regulation of oil and gas in alberta, canada presentation to the latin america and caribbean oil and...
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Regulation of Oil and Gas in Alberta, CanadaPresentation to the Latin America and Caribbean Oil and Gas Seminar
Jim Dilay, Board Member, Energy Resources Conservation Board
Alberta, Canada
July 12, 2011
Overview
• Alberta Energy Industry Scope
• Structure of Regulation• Alberta Oil and Gas
Regulation− Purpose− Principles− Delivery
• Optimizing Recovery• New Technology • Conclusion
Alberta covers 661 190 km2 (255 285 miles2), an area comparable to Texas.
Ottawa 2847km (1769 miles)Vancouver
817 km (507 miles)
New York City 3270 km (2032 miles)
Mexico City
3973 km (2469 miles)
Anchorage 2277 km
(1415 miles)
Houston3018 km (1876 miles)
Alberta’s Location
Alberta
World Oil Reserves (billions of barrels - established)
Source: Oil & Gas Journal, January 2011
Only 13% of the world’s known oil reserves are accessible to international oil companies… One-half of those reserves are in Alberta’s oil sands.
Scope of Alberta Reserves
Conventional crude oil 0.24 billion m3
Bitumen 26.9 billion m3
in situ 21.5 billion m3 surface-mineable 5.4 billion m3
Natural gas 1025 billion m3
with CBM 1093 billion m3
Natural gas liquids 0.26 billion m3
Coal 33 billion tonnes
ST98-2011
Remaining established reservesend of 2010
Producing Oil & Gas Wells 176 166*
ERCB Regulated Pipelines 394 000 km
Gas Processing Plants 955 (633 sweet gas, 292 sour gas)
Oil Sands 61 in situ**, 8 surface mines 154 primary recovery projects 20 experimental projects
Upgraders 5 facilities (240 360 m3 per day capacity)
Coal Mines 12 plants (Annual production: 32.2 Mt)
Scope of ERCB Regulated Facilities
* Producing wells: 9709 bitumen, 35 484 conventional oil, 116 603 gas, 14 120 CBM and 250 shale.** As of January 2011
Structure of Industry
• Majority of (81%) of oil and gas rights owned by the people of Alberta
− Administered by Government of Alberta
− Balance are held by freehold mineral rights
owners Federal government
(National Parks, Indian Reserves).
• Alberta leases mineral rights to private businesses
− Businesses ask Government of Alberta to post mineral rights parcels
− Competitive bidding process for posted leases Highest bids earn rights
Structure of Industry…
• Private businesses develop oil and gas resources
− Require regulatory approvals
• Companies pay royalties on production
− To Government of Alberta for Crown leases
− To rights owner for freehold lands
• Oil and gas companies also pay taxes
− Federal and Alberta income tax
− Local government property taxes
Ownership of Rights in Alberta
Surface Rights• Private Landowners• Alberta Public Lands• Federal Lands
Mineral Rights
Companies mostly leasefrom Government of Alberta
Regulator (ERCB) must consider rights ofland owners and mineral rights holders
Purpose of Regulation
• Regulation to mitigate harms
− Public safety− Environmental damage− Resource waste− Inequities
• Information and technical knowledge
− Resource appraisal− Supply and demand
appraisal− Resource information and
history− Advice to Government
Technical advice and support for policy making
Authority to conduct public inquiries
Key Regulatory Principles
• Fair, just, and transparent• Affected parties have a right
to due process− right to notice and to know
the case to be met− right to participate in decision
(hearing)− right to impartial decision
maker − Decisions with reasons
• Identify and address issues before approval
− Regulatory certainty Appeal limited to error in
law or jurisdiction
• Effective and efficient− Appropriate regulation of
risks to prevent harms− Efficient for Government,
industry and public
Regulatory Structure: Primary Regulatory Interfaces
ALBERTA ENERGY
Energy policyMineral rightsRoyaltyPre-drilling exploration
PUBLIC
Notice of applicationsInformationDirectly affectedPublic hearings
ENERGY RESOURCESCONSERVATION BOARD
Facilities/scheme approvalsInformation collectionand disseminationCompliance/inspectionsCorrelative rights
ALBERTA ENVIRONMENT
Environmental standardsand approvalsEnvironmental impactassessmentPollution control
CANADIAN ENVIRONMENTALASSESSMENT AGENCY (CEAA)
ALBERTA SUSTAINABLERESOURCE DEVELOPMENT/SURFACE RIGHTS BOARD
Surface access and rights-of-way on privately owned land
NATIONAL ENERGY BOARD
Gas exportFederally-regulatedpipelines
ALBERTA HUMAN RESOURCESAND EMPLOYMENT
Occupational healthand safety
Oil and Gas
Industry
Separation of Policy and Regulatory Functions
• Department of Energy− Energy policies− Mineral tenure− Setting royalties− Administering royalties
• ERCB− Authorization of projects− Compliance
Monitoring and Reporting Inspection Enforcement
− Closure Suspension Abandonment
− Information Data collection Information dissemination
• Alberta Energy sets and administers royalties
− Important for royalties to be “competitive” and not discourage investment
• Royalty features can positively influence industry
− Royalty credits for drilling − Royalty incentive for EOR
can enhance recoveries and life-time value of resource developments
− Incentives (credits against royalties) for value add activities (e.g., gas plant NGL/ethane extraction for petrochemical feedstocks)
Economic Policy and Regulation
• The ERCB’s mission is to ensure development is safe, fair, responsible and in the public interest
- Created in 1938 70+ years of regulatory
heritage
- Independent decision maker Adjudication Operational regulation
- 9 Board Members Chairman and Board
members appointed by Government
- 900 staff Technical experts
- 9 field centres throughout Alberta
The ERCB
• ERCB legislation requires it to:
− Consider the public interest, having regard to the social and economic effects of the project and the effects of the project on the environment.
− To effect the conservation of, and to prevent the waste of, the energy resources
− To control pollution and ensure environment conservation
• Resource conservation is a foundational element of the ERCB
Public Interest Regulation
• Preventing waste of resources
− Flaring and venting limits Directive 060
• Conserving reservoir energy− Restrictions on high gas-oil
ratio production
• Protecting reservoirs− Commingling controls
Prevent cross-flow between formations
Prevent contamination (e.g., sour gas into sweet zones)
− Injection (waste water, acid gas) control Prevent contamination of
recoverable resources Prevent harm to off-set
wells
Resource Conservation
• Reservoir equity and orderly development
− Common carrier, processor− Well density (“spacing”) limits− Pooling and unitization− Facilities proliferation
• Optimizing recovery− Maximum production rate
limitation relaxation for enhanced recovery Applies to larger pools
− Encourage but not regulate enhanced recovery Smaller pools
− Encourage cycling of retrograde hydrocarbon rich gas reservoirs
Resource Conservation…
• Optimizing oil sands recovery
− Operating criteria for oil sands mines ID 2001-07 sets out a
minimum recovery ratio ERCB experts evaluate
recovery compliance
− Gas over bitumen Shut-in of gas production
that may harm future bitumen recovery
− In situ application review Ensure valuable resource
not bypassed
− Minimum in situ recoveries Special approval to stop
steaming if not met
− Performance reporting ERCB experts assess
recovery, steam strategies
Resource Conservation…
• Important that regulation not impede appropriate use of new technology
• ERCB is enhancing its role in technology development
− Bulletin 2010-44− Single-contact (Chief
Operations Engineer)− Work with parties to assess
and validate new technologies
− Review requirements to encourage responsible innovation
• Unconventional resources regulatory framework
− Adapt regulations to better suit unconventional gas, tight oil and oil sands
− Play-based approach− Focus on regulation of risks
(versus prescriptive rules)
New Technology
New Regulatory Challenges
• Important that regulation recognize and address emerging issues
− Appropriate and timely regulation of risks to prevent harms
− Efficient for Government, industry and public
• Oil sands− Cap rock integrity
Use of thermal recovery for shallow oil sands reservoirs
− Water use and recycle− Tailings elimination for mines
• Aging infrastructure− Well and facility integrity− Abandonment of inactive
sites
• Alberta has long history of comprehensive regulation of a large resource base
• Separation of fiscal policy and delivery of regulation
• Expert application of science and technology to promote resource conservation and recovery optimization
• Regulatory improvement to adapt to new technology, changing resource development focus and emerging risks
Effective Regulation