons produced from a well completion, including upset condition. volume approved for flaring or venting in the Development 16. Record Keeping Operations Coordination Document 586 submitted to BOEM. all gas flared or vented and liquid hydrocarbons burned, must be reported to the ONRR on Form ONRR-4054 (Oil and Gas According to Title 30 CFR § 250.1163, leaseholders must prepare 10. Authorized Flaring or Venting Operations Report [OGOR]), per Title 30 CFR § 1210.102.589 Since records detailing gas flaring, gas venting, and liquid hydrocarbon An operator must receive approval from the BSEE regional 12. Economic Evaluation September 15, 2010, leaseholders must specify the volumes of burning for each facility and estimation methods used and supervisor to flare or vent natural gas, except in the Following the recommendations of the 2010 GAO report (see maintain the records for six years. They must keep these records gas flared and vented separately in OGOR Part B. They must use circumstances specified above. Following the recommendations footnote 562), the BSEE implemented pilot studies with infrared at the facility for at least the first two years; after two years, different disposition codes for flared oil-well gas, flared gas-well of the 2011 GAO report (see footnote 562), the BSEE tightened cameras and, jointly with BOEM, conducted a study on the records must be available for inspection by BSEE representatives. gas, vented oil-well gas, and vented gas-well gas.590 The 2016 GAO the approval process, as communicated in NTL No. 2012-N04. this economic viability of further reductions by adopting various At a minimum, the records must include the following: report found that the ONRR’s guidance on reporting emissions tightening led to a significant decrease in flare or vent approvals. technologies. As a result, the agencies decided not to extend from lost gas, whether flared or vented, lacked specificity.591 • daily volumes of gas flared, gas vented, and liquid hydrocarbons NTL 2020-N04583 supersedes previous NTLs on flaring and venting capture requirements to lease-use gas sources, pending further burned requests and states that the BSEE may approve flaring or venting studies. The BSEE and BOEM also analyzed data from Gulfwide 587 https://www.govinfo.gov/content/pkg/CFR-2017-title30-vol2/xml/CFR-2017-title30-vol2-part250.xml#seqnum250.1163 (accessed August 15, 2021). 583 https://www.bsee.gov/sites/bsee.gov/files/notices-to-lessees-ntl//ntl-2020-n04-flaring-and-venting-requests.pdf (accessed August 15, 2021). 588 https://www.bsee.gov/sites/bsee.gov/files/notices-to-lessees-ntl/reports/ntl2012-n03.pdf (accessed August 15, 2021). 584 The full name of the BID is Standard Operating Procedures for Processing and Issuing Decisions Regarding Flaring, Venting, and Burning Requests; Requests to Produce within 500-ft of Lease/Unit 589 https://www.law.cornell.edu/cfr/text/30/1210.102 (accessed August 15, 2021). Boundary; Gas Cap Production Requests; and Downhole Commingling Requests. 590 https://www.onrr.gov/about/PDFDocs/Dear-Reporter-Letter_OGOR_4.9.2018.pdf (accessed August 15, 2021). 585 https://www.bsee.gov/sites/bsee.gov/files/5007aa.pdf (accessed August 15, 2021). 591 GAO (2016), https://www.gao.gov/products/gao-16-607 (accessed January 13, 2022). 586 https://www.boem.gov/oil-gas-energy/exploration-and-development-plans (accessed August 15, 2021). 592 https://www.law.cornell.edu/cfr/text/30/250.1203 (accessed August 15, 2021). 172 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 173 United States: Federal Offshore • the number of hours of gas flaring, gas venting, and liquid F. Fines, Penalties, and Sanctions or facility shut-in if there is an immediate threat to safety and hydrocarbons are considered avoidably lost or wasted and hydrocarbon burning, on a daily and monthly cumulative basis environment or operators fail to correct previously identified subject to royalties (12.5 percent in old leases, 16.67 percent • a list of the wells contributing to gas flaring, gas venting, and 18. Monetary Penalties violations or pay assigned penalties. in shallow waters, and 18.75 percent in deep water), according liquid hydrocarbon burning, along with gas-to-oil ratio data to Title 30 CFR § 1202.603 Operators must value any gaseous or Title 30 CFR Subpart N provides details on OCS civil penalties.596 • reasons for gas flaring, gas venting, and liquid hydrocarbon The BSEE can impose such penalties if it determines that G. Enabling Framework liquid hydrocarbons avoidably lost or wasted under the provisions of Title 30 CFR § 1206.604 Fugitive emissions from valves, fittings, burning there is a violation (that is, a failure to comply with the Outer Continental Shelf Lands Act or its implementing regulations, 20. Performance Requirements flanges, pressure relief valves, or similar components do not • documentation of all required approvals. require approval under this subpart unless specifically required by any other applicable laws, or the terms of leases, licenses, US environmental law includes detailed requirements for flare the regional supervisor. The BSEE Resource Conservation Section 17. Data Compilation and Publishing permits, rights-of-way, or other approvals, including those for design. Title 40 CFR § 60.18600 provides general requirements for is responsible for informing the ONRR about noncompliance with flaring or venting). flares; other subparts include more details. Title 40 CFR § 63.987601 The following data sources contain historical data on flaring and regulations resulting in a loss of hydrocarbons from flaring or requires a flare compliance assessment, provides certain technical flaring volumes and GHG emissions associated with oil and gas The BSEE communicates the penalties, which are updated venting that could have been avoided and the volumes involved. details, and refers to other sections of the law for submitting flare production on the OCS: periodically, to operators. NTL 2021-N01 sets the maximum compliance assessments (§ 63.999(a)(2)) and keeping records (§ • the Technical Information Management System penalty of US$46,000 a day per violation, effective May 4, 22. Use of Market-Based Principles 63.998(a)(1)). Title 40 CFR § 63.11602 (see footnote 599) provides 2021. 597 The NTL contains a matrix of three categories of • the Gulfwide Offshore Activity Database System detailed performance requirements for flare design. For example, No evidence regarding the use of market-based principles to violations from A to C, broadly increasing with the severity of • Oil and Gas Operations Reports Part A and Part B. there should be no visible emissions, except for periods not to reduce flaring, venting, or associated emissions from the Gulf safety or environmental impacts, resulting in three increasingly exceed a total of five minutes during any two consecutive hours; a of Mexico could be found in the sources consulted. There is no onerous government responses: warning, component shut-in, and The first two databases are maintained by BOEM; the ONRR is flame should always be present; and the heat content of gas and national carbon tax or market in the United States. The CO2 facility shut-in. A warning for a category A violation has the lowest responsible for the third. Following the recommendations of the the exit velocity must be calculated using the formulas provided cap-and-trade market in California covers oil and gas operations penalty, with an assessment starting point of US$17,200 a day 2010 GAO report (see footnote 562), BOEM reconciled differences in § 63.11. Taken together, environmental regulations require that there. An increasing number of states are pursuing cap-and- per violation, but the actual penalty can drop below that. A facility in reported offshore flaring and venting volumes between the flares be operated and maintained in a manner consistent with trade markets, but typically not in states with large oil and shut-in enforcement for category C has the highest penalty, with OGOR and the Gulfwide Offshore Activity Database System. “good air pollution control practices,” typically interpreted to mean gas production.605 The petroleum industry supports a carbon an assessment starting point of US$42,500. If it is not paid, the a combustion efficiency of 98 percent. tax but not if there are also new methane and other emissions There are other data sources on flaring and venting, all of them facility can be shut in. regulations.606 much less disaggregated than the above three. The Energy Title 40 CFR § 63.11 also provides alternative practices for Failure or refusal to permit inspections or audits may be penalized Information Administration makes available online data that monitoring leaks. Standard practices for monitoring leaks are by a fine of up to US$10,000 a day per violation (Title 30 CFR § 23. Negotiated Agreements between the Public include flared and vented volumes, aggregated by region.593 The provided in other parts of Title 40, including § 60, which apply to National Oceanic and Atmospheric Administration (NOAA),594 part 250.1460). 598 An appeal can be made within 60 days by providing and the Private Sector any stationary source subject to the NSPS, and § 61 and § 63, a surety bond equal to the assessed penalty amount or higher. of the Department of Commerce, uses US satellite technology which apply to hazardous air pollutants. Appendix A-7 of § 60 No evidence regarding negotiated agreements between the public Delayed payments without an appeal will accrue interest, late to, among other things, monitor gas flaring activity around the details calculation methodologies for all regulated emissions, and the private sector could be found in the sources consulted. payment, and other applicable fees (Title 30 CFR § 250.1409).599 world. The EPA publishes annual reports entitled Inventory of US including volatile organic compound leaks, that are applicable for Greenhouse Gas Emissions and Sinks that track US GHG emissions a diverse set of facilities. 24. Interplay with Midstream and Downstream 19. Nonmonetary Penalties by source going back to 1990.595 Regulatory Framework Title 30 CFR § 250.1409 provides for further sanctions if penalties 21. Fiscal and Emission Reduction Incentives The US natural gas market is highly liquid and gas infrastructure are not paid. They may include the cancellation of the lease, right- If flaring or venting occurs without the required approval, or is vast. Most of the transportation pipeline and storage of-way, license, permit, or approval; the forfeiture of a bond; or the the BSEE regional supervisor determines that the operator infrastructure operate as regulated open access facilities. Federal barring of the violator from doing further business with the federal was negligent or could have avoided flaring or venting, the and state regulators share responsibility in licensing midstream government. The BSEE enforcement tools include component 593 https://www.eia.gov/dnav/ng/ng_prod_sum_dc_NUS_mmcf_a.htm (accessed August 15, 2021). 600 https://www.law.cornell.edu/cfr/text/40/60.18 (accessed August 15, 2021). 594 https://www.noaa.gov/ (accessed August 15, 2021). 601 https://www.law.cornell.edu/cfr/text/40/63.987 (accessed August 15, 2021). 595 https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2019 (accessed August 15, 2021). 602 https://www.law.cornell.edu/cfr/text/40/63.11 (accessed August 15, 2021). 596 https://www.law.cornell.edu/cfr/text/30/part-250/subpart-N (accessed August 15, 2021). 603 https://www.law.cornell.edu/cfr/text/30/part-1202 (accessed August 15, 2021). 597 https://www.bsee.gov/sites/bsee.gov/files/notices-to-lessees-ntl//ntl-2021-n01-revised-ocsla-civil-penalty-assessment-matrix.pdf (accessed August 15, 2021). 604 https://www.law.cornell.edu/cfr/text/30/part-1206 (accessed August 15, 2021). 598 https://www.law.cornell.edu/cfr/text/30/250.1460 (accessed August 15, 2021). 605 Argus (2020), https://www.argusmedia.com/en/news/2173283-viewpoint-us-carbon-markets-to-expand-next-year (accessed January 13, 2022). 599 https://www.law.cornell.edu/cfr/text/30/250.1409 (accessed August 15, 2021). 606 https://www.cnbc.com/2021/03/25/climate-change-american-petroleum-institute-endorses-carbon-pricing.html (accessed August 15, 2021). 174 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 175 United States: Federal Offshore United States: Federal Onshore and downstream infrastructure and regulating open access A. Policy and Targets legal challenges by several states and industry groups.614 Other (for example, setting pipeline tariffs). Pipelines that cross state states and environmental groups have been litigating to reinstate boundaries are subject to the oversight of the Federal Energy 1. Background and the Role of Reductions the 2016 Waste Prevention Rule. At the time of writing, the BLM Regulatory Commission.607 Intrastate facilities are regulated by in Meeting Environmental and Economic regulation had mostly reverted to rules set in 1980. state regulators. Typically, independent midstream companies Objectives In 2016, the EPA issued the NSPS, which include methane develop pipeline, processing, and storage facilities when they see The US flaring data and international agreements are described emissions from oil and gas operations. An Executive Order from an arbitrage opportunity to connect new production to consumers. in section 1 of the previous chapter, on the US federal offshore President Trump rescinded the clauses related to methane Sufficient numbers of shippers or users must sign up for new production. According to the Energy Information Administration, emissions in 2020. An Executive Order from President Biden capacity for midstream companies to justify investment. If the states of Texas, North Dakota, and New Mexico account for 90 directed federal agencies to reinstate the regulations (see section midstream companies are not interested, it may be necessary for percent of total national flaring in 2018.610 1 of the previous chapter). upstream companies, especially in offshore, to invest in pipelines. Delays in midstream infrastructure development have been a key The share of onshore oil production on public lands611 has been reason for increased flaring in onshore upstream operations (see 2. Targets and Limits increasing slowly for years. It picked up pace after 2015, thanks the chapters on Colorado, North Dakota, and Texas). to increased drilling and development in tight oil plays, reaching The BLM’s 2016 Waste Prevention Rule introduced monthly limits 10 percent of total onshore oil production in 2020. The share of per well, but court rulings partially vacated the rule (see section 12 The policy of the Federal Energy Regulatory Commission608 for onshore gas production on public lands has been declining for years. of this chapter). analyzing GHG emissions associated with gas pipeline projects It fell below 9 percent of total onshore gas production in 2020. has been uncertain since about 2016. Arguments for including emissions from upstream (oil and gas production activities that Flaring and venting from oil and gas operations on public lands B. Legal/Regulatory Framework supply the gas) and downstream (use of gas carried by the pipeline has been regulated by the Department of the Interior’s Bureau of and Contractual Rights such as power generation) in the commission’s review of pipeline Land Management (BLM)612 since 1980. In a 2010 report, the GAO applications have led to court cases and disagreements among identified opportunities to reduce flared and vented gas in federal 3. Primary and Secondary Legislation and commissioners. In early 2021, the Federal Energy Regulatory onshore and offshore fields to increase royalties and reduce GHG Regulation Commission, for the first time, considered GHG emissions emissions (see footnote 562). In a 2016 report, the GAO identified The BLM has the authority to manage and regulate public lands associated with pipeline construction and operation during gaps in the regulation of flaring and venting in federal onshore under the Federal Land Policy and Management Act, 1976. Title 30 its review of a pipeline.609 This change in the Federal Energy fields by the BLM and the Department of Interior’s ONRR (see US Code (Mineral Lands and Mining), as amended over the years, Regulatory Commission’s pipeline approval criteria may have footnote 591). outlines various regulators’ roles in, and general principles for, oil unintended consequences by delaying pipeline development and In 2014, the President’s Climate Action Plan set a goal of cutting and gas leasing. causing increased flaring or venting of associated gas. methane emissions from oil and gas operations by 40–45 percent BLM Notice to Lessees and Operators of Onshore Federal and Indian Oil below the 2012 level by 2025 (see footnote 566). In response, and Gas Leases, Royalty or Compensation for Oil and Gas Lost, 1980 the BLM issued the 2016 Waste Prevention Rule,613 which targeted (NTL-4A)615 is the key document governing the regulation of flaring the reduction of flaring and venting via a series of new measures, and venting on public lands. Title 43 CFR Subpart 3178 superseded including some of the recommendations from the 2016 GAO sections in NTL-4A.616 The 2016 Waste Prevention Rule A court ruling report. The BLM’s 2016 Waste Prevention Rule has never been vacated parts of the BLM’s 2016 Waste Prevention Rule. However, fully implemented, because of legal challenges from states and President Biden’s Executive Order may reinstate the rule. Various industry groups. By 2020, parts of it had been either rescinded sections of this chapter discuss the relevant clauses. by the BLM’s revisions or vacated by court rulings in response to 610 EIA (2019), https://www.eia.gov/todayinenergy/detail.php?id=42195 (accessed January 13, 2022). 611 From the perspective of oil and gas leasing and regulation of flaring and venting, federal and Indian lands are treated under same legal and regulatory structure, with some exceptions. The term “public lands” used in this chapter covers both. Indian reservations are managed by the Bureau of Indian Affairs and the BLM. 612 https://www.blm.gov/ (accessed August 15, 2021). 613 https://www.blm.gov/programs/energy-and-minerals/oil-and-gas/operations-and-production/methane-and-waste-prevention-rule (accessed August 15, 2021). 607 https://www.ferc.gov/ (accessed August 15, 2021). 614 https://www.blm.gov/sites/blm.gov/files/docs/2020-11/Public%20Outreach%20NTL-4A%2020201104%202.pdf (accessed August 15, 2021). 608 https://www.ferc.gov/ (accessed August 15, 2021). 615 https://www.blm.gov/sites/blm.gov/files/energy_noticetolessee4a.pdf (accessed August 15, 2021). 609 https://ihsmarkit.com/research-analysis/us-ferc-adjusts-gas-pipeline-review-with-deeper-look-at-ghg.html (accessed August 15, 2021). 616 https://www.law.cornell.edu/cfr/text/43/part-3170/subpart-3178 (accessed August 15, 2021). 176 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 177 United States: Federal Onshore The EPA issues and updates the NSPS under section 111 (see C. Regulatory Governance D. Licensing/Process Approval 11. Development Plans footnote 577) of the Clean Air Act, 1990.617 Title 40 CFR Subpart OOOO,618 issued in 2012, commonly known as Quad-O, focuses and Organization 9. Flaring or Venting without Prior Approval The BLM’s 2016 Waste Prevention Rule required that a waste- minimization plan be submitted along with the application for on the emissions of volatile organic compounds from onshore 6. Regulatory Authority According to NTL-4A (see footnote 615), flaring or venting is an oil well drilling permit. The BLM rescinded this requirement in oil and gas facilities for which construction, modification, or The Department of Interior’s BLM regulates flaring and venting allowed without royalty obligation or prior authorization from 2018. According to the BLM’s justification, at least some states reconstruction commenced after August 23, 2011, and on or from oil and gas leases on onshore federal and Indian lands. State the BLM if volumes are considered “unavoidably lost,” defined as have comparable gas capture requirements.621 before September 18, 2015. In 2016, Quad-O was amended with regulators or tribal authorities may have rules, regulations, or follows: Subpart OOOOa for onshore facilities for which construction, modification, or reconstruction commenced after September orders governing flaring or venting of oil-well gas or emissions • Volumes are lost during temporary emergencies, such as the 12. Economic Evaluation 18, 2015. These amendments added GHGs, including methane from flaring and venting. The BLM’s regional supervisors ratify failure of a compressor or other piece of equipment, relief of According to NTL-4A, BLM regional supervisors consider the leaks from hydraulically fractured oil well completions and most such rules and any flare or vent authorizations issued by abnormal system pressures, or other conditions that result in economics of a field-wide plan for oil and gas production for the midstream sources. In 2020, the EPA rescinded most of the new appropriate state regulators. The EPA has regulatory jurisdiction flaring or venting of gas. Such venting or flaring cannot exceed leasehold. The BLM may approve an application for flaring or restrictions following an Executive Order from President Trump over air emissions from flaring and venting. 24 hours per incident or a cumulative total of 144 hours for the venting associated gas from oil wells if either of the documents in 2017. It is expected to annul 2020 changes and develop new lease during any calendar month. below could justify the proposed action: methane regulations in response to an Executive Order from 7. Regulatory Mandates and Responsibilities • Volumes are lost during the unloading or cleaning up of a well 1. A technical and economic report by the operator President Biden. The BLM has independent statutory responsibilities to prevent the during routine evaluation tests. Such flaring or venting cannot demonstrating that waste of mineral resources, including oil and gas, in the course of exceed 24 hours. 4. Legislative Jurisdictions their extraction from public lands. The BLM and state authorities • Volumes are lost during initial production tests, not exceeding a. the expenditures necessary to market or beneficially use gas are not economically justified and Federal laws and regulators govern flaring and venting on public may disagree, as demonstrated by the 2016 Waste Prevention Rule 30 days or 50 mmcf of gas, whichever occurs first. and the legal challenges that followed its issuance (see section 1 of b. conservation of the gas, if required, would lead to the lands. Regional BLM offices have the authority to interpret • Gas vapors are released from storage tanks or other low- this chapter). premature abandonment of recoverable oil reserves and national BLM guidance if local conditions warrant it, sometimes in pressure production vessels. A BLM regional supervisor may ultimately to a greater loss of equivalent energy than coordination with state energy, environmental regulators, or tribal determine that operators must recover such vapors. The BLM and the EPA have no overlapping or conflicting would be recovered with flaring or venting of the gas. authorities. • Oil and gas are lost as a result of line failures, equipment mandates. However, it is possible that the new methane malfunctions, blowouts, fires, or similar events. If a BLM regional 2. An action plan from the operator that will eliminate flaring or regulations the EPA proposed in November 2021 will prove, upon 5. Associated Gas Ownership analysis, to be more stringent than the BLM’s present rules— supervisor determines that the loss resulted from the negligence venting within a year from the date of application. Natural resource ownership is tied to land ownership (see footnote obliging the BLM to develop waste prevention rules consistent or failure of the operator to take all reasonable measures to However, a 2016 GAO report (see footnote 591) found that the 580). The federal government owns oil, gas, and other minerals with the ultimate EPA regulations. Energy and environment prevent the loss, losses cannot be classified as “unavoidably BLM’s field offices approved a large percentage of flaring and found below the surface of public lands except for certain regulators in states have historically adapted national regulations lost.” venting requests without the documentation required in the BLM’s tribal lands. Firms access oil and gas in federal lands through a such as the EPA NSPS to their own conditions. These regulations 10. Authorized Flaring or Venting guidance. About half of the approved operations were allowed concession (lease) from the BLM state offices.619 The concession often overlap and can create uncertainty. to flare royalty-free. The GAO also observed that the BLM’s field grants the right to explore for and, if a commercial discovery is According to NTL-4A, prior authorization from a BLM regional offices had applied BLM guidance inconsistently and sometimes made, own, develop, and produce oil and gas. Royalties are not 8. Monitoring and Enforcement supervisor is required if emergency flaring is expected to last with significant differences. The rapid increase in drilling activity paid on unavoidably lost gas, which includes flared and vented longer than 24 hours. If a longer period of production testing is The BLM Oil and Gas Program conducts inspections—averaging in tight oil and other unconventional plays since the early 2010s volumes under certain conditions (see section 21 of this chapter). necessary, state regulators, if applicable, must authorize it, and 30,000 annually since 2010—to ensure compliance with federal led to a significant increase in the number of applications for and Indian laws, regulations, policies, and permit conditions of the BLM regional supervisor must ratify this authorization. various permits to the BLM’s regional offices, overwhelming staff. approval. 620 Title 43 CFR Subpart 3163 defines enforcement actions Gas from a gas well cannot be flared or vented. Except when in case of noncompliance. The BLM has the authority to impose it falls under the “unavoidably lost” category (see the previous E. Measurement and Reporting financial and nonfinancial penalties. section), associated gas from oil wells cannot be flared or vented 13. Measurement and Reporting Requirements without written approval from a BLM regional supervisor. 617 The Clean Air Act was originally enacted in 1970, replacing previous air quality legislation. It was amended significantly in 1977 and 1990. 618 https://www.law.cornell.edu/cfr/text/40/part-60/subpart-OOOO (accessed August 15, 2021). According to NTL-4A (see footnote 615), “the volume of oil or gas 619 https://www.blm.gov/programs/energy-and-minerals/oil-and-gas/leasing (accessed August 15, 2021). 620 https://www.blm.gov/programs/energy-and-minerals/oil-and-gas/inspection-and-enforcement (accessed August 15, 2021). 621 https://www.govinfo.gov/content/pkg/FR-2018-09-28/pdf/2018-20689.pdf (accessed August 15, 2021). 178 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 179 United States: Federal Onshore produced, whether sold, avoidably or unavoidably lost, vented 15. Engineering Estimates Data on flared and vented volumes, aggregated by region, are G. Enabling Framework or flared, or used for beneficial purposes must be reported.” The available online from the Energy Information Administration (see According to NTL-4A, when there is no measurement, the volume definition of beneficial purposes in NTL-4A is superseded by footnote 593). They are based on voluntary summary reports 20. Performance Requirements of oil or gas must be determined utilizing the following criteria, as Title 43 Subpart 3178 (see footnote 614), which primarily defines from states, which, in turn, depend on self-reporting by producers. applicable: Section 20 of the previous chapter covers national environmental conditions for qualification as lease-use gas. Operators must also Not all states collect or report flaring and venting data to the regulations with performance requirements applicable to flares. report to the regional supervisor “the volume and value of all oil • last measured throughput of the production facility Energy Information Administration. Those that do report do not For onshore operations, Title 43 CFR § 3179.305626 requires and gas which is sold, vented or flared without the authorization” • duration of the period in which no measurement was made necessarily follow the same reporting standards. Hence this operators to find and repair leaks at least twice a year. The BLM is [of the supervisor], or those volumes deemed by the supervisor to data set is incomplete, and there are inconsistencies between • daily lease production rates responsible for ensuring compliance with this regulation. However, be avoidably lost. state data and data published online by the Energy Information • historic production data a court vacated Subpart 3179 in 2020. One of the litigants’ Administration.624 Section 17 of the previous chapter cites other All hydrocarbons produced from a well completion, including • well production rates and gas-to-oil ratio tests concerns was that the cost of adding equipment for leak detection national data sources. all gas flared, vented, and liquid hydrocarbons burned, must be would be too high for many small operators. President Biden’s • productive capability of other wells in the area completed in the reported on Form ONRR-4054, per Title 30 CFR § 1210.102 (see Executive Order in early 2021 may lead the BLM to reinstate the footnote 589). As with federal offshore, since September 15, 2010, same formation F. Fines, Penalties, and Sanctions 2016 Waste Prevention Rule, with some modifications. • subsequent measurement or testing, as required by the leaseholders must specify flaring and venting volumes separately in OGOR Part B. They must use different disposition codes for supervisor 18. Monetary Penalties 21. Fiscal and Emission Reduction Incentives flared oil-well gas, flared gas-well gas, vented oil-well gas, and • other methods approved by the supervisor. According to Title 43 CFR § 3163.1,625 in the event of failure or According to NTL-4A (see footnote 615), unavoidably lost production vented gas-well gas (see footnote 590). refusal to comply with BLM regulations, the terms of any lease or The 2016 GAO report (see footnote 591) considers these (see section 9 of this chapter) is exempt from royalty calculations. permit, any notice, or order requirements, the regulator notifies According to NTL-4A, if the amounts of oil or gas involved have methods insufficiently specific, leading to varied methodologies BLM officers may determine that lost production was caused the party concerned in writing of the violation. A fine of US$1,000 been measured, the measured volumes must be reported. across regions subject to the approval of the BLM regional by failure to comply fully with the applicable lease terms and per violation a day for major violations and a fine of US$250 per Estimation criteria are provided. Metering is not required, but supervisor. According to the report, some operators adopted regulations, or appropriate provisions of the approved operating violation a day for minor violations may be imposed. According the BLM’s regional supervisors may require the installation of estimation techniques used in the EPA’s GHG reporting. The plan. Avoidable losses are subject to royalty. Set by law in 1920, the to Title 43 CFR § 3163.2, for failure or refusal to comply within additional measuring equipment if the goals of NTL-4A are not 2016 Waste Prevention Rule had more prescriptive requirements minimum royalty rate on federal onshore is 12.5 percent. 20 days (or another time period set by an authorized officer of met with existing equipment or estimation methods. Separately, on measurement and estimation of flare and vent volumes the BLM) of the violation notice, the operator is liable for a civil The BLM’s 2016 Waste Prevention Rule introduced several operators must follow the guidance of Title 43 Subpart 3175 on (Title 43 § 3179.301),623 but the courts vacated Subpart 3179 in penalty, which can be as high as US$5,000 per violation a day for conditions that create additional incentives. For example, it gas measurement.622 This subpart has clauses on gas metering 2020. President Biden’s Executive Order in early 2021 may lead up to 60 days. detailed the economic justification necessary for operators technology, hardware, and software requirements for metering, the BLM to reinstate the 2016 Waste Prevention Rule with some to demonstrate that capture is uneconomic and introduced a performance standards, and record-keeping requirements to modifications to avoid legal challenges. 19. Nonmonetary Penalties limit of 10 mmcf per well a month. Above this limit, the BLM ensure accurate royalty calculations. may determine that gas is avoidably lost and hence subject to 16. Record Keeping According to Title 43 CFR § 3163.1, “when necessary for royalty. The 2016 rule also required that an action plan show how 14. Measurement Frequency and Methods compliance, or where operations have been commenced without No requirements for how long records must be kept could be the operator will minimize the flaring or venting of the oil-well approval, or where continued operations could result in immediate, For reporting required by NTL-4A two forms must be filed: Form identified. However, the BLM reviews operational records every one gas within one year. An operator may apply for approval of an substantial, and adverse impacts on public health and safety, 9-329, the Monthly Report of Operation, and Form 9-361, the to four years, depending on the lease conditions and performance. extension of the one-year limit. If the operator fails to implement the environment, production accountability, or royalty income,” Monthly Report of Sales and Royalties. According to Title 30 CFR § the action plan, the entire volume of gas vented or flared during the regulator may shut down operations after due written notice. 1210.102 (see footnote 589), all operators must file Form ONRR- 17. Data Compilation and Publishing the time covered by the action plan is subject to royalty. The BLM Immediate shut in is possible if a BLM regional supervisor deems 4054 for each well for each calendar month, beginning the month rescinded these requirements in 2018. President Biden’s Executive The ONRR is responsible for compiling the OGOR databases, which the offense severe enough. Continued noncompliance may lead to in which drilling is completed unless it is only test production or Order in early 2021 may lead the BLM to reinstate some of these include flare and vent volumes as well as emissions. Given the lease cancellation. According to Title 43 CFR § 3163.2, in addition ONRR grants an exemption in writing. requirements, but modifications may be necessary to avoid legal concerns expressed in the 2016 GAO report regarding the lack of to civil penalties, there can be criminal penalties of up to two years challenges. specificity of the guidance for the OGOR reporting process, these of imprisonment. data may not be consistent or complete. 624 https://www.energy.gov/sites/prod/files/2019/08/f65/Natural%20Gas%20Flaring%20and%20Venting%20Report.pdf (accessed August 15, 2021). 625 https://www.law.cornell.edu/cfr/text/43/part-3160/subpart-3163 (accessed August 15, 2021); https://www.govinfo.gov/app/details/CFR-2018-title43-vol2/CFR-2018-title43-vol2-sec3163-1 622 https://www.law.cornell.edu/cfr/text/43/part-3170/subpart-3175 (accessed August 15, 2021). (accessed December 29, 2021). 623 https://www.law.cornell.edu/cfr/text/43/3179.301 (accessed August 15, 2021). 626 https://www.govinfo.gov/content/pkg/FR-2017-10-05/pdf/2017-21294.pdf (accessed February 9, 2022). 180 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 181 United States: Federal Onshore United States: Colorado 22. Use of Market-Based Principles A. Policy and Targets regulations that apply to federal lands in Colorado. No evidence regarding the use of market-based principles to The Environmental Impact Prevention 900 Series, 2021,630 is 1. Background and the Role of Reductions reduce flaring, venting, or associated emissions could be found in Colorado’s central state-level regulation on flaring and venting. in Meeting Environmental and Economic The Safety and Facility Operations Regulations 600 Series, 2021,631 the sources consulted. See section 22 of the chapter on the United States: Federal Offshore. Objectives regulate the siting requirements for all oil and gas industry– Colorado has one of the lowest flaring rates among the oil- related facilities, including flare pits. The Rules of Practice 23. Negotiated Agreements between the Public producing states. Through House Bill 19-1261, 627 it committed to and Procedure 500 Series, 2021,632 govern hearings, including and the Private Sector reducing its GHG emissions to 26 percent below 2005 levels by enforcement hearings. Combined with § 34-60-121, Colorado Law, 2025, 50 percent below 2005 levels by 2030, and 90 percent Colorado Revised Statutes, 2017,633 these rules allow disciplinary No evidence regarding negotiated agreements between the public below 2005 levels by 2050. Senate Bill 19-181628 aims to prevent action to be taken. and the private sector could be found in the sources consulted. the escape of natural gas into the air through flaring or venting The Colorado Air Pollution Prevention and Control Act, 1984,634 and to minimize adverse impacts on public health and the 24. Interplay with Midstream and Downstream environment from oil and gas operations. Governor Jared Polis includes key aspects affecting climate change, air quality, and Regulatory Framework signed both pieces of legislation into law in 2019. The state federal air quality standards. Regulation Number 1 Emission Control for Particulate Matter, Smoke, Carbon Monoxide, and For a description of the US natural gas market and infrastructure endorsed the World Bank’s Zero Routine Flaring by 2030 initiative Sulfur Oxides, 5 CCR 1001-3, 2007,635 covers requirements for development, see section 24 of the chapter on the United States: in early 2021 (World Bank, n.d.; see footnote 3). Section 1 of atmospheric emissions from combustion devices. Regulation Federal Offshore. For onshore operations, the BLM’s proposed the previous chapter provides federal information relevant to Number 3 Stationary Source Permitting and Air Pollutant Emission waste minimization plan (see section 11 of this chapter) was Colorado’s onshore oil and gas operations. Notice Requirements 5 CCR 1001-5, 2020,636 represents the primary intended to guide operators to work with midstream companies reporting and permitting regulation and encompasses the to identify sufficient pipeline and processing capacity near the 2. Targets and Limits permitting aspects of flaring and venting. Regulation Number 7, planned drilling site so that associated gas can be captured Colorado’s Greenhouse Gas Pollution Reduction Roadmap contains Control of Ozone Via Ozone Precursors and Control of Hydrocarbons from the first day of production. The previous US administration near-term and long-term targets, including for oil and gas sector. via Oil and Gas Emissions (Emissions of Volatile Organic Compounds rescinded this requirement. The current one may reintroduce it or Implementation of new rules to eliminate routine flaring and and Nitrogen Oxides), 5 CCR 1001-9, 2009,637 governs the operation something similar. venting is mentioned as a near-term goal. of oil and gas equipment, including requirements for gas capturing and combustion equipment. B. Legal/Regulatory Framework 4. Legislative Jurisdictions and Contractual Rights Flaring and venting are matters for both national and state- 3. Primary and Secondary Legislation level agencies. The BLM regulates flaring and venting on lands and Regulation owned by the federal government and on lands owned by or held in trust for Native American tribes and individual tribal members The Colorado Oil and Gas Conservation Act, 1951,629 defines the within the boundaries of federally recognized reservations. State regulatory and enforcement authority for the state. Section regulations apply to all lands, including those that belong to the 3 of the previous chapter provides relevant federal laws and federal government, except for lands owned by Native American 627 https://leg.colorado.gov/sites/default/files/2019a_1261_signed.pdf (accessed August 23, 2021). 628 https://cogcc.state.co.us/sb19181.html#/overview (accessed August 28, 2021). 629 https://law.justia.com/codes/colorado/2016/title-34/oil-and-natural-gas/article-60/ (accessed August 23, 2021). 630 https://cogcc.state.co.us/documents/reg/Rules/LATEST/900%20Series%20-%20Environmental%20Impact%20Prevention.pdf (accessed August 28, 2021). 631 https://cogcc.state.co.us/documents/reg/Rules/LATEST/600%20Series%20-%20Safety%20and%20Facility%20Operations%20Regulations.pdf (accessed August 28, 2021). 632 https://cogcc.state.co.us/documents/reg/Rules/LATEST/500%20Series%20-%20Rules%20of%20Practice%20and%20Procedure.pdf (accessed August 28, 2021). 633 https://leg.colorado.gov/sites/default/files/images/olls/crs2017-title-34.pdf (accessed August 23, 2021). 634 https://www.epa.gov/sites/production/files/2017-12/documents/table_c_co_5-ccr-1001-02_common_provisions_regulation_0.pdf (accessed August 23, 2021). 635 https://www.law.cornell.edu/regulations/colorado/5-CCR-1001-3 (accessed August 23, 2021). 636 https://www.law.cornell.edu/regulations/colorado/5-CCR-1001-5 (accessed August 23, 2021). 637 https://www.law.cornell.edu/regulations/colorado/5-CCR-1001-9 (accessed August 23, 2021). 182 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 183 United States: Colorado tribes and their members within the boundaries of federally The COGCC is the primary regulator of flaring and venting D. Licensing/Process Approval If the gas release had not been authorized, Rule 912 requires the recognized reservations. With respect to air emissions, the EPA because of its direct authority to prevent natural gas waste operator to notify the director of the COGCC within 24 hours and plays a role by approving State Implementation Plans (SIPs). and protect public health. Rule 903 of the Environmental Impact 9. Flaring or Venting without Prior Approval then produce additional data on the incident within 10 days of Prevention 900 Series, 2021 (see footnote 630) prohibits routine the event. In the case of intended flaring of hydrogen sulfide, Rule During drilling operations, Rule 903.b of the Environmental Impact 5. Associated Gas Ownership flaring and venting. It also includes record-keeping and reporting 612 of the Safety and Facility Operations Regulations 600 Series, Prevention 900 Series, 2021 (see footnote 630) allows emergency requirements to ensure that oil and gas operators comply with the 2021 (see footnote 631) requires the operator to submit an air Land ownership determines mineral rights. About 36 percent of flaring without prior notice when necessary to protect the safety rule’s prohibition of flaring and venting. The COGCC can impose monitoring plan to the director of the COGCC before flaring. land in Colorado is federal land. Private landowners with surface of onsite personnel. However, a verbal notification must be penalties and otherwise require operators to take corrective rights own the rights to mineral resources under their land unless provided to the COGCC within 12 hours of the event, and a written action if the operator violates any part of Rule 903. 11. Development Plans mineral rights are severed from surface rights (via a separate sale, report must be submitted within 7 days. for example). Companies can obtain a concession from the mineral The AQCC also regulates flaring and venting as part of its Flaring approval during completion can be granted through an rights owner to explore for oil and gas. In case of a commercial statutory duty to ensure compliance with federal ambient air 10. Authorized Flaring or Venting approved gas capture plan during the permitting process or a discovery, the concessionaire owns oil and gas under the leased quality standards and minimize emissions from the oil and gas subsequent application explaining why flaring is necessary. The Rule 903.c requires operators to use reduced emission completion area. Under most private leases, royalties are not paid on lost gas, sector. The key powers assigned to it cover instruments such as plan must detail how the operator will minimize adverse impacts practices and enclose all flowback vessels to limit venting during which includes flared and vented volumes. permitting, compliance, and record-keeping. and include information on the volume of gas that will be flared completion operations. Flaring is allowed only with prior approval and the duration of flaring. of the COGCC through a gas capture plan. Flaring is also allowed C. Regulatory Governance 8. Monitoring and Enforcement for a period not exceeding 24 hours during completion operations All proposed new facilities must submit a gas capture plan as and Organization Rule 901 of the Environmental Impact Prevention 900 Series, or for safety reasons during an upset condition. part of their permit application, in accordance with Rule 903.e. 2021, empowers the director of the COGCC to take corrective The gas capture plan must include a commitment to connect Rule 903.d states that flaring or venting is prohibited during 6. Regulatory Authority action whenever there is a reasonable belief that the conduct of the production facility to a gathering line before production production operations unless one of the following exceptions oil and gas operations is causing harm to public health, safety, starts or a plan for how the operator will connect the facility to a Based on the Colorado Oil and Gas Conservation Act, 1951, the applies: welfare, the environment, or wildlife resources. Rule 903 of the gathering line or otherwise put natural gas to beneficial use. If the Colorado Oil and Gas Conservation Commission (COGCC)638 Environmental Impact Prevention 900 Series, 2021, specifies formal • Flaring or venting lasting less than 24 hours is allowed during an gas capture plan is not implemented, the director of the COGCC has the authority to regulate and enforce the development and notification and reporting requirements with regard to flaring and upset condition. Operators must maintain records of the date, may require the well to be shut in until there is an acceptable gas production of the state’s oil and gas resources in a manner that venting activities. All flared or vented gas needs to be metered cause, duration, and estimated volume of gas vented or flared capture plan. protects public health, safety, welfare, the environment, and or estimated and reported in the operator’s monthly report of during each upset condition. wildlife resources. As per the Colorado Air Pollution Prevention and For wells completed before January 15, 2021, that are not Control Act, 1984 (see footnote 634), the Air Quality and Control operations, which must be shared with the COGCC upon request. • Venting is allowed during active and required maintenance if it connected to a gas gathering system or otherwise do not put Commission (AQCC) 639 oversees the state’s air quality and The COGCC’s field inspectors are tasked with inspection and is in line with AQCC requirements, as long as the operator uses natural gas to beneficial use, a formal application for permission emission efforts. It has the authority to adopt emission control compliance supervision. best practices to minimize venting during the maintenance or to flare, including a gas capture plan, must be made. The director regulations. repair activity. of the COGCC can approve the application once for up to 12 In cases where Rule 903 is violated, § 34-60-121, Colorado Law, Colorado Revised Statutes, 2017 (see footnote 631) and Rule 525 of • Flaring lasting less than 24 hours can be allowed for safety months, but in no case will such wells be allowed to flare or vent 7. Regulatory Mandates and Responsibilities The Rules of Practice and Procedure 500 Series, 2021 (see footnote considerations in the event of liquids unloading. natural gas after January 15, 2022. Both the COGCC and the AQCC have overlapping and shared 630) enable the COGCC to impose penalties and otherwise require • For production evaluation and productivity testing purposes, According to Rule 904 of the Environmental Impact Prevention 900 authority over flaring and venting. For areas of joint interest operators to take corrective action (see section 18 of this chapter). flaring is allowed for up to 60 days, provided an approved gas Series, 2021 (see footnote 630), starting in 2022, the director of between the COGCC and AQCC, particularly the protection of capture plan is in place (see the next section). the COGCC will carry out an annual EIA of the cumulative impact public health, an energy liaison officer from the Department of • Flaring is allowed during wellhead pressure tests. of flaring and venting on key environmental metrics. Operators Public Health is assigned to coordinate alignment. can be required to contribute as a condition of their development plans receiving approval. 638 https://cogcc.state.co.us/#/home (accessed August 28, 2021). 639 https://cdphe.colorado.gov/aqcc (accessed August 23, 2021). 184 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 185 United States: Colorado 12. Economic Evaluation 17. Data Compilation and Publishing Under § 34-60-121(2), Colorado Law, Colorado Revised Statutes, 2017 (see footnote 633), individual employees of an operator that If the required gathering infrastructure (as discussed in the At the state level, the COGCC publishes oil- and gas-related data intentionally make a false report to the COGCC may also be subject previous section) is unlikely to be available, an operator may either on its website.642 The Energy Information Administration compiles to criminal prosecution. If found guilty, an employee may be fined shut in the well or make a formal variance request to COGCC data from states and reports on its website, but the data are up to US$5,000 or sentenced to up to six months of imprisonment. under Rule 502 of The Rules of Practice and Procedure 500 Series, incomplete (see section 17 of the chapter on the United States: 2021 (see footnote 632). A formal variance request requires the Federal Onshore). operator to prove in a formal hearing that it would suffer undue G. Enabling Framework economic hardship and that there will be no net adverse impacts from continued flaring or venting. F. Fines, Penalties, and Sanctions 20. Performance Requirements 18. Monetary Penalties Rule 903 of the Environmental Impact Prevention 900 Series, 2021 E. Measurement and Reporting According to § 34-60-121, Colorado Law, Colorado Revised Statutes, (see footnote 630) requires a 98 percent design efficiency for the combustion of flare gas. This requirement is in line with the 2017 (see footnote 633), and Rule 525 of The Rules of Practice EPA’s643 national legislation (see section 20 of the chapter on the 13. Measurement and Reporting Requirements and Procedure 500 Series, 2021 (see footnote 632), the COGCC United States: Federal Offshore). Under Rule 903(d) of the Environmental Impact Prevention 900 has powers to impose penalties on operators violating its rules, Series, 2021 (see footnote 630), gas flared or vented needs to be orders, or permits. The penalties depend on the duration and 21. Fiscal and Emission Reduction Incentives metered subject to the requirements of Rules 429 and 430 of the severity of the adverse consequences on public health, safety, or Operations and Reporting 400 Series, 2021,640 or estimated and the environment. However, penalties are limited to US$15,000 a No evidence regarding fiscal or emission reduction incentives could reported on a per-well basis in the operator’s monthly operations day of violation. Higher penalties are possible for behaviors such be found in the sources consulted. report as required by Rule 413. as gross negligence and willful misconduct, noncooperation of the operator, significant loss of resources, and falsified reports. 22. Use of Market-Based Principles 14. Measurement Frequency and Methods Mitigating factors include self-reporting or prompt and prudent No evidence regarding the use of market-based principles to responses by the operator. reduce flaring, venting, or associated emissions in Colorado could According to Rule 903(d) of the Environmental Impact Prevention 900 Series, 2021 (see footnote 630), the metered or estimated gas flared be found in the sources consulted (but see section 22 of the 19. Nonmonetary Penalties chapter on the United States: Federal Offshore). or vented during production operations must be reported monthly. Rule 901 of the Environmental Impact Prevention 900 Series, 2021 15. Engineering Estimates (see footnote 630), empowers the director of the COGCC to 23. Negotiated Agreements between the Public suspend operations or initiate immediate mitigation measures and the Private Sector Under Rule 903(d) of the Environmental Impact Prevention 900 until the cause of the threat to public health, safety, welfare, the Series, 2021, per-well estimates of the gas flared or vented are No evidence regarding negotiated agreements between the public environment, or wildlife resources is identified and mitigated. Rule permitted. and the private sector could be found in the sources consulted. 210.a of the General Provisions 200 Series, 2021 (see footnote 641) and Rule 525 of The Rules of Practice and Procedure 500 Series, 2021 16. Record Keeping 24. Interplay with Midstream and Downstream (see footnote 632) also empower the COGCC to issue corrective Regulatory Framework According to Rule 903 of the Environmental Impact Prevention 900 actions to stop an adverse event. Rule 209(a) of the General Series, 2021, the operator needs to maintain flaring and venting Provisions 200 Series, 2021, empowers the director of the COGCC The intention of the gas capture plan mentioned in Rule 903(e) data records. Rule 206 of the General Provisions 200 Series, 2021, 641 to require an operator to conduct tests or surveys, if necessary of the Environmental Impact Prevention 900 Series, 2021 (see requires operators to keep all records for five years and provide and reasonable, to protect and minimize adverse impacts to public footnote 630) is to ensure the beneficial use of the gas in the access to the director or the COGCC upon request (see sections 10 health, safety, welfare, the environment, or wildlife resources. future. In areas with a limited pipeline network, the beneficial use and 14 of this chapter). requirement has led to solutions for gas that would otherwise have been flared. See section 24 of the chapter on the United States: Federal Onshore. 640 https://cogcc.state.co.us/documents/reg/Rules/LATEST/400%20Series%20-%20Operations%20and%20Reporting.pdf (accessed August 28, 2021). 641 https://cogcc.state.co.us/documents/reg/Rules/LATEST/200%20Series%20-%20General%20Provisions.pdf (accessed August 28, 2021). 642 https://cogcc.state.co.us (accessed August 28, 2021). 643 https://www.epa.gov/ (accessed August 28, 2021). 186 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 187 United States: North Dakota A. Policy and Targets 2. Targets and Limits Restriction of Emission of Visible Air Contaminants654 mentions and gas in the state (including drilling permits and gas capture restrictions applicable to flares. Section 33.1-15-07-02 of NDAC plan), but the NDIC has jurisdiction over flaring and venting. In the early 2010s, the North Dakota Petroleum Council’s Flaring 1. Background and the Role of Reductions Article 33.1-15-07: Control of Organic Compounds Emissions 655 DAQ (see footnote 653), regulates emissions from upstream, Task Force targeted capturing 74 percent of associated gas in in Meeting Environmental and Economic prohibits the emission of organic compounds in gaseous and vapor midstream, and downstream oil and gas operations. The BLM and 2014, gradually increasing to 90 percent by late 2020; it proposed Objectives forms except in emergencies unless they are burned in flares or the EPA, and, in some cases, tribal authorities have authority over 95 percent as a potential target beyond 2020. The North controlled otherwise. oil and gas operations on federal and Indian lands. Both federal and state policy regulate flaring and venting In North Dakota Industrial Commission (NDIC)647 Order 24665, 2014,648 Dakota. Because of increased drilling activity in the Bakken play, operationalized these targets, raising the 2020 target to 91 4. Legislative Jurisdictions 7. Regulatory Mandates and Responsibilities the volume of gas flared has increased rapidly and substantially, percent in 2018.649 according to data provided by the Energy Information Flaring and venting in North Dakota are subject to both state and The NDIC regulates the volume of gas flared at a well site under federal jurisdiction because a large share of production in the state its mandate to conserve mineral resources (NDAC 43-02-03); DAQ Administration.644 The total volume increased from 10 bcf in 2007 B. Legal/Regulatory Framework comes from federal and tribal lands. The BLM’s North Dakota Field regulates emissions from flares. DAQ’s remit includes when gas to 205 bcf in 2019; flare intensity has exceeded 300 cubic feet (cf) of associated gas per barrel of oil produced since the late 2000s, and Contractual Rights Office manages about 2,500 leases on federal lands and has trust should be flared, the permissible types of flaring, and proper flare reaching 400 cf per barrel in 2019. The only exception occurred responsibility for more than 3,000 leases on Indian lands. Tribal operation. Wells must be registered using the NDIC–issued well 3. Primary and Secondary Legislation during the low oil price period of 2015–17, when the flare intensity authorities may have jurisdiction in some situations. With respect number with DAQ. DAQ regulations on air emissions are mostly and Regulation to air emissions, the EPA plays a role by approving SIPs. based on EPA regulations. averaged 220 cf per barrel. North Dakota Administrative Code (NDAC) Chapter 43-02-03 650 The state put gas capture rules in place in 2014 to reduce the provides guidance on oil and gas conservation. NDAC Section 5. Associated Gas Ownership 8. Monitoring and Enforcement amount of flaring allowed from 26 percent to 12 percent of total 43-02-03-45 bans venting and requires casinghead gas to be Land ownership determines mineral rights. About 10 percent of Under NDAC 43-02-03-14, the NDIC, or its representatives, can associated gas produced by 2020 and 9 percent after 2020. flared, with the estimated volume reported to the director of the land in North Dakota is federal or Indian land, where the respective access all sites and records across all oil and gas operations. DAQ About US$1 billion had been invested in infrastructure by 2016, oil and gas division of the North Dakota Department of Mineral government owners own subsurface oil and gas. The Fort Berthold has the authority to inspect oil and gas sites to ensure compliance and the gas capture rate reached 85 percent. However, during the Resources. Section 38-08-06.4 of North Dakota Century Code Reservation encompasses more than 1 million acres and the two with its air permits and the proper functioning of emission control oil price downturn, there was virtually no spending on gas capture Chapter 38-08651 declares gas flaring as restricted and describes most-drilled oil formations, the Bakken and the Three Forks. Many equipment.657 Both the NDIC and DAQ can enforce compliance infrastructure; operators focused on drilling in the Bakken’s core the conditions under which an operator can flare. Order 24665, reservoirs are also within the jurisdiction of the Mandan Hidatsa using monetary and nonmonetary penalties. area, where wells produce more gas. Oil production bounced back 2014, introduces restrictions on flaring that strive to meet the and Arikara Nation. In the rest of the state, private landowners quickly in 2018, exceeding takeaway infrastructure, and the North Dakota Petroleum Council’s Flaring Task Force targets (see Nevertheless, regulators have struggled to ensure compliance, own the rights to mineral resources under their land. In some gas capture rate declined until 2020, when the state reported a the previous section) and outlines requirements for obtaining mainly because of a shortage of midstream capacity but also cases, mineral rights may be severed from surface rights but are gas capture rate of 92 percent, largely as a result of decreased exemptions for flaring and penalties for noncompliance with because of problems at well sites. In October 2020, for example, held privately. Companies obtain a concession from the mineral production amid the COVID-19 pandemic and new midstream regulations and permit conditions. Federal and tribal policies apply DAQ issued a compliance alert with respect to air emissions from rights owner to explore for oil and gas. In case of a commercial capacity that came online in 2019. to federal and Indian lands. oil and gas operations. The alert listed several problems with flare discovery, the concessionaire owns oil and gas under the leased equipment and leaks from various equipment as key concerns.658 Much of the oil and gas development in North Dakota has occurred Sections 33.1-15-20-02 and 33.1-15-20-04 of NDAC Chapter area. Under most private leases, royalties are not paid on lost gas, 33.1-15-20: Control of Emissions from Oil and Gas Well Production which includes flared and vented volumes. on federal and tribal lands.645 The BLM manages 4.1 million acres of federal and Indian Trust mineral estate in the state.646 Federal Facilities 652 require all oil and gas wells within the state to be D. Licensing/Process Approval onshore policy and regulation are applicable on these lands. registered with the North Dakota Department of Environmental C. Regulatory Governance 9. Flaring or Venting without Prior Approval Quality’s Division of Air Quality (DAQ)653 and adhere to emission controls. Section 33.1-15-03-03.1 of NDAC Article 33.1-15-03: and Organization North Dakota Century Code Section 38-08-06.4 (see footnote 651), allows gas flaring from oil wells up to one year from first 6. Regulatory Authority 644 https://www.eia.gov/dnav/ng/hist/n9040nd2a.htm (accessed August 15, 2021). production. The venting of casinghead gas is not allowed under 645 https://www.eia.gov/state/analysis.php?sid=ND (accessed August 15, 2021). The Oil and Gas Division of the North Dakota Department of any circumstances; instead, operators must have equipment in 646 https://www.blm.gov/office/north-dakota-field-office (accessed August 15, 2021). 647 https://www.nd.gov/ndic/ (accessed August 15, 2021). Mineral Resources656 regulates the drilling and production of oil place to flare. 648 https://www.dmr.nd.gov/oilgas/or24665.pdf (accessed August 15, 2021). 649 https://www.dmr.nd.gov/oilgas/GuidancePolicyNorthDakotaIndustrialCommissionorder24665.pdf (accessed August 15, 2021). 654 https://www.legis.nd.gov/information/acdata/pdf/33.1-15-03.pdf (accessed August 15, 2021). 650 https://www.legis.nd.gov/information/acdata/pdf/43-02-03.pdf (accessed August 15, 2021). 655 https://www.legis.nd.gov/information/acdata/pdf/33.1-15-07.pdf (accessed August 15, 2021). 651 https://www.legis.nd.gov/cencode/t38c08.pdf (accessed August 15, 2021). 656 https://www.dmr.nd.gov/oilgas/ (accessed August 15, 2021). 652 https://www.legis.nd.gov/information/acdata/pdf/33.1-15-20.pdf (accessed August 15, 2021). 657 https://deq.nd.gov/AQ/compliance/Inspection.aspx (accessed August 15, 2021). 653 https://deq.nd.gov/AQ/oilgas/OilGasWell.aspx (accessed August 15, 2021). 658 https://deq.nd.gov/publications/AQ/policy/PC/OilGas/20201005_OG_Compliance_Alert.pdf (accessed October 6, 2021). 188 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 189 United States: North Dakota 10. Authorized Flaring or Venting 12. Economic Evaluation 14. Measurement Frequency and Methods same level of penalty applies if an operator fails to comply with production restrictions for three months despite monthly notices According to North Dakota Century Code Section 38-08-06.4, after According to Order 24665, 2014 (see footnote 648), well payouts Per NDAC Section 43-02-03-52.1, Form 5B must be reported of violations from the NDIC. the first year of production, flaring must cease. The operator and economics should not be used to determine the production monthly on or before the fifth day of the second month after the can cap the well, connect it to a gathering system, increase restrictions imposed on operators that do not comply with gas was produced. In November 2018, North Dakota loosened North Dakota Century Code Section 38-08-16 allows for civil the use of associated gas, or use the gas in any other beneficial gas capture plans. At the same time, the order allows for the flared gas reporting regulations, allowing producers the option of penalties that can be imposed on oil and gas operators that action approved by the NDIC. Operators may apply for a flaring maximum efficient rate of oil production in many circumstances. excluding particular well sites that fall under certain criteria from violate any rule, regulation, or order from the NDIC. Civil penalties exemption if the connection of a well to a natural gas gathering The NDIC tries to distinguish between operators that are their reporting. may be up to US$12,500 for each offense. Each day’s violation is a line is economically infeasible. connected to gathering systems but flare and those that flare separate offense. because of midstream bottlenecks. Over the years, the NDIC policy 15. Engineering Estimates DAQ has an independent permit application for flares associated 19. Nonmonetary Penalties and regulation have shifted toward encouraging investment in with air quality and the control of pollutants659 for oil or gas Per NDAC Section 43-02-03-52.1, Form 5B requires an accounting midstream infrastructure. Nevertheless, the comparison of the Operators of oil wells that do not report associated gas production facilities classified as a major stationary source or a equivalency: Gas produced minus lease-use gas minus flared gas value of oil and the value of associated gas if captured remains volumes by the due date (see section 13 of this chapter) may major modification. must equal wet gas transferred. Certain sections of NDAC Article central to operators’ decisions to invest in capture infrastructure be shut in for up to 30 days. If operators continue to produce 33.1-15 include formulas to use when calculating emissions. 11. Development Plans and the NDIC’s assessment of drilling applications and flaring gas during the shut-in period, they will be subject to penalties. exemptions. 16. Record Keeping North Dakota Century Code Section 38-08-16 states that a person Order 24665, 2014, requires upstream operators to submit a gas who willfully violates any rule or order of the commission that capture plan with every drilling permit application to the NDIC. NDAC Section 43-02-03-85 requires all oil and gas to keep records Gas capture plans must include information on area gathering E. Measurement and Reporting on all of their operations covered under NDAC Chapter 43-02-03 for pertains to the prevention or control of pollution or waste is guilty of a Class C felony. A court of competent jurisdiction may system connections and processing plants, the rate and duration at least six years. 13. Measurement and Reporting Requirements impose a criminal penalty. of planned flowback, current system capacity, and a timeline for connecting the well. They must also include a signed affidavit NDAC Section 43-02-03-52.1 requires reporting of the amounts 17. Data Compilation and Publishing verifying that the plan has been shared with area midstream of gas associated with oil wells from the first day of production, Flared gas volumes are reported by the North Dakota Department G. Enabling Framework companies. including flowback and production test gas and flared volumes, using Gas Production Report Form 5B.660 NDAC Section 43- of Mineral Resources along with other production data.663 The 20. Performance Requirements The NDIC allows production from horizontal wells in Bakken and Energy Information Administration compiles data from states and 02-03-44 mandates all measurement equipment and volume The NDIC regulations are designed to provide operators maximum Three Forks Pools for up to 90 days (one year in noncore areas) reports on its website, but the data are incomplete (see section 17 determination used for reporting casinghead gas to be compliant flexibility to manage their drilling, operation, and gas capture at the maximum efficiency rate irrespective of flaring volumes. of the chapter on United States: Federal Onshore). with American Gas Association standards. plans within the gas capture goals (see footnote 647). The After 90 days, the operator should either meet gas capture goals standards are applied state-wide, then at the county level, field or limit production. NDIC Order 24665, 2014 (see footnote 649) DAQ requires operators to submit an Incinerators or Flares Annual Emission Inventory Report. 661 Oil and gas operators may F. Fines, Penalties, and Sanctions level, and well level. The enforcement mechanism provides that provides flexibility in the form of temporary exemptions from if the operator cannot attain the capture goals at the maximum production restrictions for up to one year if an operator files a be responsible for submitting additional environmental reports to 18. Monetary Penalties both DAQ and the EPA. 662 Operators must use air quality models efficiency rate, wells will be restricted to 200 barrels of oil a day request and provides the necessary documentation. The NDIC may According to North Dakota Century Code Section 38-08-06.4, or formulas included in different chapters of NDAC Article 33.1-15 if at least 60 percent of the monthly volume of associated gas consider further flexibility under other extenuating circumstances violators of flaring exemptions will pay production taxes and while reporting air emissions data. produced from the well is captured. Otherwise, oil production from after notifying the operator and hearing whether the exemption royalties on flared gas. NDIC Order 24665, 2014 (see footnote 647) such wells should not exceed 100 barrels of oil a day. is expected to result in a significant net increase in gas capture outlines penalties the NDIC may impose on operators for failing within a year. The NDIC has also implemented a gas capture credit Because of the unique properties of the geologic formations in to comply with gas capture goals. Penalties start at US$1,000 system (see section 22 of this chapter). Bakken, DAQ has developed guidelines and regulations related to a month, commencing the month following the month in which the air quality requirements of facilities producing and processing the operator fails to attain the gas capture goals, oil production oil and gas from these formations.664 More efficient pollution exceeds production restrictions, and the operator fails to file control is required for tanks located on sites where the emissions for a hearing with the NDIC. Penalties double every month of of volatile organic compounds from tanks are greater than 20 noncompliance up to a maximum of US$12,500 a month. The 659 https://deq.nd.gov/forms/aq/Permitting/SFN59652.pdf (accessed August 15, 2021). 660 https://www.dmr.nd.gov/oilgas/rules/forms/form5B.PDF (accessed August 15, 2021). 661 https://deq.nd.gov/forms/aq/aeir/SFN11624.pdf (accessed August 15, 2021). 663 https://www.dmr.nd.gov/oilgas/stats/Gas1990ToPresent.xls (accessed August 15, 2021). 662 https://deq.nd.gov/AQ/compliance/Reporting.aspx (accessed August 15, 2021). 664 https://deq.nd.gov/publications/AQ/policy/PC/20110502_OilGas_Permitting_Guidance.pdf (accessed August 15, 2021). 190 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 191 United States: North Dakota tonnes a year, and such controls must be in place and operational least 75 percent of the gas and natural gas liquids volume (more 24. Interplay with Midstream and Downstream within 60 days of production starting. than 50 percent of propane and heavier molecules) for beneficial Regulatory Framework consumption, such as the production of petrochemicals or Companies need to meet certain performance requirements Per NDIC Order 24665, 2014, operators must submit signed fertilizer. to qualify for a DAQ air permit (see section 10 of this chapter). affidavits to the NDIC when applying for a drilling permit to NDAC Section 33.1-15-20, 2019, focuses on preventing significant The gas tax rate was as high as $0.18 per mcf in 2009 and 2010. prove that they have communicated their gas capture plans with deterioration of air quality as a result of emissions from oil and It was reduced in 2015. In July 2021, it was set at $0.04 per midstream companies. Ideally, this procedure would prevent gas well production facilities and refers to many other sections mcf.669 drilling before sufficient midstream capacity is available. The NDIC of Chapter 33.1-15 on Air Pollution Control. NDAC Section 33.1- envisions separate semi-annual meetings with gas gathering 15-20, 2019, provides a formula to calculate emissions, which 22. Use of Market-Based Principles companies and operators that had repeatedly failed to meet gas should meet ambient air quality standards as outlined in NDAC capture goals. The NDIC considers timely communication among Per NDIC Order 24665, 2014, an operator is allowed to accumulate Section 33.1-15-02, 2019.665 Flares must have automatic ignitors producers, midstream companies, and the NDIC essential to credits for LNG utilization, CNG utilization, and volumes of or continuously burning pilots, and the flare stack must be tall coordinate upstream and midstream development and reduce gas captured during the most recent six months in excess enough for adequate dispersion of emissions. NDAC Section 33.1- flaring. See section 24 of the chapter on the United States: Federal of the current gas capture goal. The NDIC grants the use of 15-07, 2019, bans the release of organic compounds in gaseous and Onshore. credits to meet monthly gas capture target only under certain vapor forms except in emergencies or when flared or combusted circumstances: right-of-way issues, midstream outages, federal in another effective control device approved by the NDIC. NDAC regulations, safety issues, delayed access to electricity, and Section 33.1-15-03, 2019, restricts the opacity of emissions from possible reservoir damage. Credits cannot be transferred to flares. another operator. Unused credits expire after six months. According to DAQ, equipment at oil and gas facilities in North Most transportation contracts are for interruptible service, which Dakota may be subject to Title 40 CFR § 60 and § 63.666 DAQ has means a producer may be denied the ability to transport natural also implemented the national NSPS, as outlined in Title 40 CFR 60 gas in a gathering system if the system is constrained, such as Subpart OOOO and Subpart OOOOa.667 Flares on federal and Indian when a shortage of processing capacity causes downstream lands must meet federal performance requirements, as detailed in bottlenecks. In November 2019, the NDIC issued an order to section 20 of the chapter on the United States: Federal Offshore. encourage firm (that is, uninterruptible) service agreements, which would guarantee access to pipelines. 21. Fiscal and Emission Reduction Incentives NDAC Section 43-02-03-60.3, 2014, states that any operator 23. Negotiated Agreements between the Public seeking to have a well certified for purposes of eligibility for the and the Private Sector gas tax incentive provided in North Dakota Century Code Section 57-51-02.6668 should apply for certification as an oil or gas well The North Dakota Oil and Gas Research Program,670 an NDIC employing a system to avoid flaring. Gas is exempt from tax for initiative, is a joint state and industry effort established in 2003 2 years and 30 days from the date of first production if either of that supports research into oil and natural gas exploration and these conditions is met: production. Recent projects include efforts to develop methods for reducing flaring through small-scale gas-to-liquids, CNG, LNG, and • The gas is used at the well site to generate electricity, and at electricity generation. least 75 percent of the gas is consumed. • The gas is collected at the well site by a system that takes in at 665 https://www.legis.nd.gov/information/acdata/pdf/33.1-15-02.pdf (accessed August 15, 2021). 666 https://deq.nd.gov/publications/AQ/policy/PC/OilGas/RegulationSummary2m.pdf (accessed August 15, 2021). 667 https://deq.nd.gov/AQ/oilgas/QuadO.aspx (accessed August 15, 2021). 668 https://www.legis.nd.gov/cencode/t57c51.pdf#nameddest=57-51-02p6 (accessed August 15, 2021). 669 https://www.nd.gov/tax/user/businesses/formspublications/oil--gas-severance-tax/forms--instructions/north-dakota-gas-tax-rate/ (accessed August 23, 2021). 670 https://www.dmr.nd.gov/ogr/Default.aspx (accessed August 15, 2021). 192 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 193 United States: Texas A. Policy and Targets 2. Targets and Limits 4. Legislative Jurisdictions 8. Monitoring and Enforcement There is a 10-day limit on flaring during drilling and well testing. Flaring and venting in Texas are primarily state matters; The RRC’s inspectors (usually housed in district offices closer 1. Background and the Role of Reductions Once testing is over, the RRC can authorize further flaring up federal onshore regulations are largely irrelevant in Texas. The to operations) can visit sites “to witness operations, conduct in Meeting Environmental and Economic to 180 days. Operators may release low-pressure-separator share of producible completions in Texas out of total producible inspections, provide information about permitting requirements, Objectives hydrocarbons, up to 15 mcf a day from a gas well or 50 mcf a day, completions across all federal lands approved by the BLM and ensure compliance with permits issued by the Commission” Flaring and venting have been regulated in Texas for decades, but from an oil lease or commingling point for commingled operations was about 0.5 percent through the 2010s. With respect to air (see footnote 680). The RRC has used a light-touch approach flare volumes soared, from about 35 bcf in 2011 to 251 bcf in 2019, (see sections 9 and 10 of this chapter). emissions, the EPA plays a role by approving SIPs. to regulating flaring from oil and gas activity. State policy and according to data from the Energy Information Administration.671 regulation have focused on economic development and job creation. The increase reflected a ramp-up in drilling activity in the B. Legal/Regulatory Framework 5. Associated Gas Ownership With 12 percent of Texas being public lands, revenues from mineral Permian, Eagle Ford, and other plays and the inability of the extraction are important. The RRC’s commissioners are not midstream gas infrastructure to grow in parallel with associated and Contractual Rights Land ownership determines mineral rights. About 12 percent of appointed but are elected, creating an inherent tension between Texas is public land managed by the General Land Office. Revenue gas production. The Permian Methane Analysis Project672 found the regulator’s duties to protect the environment and to steward 3. Primary and Secondary Legislation from mineral resources developed on these lands is used for public that about 11 percent of Permian flares surveyed were either unlit the efficient development of mineral resources and environmental and Regulation education. Federal lands account for only about 1 percent of all or malfunctioning.673 protection. Separately, per SIP, the TCEQ is expected to conduct land in Texas. In the rest of the state, private landowners own The Texas Natural Resources Code’s Chapter 85 declares the waste inspections at least quarterly to ensure the proper operation of In response, the state oil and gas regulator, the Railroad the rights to mineral resources under their land. In some cases, of oil and gas resources “illegal and prohibited.”677 With respect to continuous monitoring systems and pressure valves. Commission (RRC), revised its reporting requirements. The RRC’s mineral rights may be severed from surface rights but are still flaring, the RRC implements this clause using Texas Administrative number of authorizations for flaring and venting increased from held privately. Companies obtain a concession from the mineral Code, Title 16, Part 1, Section 3.32,678 known as Statewide Rule 107 in 2008 to 6,972 in 2019 (see footnote 682). The rise in flare 32. The rule outlines the conditions under which flaring may be rights owner to explore for oil and gas. In the case of a commercial D. Licensing/Process Approval permitting has been steady, except in 2016 and 2017, when the discovery, the concessionaire owns oil and gas under the leased allowed. In response to increased flaring volumes and public area. Under most private leases, royalties are not paid on lost gas, 9. A Flaring or Venting without Prior Approval global oil price slumped. The industry is trying to improve its scrutiny, the RRC published a new Application for Exception to performance, but the lack of gas pipeline and processing capacity which includes flared and vented volumes. Statewide Rule 32 (see footnote 678) allows operators to flare Statewide Rule 32 in late 2020 but did not change the rule (see remains the leading cause of continued flaring. According to data oil-well gas while drilling a new well and testing the well for up section 10 of this chapter). from the Energy Information Administration, Texas has flared The Texas Air Quality SIP was adopted in 2004 and approved by C. Regulatory Governance to 10 days. Venting is allowed for releases lasting less than 24 70–90 cf per barrel of oil produced since the 1990s, but its flaring hours, unless flaring is necessary for safety reasons; operators are intensity doubled to 140–150 cf per barrel in 2018 and 2019. the EPA in 2006. Texas’ SIP Vent Gas Control program 679 (Sections and Organization encouraged to verify with RRC District Offices whether they can 720–729 of Chapter 115, entitled “Control of Air Pollution from vent or must flare. Gas that must be unloaded from a well may Pressure on the RRC and the oil and gas industry to end routine 6. Regulatory Authority Volatile Organic Compounds”) is most relevant for oil and gas be vented for up to 24 hours in one continuous event or up to 72 flaring is increasing from various quarters, including investors,674 operations. There is also a GHG permitting program at the Texas The RRC681 regulates the exploration, production, and cumulative hours in one month. environmental groups, and other civic organizations in Texas and transportation of the oil and gas industry.682 The TCEQ683 Commission on Environmental Quality (TCEQ), 680 but it focuses elsewhere.675 Although they were eventually abandoned, the Texas regulates air emissions. primarily on power plants based on the EPA’s GHG program under 10. Authorized Flaring or Venting Legislature considered two bills on emissions and flaring by the oil the Clean Air Act, 1990. and gas industry in early 2021.676 Statewide Rule 32 allows operators to flare oil-well gas beyond the 7. Regulatory Mandates and Responsibilities initial 10 days with an exception to Rule 32 issued by the RRC. The RRC has jurisdiction over the permitting of flaring operations Typically, exceptions are not granted for flaring from gas wells. with respect to preventing the waste of natural resources. The Flaring exceptions are granted for 45 days at a time for up to TCEQ is charged with reviewing and approving air pollution 180 days. More documentation is required every time an operator 671 https://www.eia.gov/dnav/ng/hist/na1130_rtxo_2a.htm (accessed August 15, 2021). permits for industrial and commercial sources, including flaring 672 https://www.permianmap.org/ (accessed August 15, 2021). applies for an extension. Exceptions beyond 180 days must be 673 EDF (2020), https://www.edf.org/media/initial-data-showing-permian-flaring-rise-again-new-survey-finds-1-10-flares-malfunctioning (accessed January 13, 2022). and venting. approved by an RRC Final Order after a hearing. An exception may 674 Crowley (2020), https://www.worldoil.com/news/2020/9/7/investment-giants-urge-texas-to-end-most-natural-gas-flaring (accessed August 15, 2021). 675 https://www.houstonchronicle.com/business/columnists/tomlinson/article/Ending-natural-gas-flaring-in-Texas-is-only-the-15350987.php (accessed August 15, 2021). be approved administratively and indefinitely if flaring is less than 676 Buckley (2021), https://www.houstonpublicmedia.org/articles/news/energy-environment/2021/01/06/388716/lawmakers-could-address-natural-gas-flaring-in-upcoming-session/ (accessed January 13, 2022). 50 mcf a day at an oil well and 15 mcf a day at a gas well. 677 https://statutes.capitol.texas.gov/Docs/NR/htm/NR.85.htm (accessed August 15, 2021). 678 https://www.rrc.texas.gov/media/hsdcozmr/chapter3-all-text-effective-july15-2020.pdf (accessed August 15, 2021). 681 https://www.rrc.texas.gov/oil-and-gas/ (accessed August 15, 2021). 679 https://www.epa.gov/sips-tx/texas-sip-30-tac-115720-115729-vent-gas-control (accessed August 15, 2021). 682 https://www.rrc.state.tx.us/about-us/faqs/oil-gas-faqs/flaring-regulation/ (accessed August 28, 2021). 680 https://www.tceq.texas.gov/permitting/air/guidance/newsourcereview/ghg/ghg-permitting.html#qa (accessed August 15, 2021). 683 https://www.tceq.texas.gov/ (accessed August 15, 2021). 194 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 195 United States: Texas According to the RRC, most exceptions are for flaring casinghead E. Measurement and Reporting 15. Engineering Estimates violation, the operator’s history of compliance, and other relevant gas from oil wells. Flaring could be necessary for extended periods factors to determine the amount of the penalty. Part 1, Section 3.27 of Texas Administrative Code, Title 16 (see if the well is drilled in new exploration areas without sufficient 13. Measurement and Reporting Requirements footnote 678) details measurement requirements and standards gas pipeline or processing capacity. Other acceptable reasons 19. Nonmonetary Penalties Operators must report volumes of gas flared to the RRC using for RRC Form PR reporting. According to Texas SIP Vent Gas include processing plant shutdowns and repairs or maintenance the monthly production report (Form PR).688 This report must Control regulations, the flow rate of the gas routed to the flare, According to Subsections 91.701–91.707 of Texas Natural Resources at production or pipeline facilities such as compressors (see include metered gas volumes from both gas wells and casinghead in standard cubic feet per minute, must be determined by either Code, Title 3,694 the RRC may cancel a certificate of compliance footnote 682). gas from oil wells at the lease level (see footnote 682). The RRC complying with the monitoring requirements or using process after issuing a notice of violation to the operator. Once the Separately, operators should apply for standard air permits updated instructions for completing Form PR and instructed knowledge and engineering calculations. certificate is canceled, operations must stop. The RRC can also from the TCEQ if activities (such as flaring) are considered operators to report flaring and venting separately and remark modify, suspend, or terminate a permit if there is a violation (see “routine events.” 684 The TCEQ provides guidelines for standard on the status of the RRC exception for each flaring or venting 16. Record Keeping footnote 692). air permits. 685 These permits do not authorize emissions from event.689 The RRC is also developing an online system for the No evidence regarding record-keeping requirements could be found upsets, emergencies, or malfunctions. They cover volatile organic flare and vent program. This system will include information on in the sources consulted. G. Enabling Framework compounds, particulate matter, and oxides of nitrogen but do not permitting, data analysis, and compliance. cover methane and carbon dioxide. 20. Performance Requirements Texas SIP Vent Gas Control regulations (see footnote 679) require 17. Data Compilation and Publishing the operator of each affected flare or vent gas stream to adhere The TCEQ provides guidance on how flares must be designed and 11. Development Plans Data from RRC Form PR are available on the RRC website.690 TCEQ to reporting and record-keeping requirements, which include the operated,695 based on the specifications of Title 40 CFR § 60.18 air emissions data are available in various formats.691 Several data No evidence regarding development plans could be found in the development and implementation of a quality assurance plan for (see footnote 600). Among other requirements, it requires flares to sets include volatile organic compounds and point sources. The sources consulted. the monitoring requirements, including installation, calibration, be always operated with a flame present or have a constant pilot Energy Information Administration compiles data from states and operation, and maintenance of continuous emissions monitoring flame, which should be continuously monitored by a thermocouple, reports on its website, but the data are incomplete (see section 17 12. Economic Evaluation systems. Separately, operators must submit written notification infrared monitor, or ultraviolet monitor. There should be no visible of the chapter on the United States: Federal Onshore). to the regional office of the EPA at least 45 days before conducting emissions, except during periods not exceeding a total of five In late 2020, the RRC updated Statewide Rule 32 Exception any flare and vent gas stream testing, as required by Texas SIP. minutes during any two consecutive hours. Data Sheet (Form R-32), used by operators to apply for flaring exceptions. After collecting comments from stakeholders on F. Fines, Penalties, and Sanctions 14. Measurement Frequency and Methods 21. Fiscal and Emission Reduction Incentives a draft, it published a new version, entitled “Application for 18. Monetary Penalties Exception to Statewide Rule 32.”686 The new form requires Operators must file RRC Form PR monthly. Historically, flared and Part 1, Section 3.103 of Texas Administrative Code, Title 16 (see Most violations, including the violation of flaring exceptions, are operators to include technical and economic justifications with vented gas volumes were reported together in Form PR, but new footnote 678) provides for an incentive to market flared or vented resolved through the RRC’s district offices by means other than the goal of reducing the duration of flaring exceptions. This RRC instructions require that operators report them separately gas via an exemption from the state severance tax of 7.5 percent administrative penalties.692 Nevertheless, the RRC has statutory specific information enables the RRC to assess compliance by starting in September 2021. on the marketed gas volume for the life of the well. To qualify, authority to assess administrative penalties for violations related identifying and tracking the location of flare and vent points. The such marketed gas should have previously been vented or flared Texas SIP Vent Gas Control regulations require operators of to safety, environmental, and other permits according to Texas documentation required includes a cost–benefit analysis, a map for 12 months or more. However, this incentive is at least partially affected flares to install an on-line analyzer system capable of Natural Resources Code Subsections 81.0531 through 81.0533.693 showing the nearest pipeline capable of accepting gas, and an negated by Subtitle I, Section 201.053 of Texas Administrative determining highly reactive volatile organic compounds at least The RRC may assess up to US$10,000 a day per violation and estimate of gas reserves. In most cases, the changes are expected Code, Title 2,696 which exempts oil-well gas that is lawfully vented once every 15 minutes. The system must also measure other US$1,000 a day for non-safety- or pollution-related violations. to reduce the time an operator may obtain an administrative or flared from the severance tax. potential emissions—such as hydrogen, nitrogen, carbon dioxide, Part 1, Section 3.107 of Texas Administrative Code, Title 16 (see exception to flare by 50–80 percent. 687 methane, and other volatile organic compounds—sufficient to footnote 678) provides guidelines on penalties for various types of determine the molecular weight and net heating value of the gas oil and gas violations. The RRC considers the seriousness of the combusted in the flare to within 5 percent. 690 https://www.rrc.texas.gov/resource-center/research/data-sets-available-for-download/ (accessed August 15, 2021). 684 https://www.tceq.texas.gov/downloads/assistance/industry/oil-gas/og-ee-compliance-alert.pdf (accessed October 22, 2021). 691 https://www.tceq.texas.gov/agency/data/lookup-data/download-data.html (accessed August 15, 2021). 685 https://www.tceq.texas.gov/assets/public/permitting/air/Announcements/oilgas-sp.pdf (accessed August 15, 2021). 692 https://www.rrc.texas.gov/media/k1sdgewz/og-s-plan-fy-2021.pdf (accessed August 15, 2021). 686 https://www.rrc.texas.gov/media/jekdiczs/r-32-fillable.pdf (accessed August 15, 2021). 693 https://statutes.capitol.texas.gov/Docs/NR/htm/NR.81.htm (accessed August 15, 2021). 687 https://www.rrc.texas.gov/news/110920-rrc-conference-flaring-action/ (accessed August 15, 2021). 694 https://statutes.capitol.texas.gov/Docs/NR/htm/NR.91.htm (accessed August 15, 2021). 688 https://www.rrc.texas.gov/media/vurjvrzb/formprf.pdf (accessed August 15, 2021). 695 https://www.tceq.texas.gov/assets/public/permitting/air/Guidance/NewSourceReview/bpc_flares.pdf (accessed August 15, 2021). 689 https://www.rrc.texas.gov/announcements/030221-rrc-adopts-revisions-to-form-pr-monthly-production-report/ (accessed August 15, 2021). 696 https://statutes.capitol.texas.gov/Docs/TX/htm/TX.201.htm (accessed August 15, 2021). 196 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 197 United States: Texas 22. Use of Market-Based Principles The TCEQ operates several cap-and-trade programs, but they focus on urban air quality, mostly in Houston’s eastern Gulf Coast region. They do not capture volatile organic compounds from oil and gas operations in most of the state. There is no similar program for GHGs. 23. Negotiated Agreements between the Public and the Private Sector No evidence regarding negotiated agreements between the public and the private sector could be found in the sources consulted. 24. Interplay with Midstream and Downstream Regulatory Framework The primary reason for flaring in the Permian Basin has been the lack of natural gas pipeline capacity to transport gas to markets. Several natural gas pipelines have been built or are under construction to transport gas to markets, including LNG facilities. In the meantime, because the impact of gas sales on overall well economics has been limited, the RRC appears unlikely to restrict oil production to reduce flaring. For example, in May 2020, the RRC rejected a proposal to cut oil production by 20 percent in a 2 to 1 vote. The split decision was based on the expectation that the issue would resolve itself once the necessary infrastructure was built. However, the RRC’s new requirement of more detailed economic justifications before approving flaring exceptions may change the current situation. As highlighted in the Texas Natural Resources Code, preventing the waste of the state’s natural resources is attracting attention.697 Some Permian Basin producers, mainly small ones, argue that delaying well completions or reducing oil production rates while waiting for sufficient gas takeaway capacity will lead to an immediate loss in income that far exceeds any future revenue increase from gas sales. Major producers in the Permian Basin Photo credit: © G B Hart/ Shutterstock treat gas takeaway capacity as a manageable constraint that involves ensuring that adequate takeaway infrastructure is in place before bringing a well online and being willing to shut in a well until takeaway capacity is secure. Ongoing consolidation among operators is reinforcing this trend. 697 https://www.rrc.texas.gov/news/012621-commissioner-wright-statement-on-flaring-exceptions/ (accessed August 15, 2021). 198 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 199 Venezuela, República Bolivariana de 8.19 billion cubic meters of gas flared in 2021 A. Policy and Targets B. Legal/Regulatory Framework (total oil production 589 thousand barrels per day) 1. Background and the Role of Reductions and Contractual Rights in Meeting Environmental and Economic 3. Primary and Secondary Legislation Objectives and Regulation Between 2012 and 2021, the flaring intensity in the República Article 2 of the Organic Law on Hydrocarbons, 2006,700 states Change in Flare Gas Volumes* Change in Flare Gas Intensity** Bolivariana de Venezuela increased by a factor of four—by far that activities related to natural gas are governed by the the largest increase in the countries studied. In 2021, its flaring Organic Law on Gaseous Hydrocarbons, 1999,701 except for the intensity was 38.1 m per barrel of crude oil produced, the highest 3 extraction of associated gas, which is governed by the Organic 2015-2021 2015-2020 2015-2021 2015-2020 of all countries studied (figure 21). Despite a declining trend in oil Law on Hydrocarbon, 2006. These laws allow for gas exploration -12% -8% 267% 335% production starting in 2018, which reduced 2021 production to and exploitation operations by third parties, without PDVSA about one-fifth the 2012 level, the volume of gas flared remains intervention, but with the obligation to sell the gas to PDVSA or stable. There were 162 individual flare sites in the last flare count, other state companies at prices set by the government. Article conducted in 2019. 2 of the Organic Law on Gaseous Hydrocarbons, 1999, governs * Annual volumes in billion cubic meters ** Cubic meters of gas flared per barrel of oil produced The country submitted its NDC to the UNFCCC in 2018. It includes the collection, storage, processing, industrialization, transport, a national mitigation plan that aims to reduce emissions by at distribution, and internal and external commercialization of least 20 percent by 2030698 compared with a scenario in which nonassociated and associated gas. the plan is not implemented. The NDC cites projects by the Figure 21 Gas flaring volume and intensity in República Bolivariana de Venezuela, 2012–21 Other relevant laws and regulations include Regulation of the national oil company, Petróleos de Venezuela, S.A. (PDVSA),699 Fl rin Int nsit Fl rin Volum Hydrocarbon Law, 1943,702 Regulation on the Conservation of to reduce flaring and venting by implementing associated gas Hydrocarbons, 1969,703 and Decree 638/1995, Norms on Air Quality 11 50 utilization projects. These projects are reported to reduce GHG and Control of Atmospheric Pollution, 1995.704 10 emissions by more than 500,000 tCO2e. 45 More than 90 percent of the gas produced in the República 4. Legislative Jurisdictions 9 40 Bolivariana de Venezuela is associated with crude oil production. Natural gas, including flared and vented gas, is a matter of Cubic m t rs (m³) of 8 Most of the flared gas comes from mature fields in the eastern national jurisdiction, as stated in Articles 1–3 of the Organic Law 35 part of the country and the Orinoco Belt. The routine flaring of on Gaseous Hydrocarbons, 1999. r 7 30 gas by PDVSA in northern Monagas has become one of the largest s fl r d/ sources of natural gas flaring in the world. 6 s fl r d/b rr l of oil produc d 5. Associated Gas Ownership 25 2. Targets and Limits The Constitution of the República Bolivariana de Venezuela, billion m³ of 5 20 1999,705 Article 3 of the Regulation of the Hydrocarbon Law, 1943, 4 No evidence regarding targets and limits could be found in the and Article 1 of the Organic Law on Gaseous Hydrocarbons, 1999, 15 sources consulted. 3 vest all hydrocarbon rights in the state. Concessions grant companies the right to explore, develop, and exploit hydrocarbons. 10 2 Article 21 of the Regulation on the Conservation of Hydrocarbons, 5 1969, states that if the operator does not use the gas as specified 1 698 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Venezuela%20(Bolivarian%20Republic%20of)%20First/Primera%20%20NDC%20Venezuela.pdf (accessed August 20, 2021). 0 0 699 http://www.pdvsa.com/ (accessed August 20, 2021). 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 700 http://www.minpet.gob.ve/images/biblioteca/leyes/LEY_ORGANICA_DE_HIDROCARBUROS_CORREGIDA.pdf (accessed August 20, 2021). 701 http://www.minpet.gob.ve/images/biblioteca/leyes/LEY_ORGANICA_DE_HIDROCARBUROS_GASEOSOS.pdf (accessed August 20, 2021). Note: Flare data graphs shown in this report are based on global flaring data estimates by the Global Gas Flaring Reduction Partnership (GGFR) using satellite data from the Colorado School of Mines. 702 http://www.minpet.gob.ve/images/biblioteca/leyes/REGLAMENTO_DE_LA_LEY_DE_HIDROCARBUROS.pdf (accessed August 20, 2021). This approach is applied to all countries covered in this report in a consistent manner. 703 http://www.minpet.gob.ve/images/biblioteca/leyes/reglamento_conservacion_recursos_hidrocarburos.pdf (accessed August 20, 2021). 704 http://www.cipram.com.ve/pdf/Decreto%20638%20Normas%20sobre%20calidad%20del%20Aire%20y%20Control%20de%20la%20Contaminacion%20Atmosferica.pdf (accessed August 20, 2021). Source: www.worldbank.org/en/programs/gasflaringreduction/global-flaring-data (April 2021) 705 http://www.pdvsa.com/images/pdf/marcolegal/constitucion_de_la_republica_bolivariana_de_venezuela.pdf (accessed August 20, 2021). 200 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 201 Venezuela, República Bolivariana de in Article 20, the Ministry of Mines and Hydrocarbons (now the D. Licensing/Process Approval measure, if economically justified, to use associated gas for any of dioxide, oxides of nitrogen, particulate matter, and other air Ministry of Popular Power of Petroleum) may take it free of charge the following purposes: pollutants are. at the separator’s exit. 9. Flaring or Venting without Prior Approval • maintenance of reservoir pressure in accordance with recognized technical procedures in the oil industry 15. Engineering Estimates Article 121 of the Regulation of the Hydrocarbon Law, 1943 (see C. Regulatory Governance footnote 700) establishes that excess gas that cannot be used or • any internal, commercial, or industrial use, including its use as a Article 7 of Decree 638/1995 provides the analytical method, and Organization returned to the field can be flared. Only gas from wells with very fuel in the operator’s facilities measurement period, and sampling method for each air pollutant low pressure is allowed to be vented. Vents must be high enough to • injection into oil fields or other appropriate strata or covered by the decree. Sampling can be carried out either 6. Regulatory Authority facilitate the dispersion of gas without causing harm. underground storage, according to recognized technical manually or automated via instruments. Analytical methods procedures. include automated approaches such as flame photometry and The Ministry of Popular Power of Petroleum706 (known as Article 40 of Decree 638/1995 (see footnote 704) states that manual approaches such as colorimetry. MINEC may authorize MinPetróleo) is the overarching policy and regulatory authority. MINEC may authorize trial periods for the initial operation of other measurement methods if requested by the regulated party. The Ministry of Popular Power for Ecosocialism (Ministerio Article 22 states that any associated gas that cannot be utilized processes or equipment to control emissions. This authorization del Poder Popular para el Ecosocialismo [MINEC])707 is the in the above ways must be disposed of in a manner that does not is granted in accordance with Article 21 of the Organic Law of the 16. Record Keeping environmental policy and regulatory authority. cause harm. Environment, 2006 (see footnote 707); its duration is limited to six months or less. In cases of emergency or unforeseeable emissions No evidence regarding record-keeping requirements could be found 7. Regulatory Mandates and Responsibilities in violation of the regulations, the operator must notify MINEC and E. Measurement and Reporting in the sources consulted. MinPetróleo is in charge of formulating, executing, and evaluating activate its emergency contingency plans. 13. Measurement and Reporting Requirements 17. Data Compilation and Publishing the country’s oil and gas policies and regulating the industry. It supervises and controls the operations of the PDVSA and 10. Authorized Flaring or Venting Article 13 of Decree 638/1995 (see footnote 704) states that the Both MinPetróleo and the PDVSA have published flaring data, with its subsidiaries, which the government owns. MINEC regulates composition of emissions from flaring must be carried out by Articles 20–23 of Decree 1257/1996 (see footnote 708) require the last publication dating back to 2016. emissions from oil and gas operations and is responsible for a minimum of three samples at each selected collection point operators to obtain environmental licenses before starting when the study is carried out for the first time and a minimum of authorizing flaring and venting. It provides permission to flare on a case-by-case basis, in accordance with Decree 638/1995 (see exploration or production. Applicants must submit to MINEC an two samples after that. The runs should be carried out when the F. Fines, Penalties, and Sanctions EIA that describes their gas flaring and venting activities. After production volume is greater than the annual average. Article 26 footnote 680), which stipulates air quality limits and permitted 18. Monetary Penalties evaluation, MINEC may grant an environmental license for such requires operators to submit details of the composition of their maximum air emission levels for controlling atmospheric activities. The license may contain specific requirements and emissions to MINEC at least annually. No information was identified in the current legislation specific emissions, including from flaring. Article 20 of Decree 1257/1996708 emission reporting procedures for flaring and venting, which are to penalties for flaring or venting. However, noncompliance with requires the submission of an EIA based on a feasibility study Article 28 of Decree 1257/1996 (see footnote 708) requires set on a case-by-case basis. In addition, Decree 638/1995 (see the pollutant emission limits established in Decree 638/1995 and a production plan to MINEC for approval before a project’s submission of an Environmental Supervision Plan to MINEC footnote 704) requires a specific flaring permit to be sought from (see footnote 704) can trigger sanctions per Articles 108–135 commissioning. for each project, together with the request for environmental MINEC during operations. of the Organic Law of the Environment, 2006 (see footnote 709). authorization. In the case of hydrocarbons, the plan will be Article 108 states that financial penalties may be up to 10,000 8. Monitoring and Enforcement 11. Development Plans incorporated in the corresponding Environmental Impact Study. tax units. Article 129 states that experts will determine the Article 6 of the Organic Law on Gaseous Hydrocarbons,1999 (see The Environmental Supervision Plan should include measures to No evidence regarding development plans could be found in the amount of damage, which will serve as the basis for sanctions and footnote 701) and Articles 10, 14, and 16 of the Organic Law of the mitigate the impacts of gas flaring and venting as well as the sources consulted. environmental measures. Environment, 2006,709 empower the regulator to monitor and audit reporting of volumes and emissions. the oil and gas operations for the protection of the environment. The Environmental Penal Law, 2012,710 focuses on criminal behavior 12. Economic Evaluation 14. Measurement Frequency and Methods negatively affecting the environment and natural resources. Article 20 of the Regulation for the Conservation of Hydrocarbons, Article 96 sanctions offenders with a monetary penalty of up to Article 6 of Decree 638/1995 specifies sampling period criteria 1999 (see footnote 703) requires operators to take any reasonable 2,000 tax units for emitting or allowing the escape of pollutants (frequency, duration, and number of samples) to ensure compliance with air quality limits set in the decree. CO2 and harmful to the environment. 706 http://www.minpet.gob.ve/index.php/es-es/organizacion/quienes-somos1 (accessed August 20, 2021). methane emissions are not included in the decree, but sulfur 707 http://www.minec.gob.ve/marco-juridico/ (accessed August 20, 2021). 708 https://www.slideshare.net/pppm_info/decreto-n-1257-fecha-13-de-marzo-de-1996-normas-sobre-evaluacion-ambiental-de-actividades-susceptibles-de-degradar-el-ambiente (accessed August 20, 2021). 709 http://euroclimaplus.org/intranet/_documentos/repositorio/Ley%20Org%C3%A1nica%20del%20Ambiente_2006Venezuela.pdf (accessed August 20, 2021). 710 http://euroclimaplus.org/intranet/_documentos/repositorio/Ley%20Penal%20del%20Ambiente%20(2012).pdf (accessed August 21, 2021). 202 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 203 Venezuela, República Bolivariana de 19. Nonmonetary Penalties 23. Negotiated Agreements between the Public Article 51 of the Organic Law on Gaseous Hydrocarbons, 1999 (see and the Private Sector footnote 701) empowers the MinPetróleo minister to suspend No evidence regarding negotiated agreements between the public activities for up to six months, depending on the seriousness of and the private sector could be found in the sources consulted. the offense and the offender’s past performance. Articles 112 and 119 of the Organic Law of the Environment, 2006 (see footnote 24. Interplay with Midstream and Downstream 709) empower the responsible environmental authority to revoke Regulatory Framework licenses. Article 96 of the Environmental Penal Law, 2012, provides The Organic Law on Gaseous Hydrocarbons, 1999 (see footnote for imprisonment of six months to two years for emitting harmful 701) created the National Gas Entity (Ente Nacional del Gas)711 as quantities of gas or allowing it to escape. a decentralized body, with functional, administrative, technical, and operational autonomy. The National Gas Entity reports to G. Enabling Framework MinPetróleo and is responsible for coordinating the country’s gas development activities. 20. Performance Requirements In 2002, PDVSA Gas, S.A. was established with the purpose No evidence regarding performance requirements could be found of managing the commercial aspects of the country’s natural in the sources consulted. gas activities: exploration and exploitation of nonassociated gas; extraction, storage, commercialization, and distribution 21. Fiscal and Emission Reduction Incentives of LPG; and transportation, distribution, and marketing of Article 104 of the Organic Law of the Environment, 2006 (see natural gas. However, the domestic gas market is comparatively footnote 709) provides three types of economic or fiscal small, because electricity demand is met almost entirely by incentives, which could in principle be applied to flaring reduction: hydropower. Domestic gas prices are regulated at levels well below international prices, deterring the required investments in both • a state-financed credit system associated gas and nonassociated gas development. • exemptions from the payment of taxes, fees, and contributions • any other legally established economic or fiscal incentive. These incentives will be granted to persons who invest in preserving the environment according to the terms established in Article 102. The incentives aim to promote the adoption of clean technologies, environmental management systems, conservation practices, and the sustainable use of natural resources, as stated in Article 103. Photo credit: © Alejandro Solo / Shutterstock. 22. Use of Market-Based Principles No evidence regarding the use of market-based principles to reduce flaring, venting, or associated emissions could be found in the sources consulted. 711 http://www.minpet.gob.ve/index.php/es-es/entes-adscrito/16-entes-adscrito/91-enagas (accessed August 23, 2021). 204 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 205 Glossary battery system of equipment, such as tanks, used to receive unprocessed crude oil or vessels separating oil, gas, and water from the fluid produced by one or more wells conditional contribution measures countries would take in a Nationally Determined Contribution (NDC) of the United Nations Framework for Convention on Climate Change (UNFCCC) if international means of support were provided or other conditions were met downstream marketing and distribution of treated natural gas and products derived from oil and natural gas flaring intensity a measure of the volume of gas flared per volume of oil produced, such as m³ of gas per barrel of oil hydrocarbons organic compounds consisting of carbon and hydrogen, such as oil and natural gas midstream storage, processing, and transportation of oil and gas, including the refining of crude oil nonroutine flaring flaring other than routine and safety flaring routine flaring flaring during normal oil production operations in the absence of sufficient facilities or amenable geology to re-inject the produced gas, utilize it on-site, or dispatch it to a market (excluding safety flaring, even when continuous) sour gas natural gas containing significant amounts of hydrogen sulfide unconditional contribution measures countries agree to take in an NDC of the UNFCCC based on their own resources and capabilities, without any conditions upstream exploration and extraction of oil and gas resources Photo credit: © manine99 / Shutterstock. 206 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World February 2022 Regulation of Gas Flaring and Venting: 28 Case Studies from around the World May 2022 207 References Agrawal, Harshit. 2019. “Challenges and opportunities to reduce flaring at upstream oil and gas facilities: Highlights of Petroleum GAO (U.S. Government Accountability Office). 2016. “Oil and gas: Interior could do more to account for an manage natural gas Development Oman’s strategy as an international best practice.” Paper presented at the Abu Dhabi International Petroleum Exhibition emissions.” GAO 16-607. 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October. https:// www.gao.gov/products/gao-11-34 The World Bank’s role in gas flaring reduction The World Bank’s Global Gas Flaring Reduction Partnership (GGFR) is a trust fund composed of governments, oil companies, and multilateral organizations committed to ending routine gas flaring and venting at oil production sites across the world. The Partnership helps identify solutions to the array of technical, financial, and regulatory barriers to flaring and venting reduction by developing country-specific flaring reduction programs, conducting research, sharing best practices, raising awareness, securing commitments to end routine flaring through the ‘Zero Routine Flaring by 2030’ global initiative, and advancing flare measurements and reporting. Global Gas Flaring Reduction Partnership (GGFR) Multi-Donor Trust Fund 1850 I Street NW, Washington, DC 20006 ggfr@worldbank.org