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Examining the Effects of Environmental Policy on Shale Gas Production: The Case of Alberta, Canada

Figure 2. CO/RE model. (After Konschnik and Boling 2014).

ABSTRACT

The increase in natural gas production in North America resulting from the implementation of new technologies related to the fracturing (fracking) of natural gas-bearing shale reservoirs has enhanced the security of supply and lowered energy costs in the continent. Yet the environmental impact associated with shale gas development has raised concerns and debate among energy and environmental policy makers as to how best to address these concerns. As Canada’s largest producer of natural gas, the Province of Alberta is an example of a jurisdiction with numerous regulations for dealing with such environmental risks.

 

Authors

Peter Langer, Dale Carl, Philip R. Walsh

Ted Rogers School of Management, Ryerson University, Toronto, Canada
Received: July 21, 2017; Accepted: September 3, 2017; Published: September 6, 2017
Copyright © 2017

This paper applies the CO/RE model of Konschnik and Bolingin examining Alberta’s environmental regulatory framework and the impact; it will have on further shale gas production in the province. Aside from the identification of risks associated with increased seismicity, the results of this examination suggest that the current regulatory environment does not appear to have any adverse effect on current and future shale gas production within the province.

Furthermore, Alberta’s environmental regulation has influenced shale gas producers to pursue innovation in technology and engineering practice and has helped establish a collaborative approach to mitigating environmental risk.

1. Introduction

The recent popularity of shale gas production has led to a new era termed the “golden age of gas”, which has been made possible by a process known as fracking [1] . This new phenomena has caught the attention of many climate change policymakers. This attention is heightened due to the fact that there is currently international action being taken to better understand the causes of climate change and to create policies that would reduce greenhouse gas emissions by encouraging a move from investment in traditional fossil fuels as primary energy sources to zero-carbon energy sources such as solar, wind and nuclear power [2] . The main way governments are trying to address this issue is through policy and regulation [3] [4] and it is becoming more evident that this is occurring using a “bottom to top” approach where policy development occurs at regional and local levels [5] . Academics have analyzed the effectiveness of various environmental policies, such as the Kyoto Accord [6] , and why these policies are sometimes ineffective [7] . Frameworks have been suggested by researchers for criteria that will help to implement effective and meaningful policies, such as the CO/RE (Characterization, Optimization, Regulation, Enforcement) framework [8] . Additionally, models have been proposed that attempt to incorporate the effects of policy on natural gas production in the USA [9] .

Apart from the existing industrial sector regulations on emissions, it is not clear yet which restrictive protective policies will be implemented in Canada and more specifically Alberta, or to what degree they will affect shale gas production. One of the main reasons for this uncertainty is the various environmental debates which have been articulated in the work done by the Yale School of Forestry and Environmental Studies. This group has addressed three main topics which are currently being debated with respect to the fracking process: the effects on air quality, the implications for water tables, and its relation to earthquakes [10] . Decisive conclusions have not been drawn on the long-term effects of any of these questions, which can make it difficult for governments to implement effective policies related specifically to the process of shale gas extraction. Furthermore, since natural gas is considered one of the transition fuels for a low-carbon economy [11] , the support for shale gas production has also been positioned, in some circles, as an environmentally friendly alternative to the traditional carbon-emitting fuel sources such as coal and petroleum.

Lastly, in a country that has an abundant supply of this resource, Canada has to be careful in the regulation that it elects to enact as it can have large economic and environmental impacts [12] . There has already been significant investment from industry into infrastructure to extract this resource [11] . Therefore, the government can expect substantial resistance from industry to any regulation that will restrict access to this resource. To add to this, the Canadian government has a history of not enforcing strong regulation on this industry [6] [7] .

In this paper, the regulations governing shale gas extraction activities will be analyzed. Knowledge will be built around the effectiveness of these policies when they are put into practice and using the CO/RE model, a conclusion will be drawn with regards to the impact of environmental policy and regulation on Alberta shale gas production in the current political and regulatory environment.

2. Current Regulation in Canada

When it comes to the regulation of natural resources in Canada, both the federal and provincial governments have important roles to play. The regulation of the development of land is done mostly the same across Canada, with the exception of Quebec (Quebec has a first-come first-serve system). There are two ways in which exploration and production rights are acquired-one where the provincial legislation has dictated that mineral rights belong to the Crown and one where mineral rights are owned by the land owner. In the former case it is usually through land sales run by the province where bids are awarded and in the latter case it is through direct negotiation with the landowner. In both cases, the surface rights remain with either the Crown or the landowner with access rights determined in both cases through negotiation [13] .

The federal government’s role is to manage interprovincial energy trade, cross-jurisdiction pipelines, pollution prevention, habitat protection, regulatory oversight of chemicals in addition to resource regulation in the Canadian North, offshore marine areas and Aboriginal lands [13] . This management is done in part by four groups: Natural Resources Canada, Environment Canada, Health Canada and the National Energy Board [13] . When it comes to the provinces, as stated under the Canadian Constitution, “provinces own onshore resources within their borders and are the primary relator of their development” [13] .

There are three main areas in which regulators are concerned: effects on water resources, on air and on land. With regard to the regulation of water, provinces are responsible for authorizing water withdrawals [14] . Provincial jurisdiction also applies to waste water and the hazardous chemicals that are generated from the fracking process. However, Environment Canada and Health Canada have an obligation to assess new chemical substances that are made in, or imported to Canada, including those that are used in the fracking process [14] . Air quality is also largely regulated at the provincial level as opposed to the federal level. By way of example,

“…the Alberta Energy Regulator (AER) states, ‘For concerns such as increased truck traffic, the AER will work with counties and municipalities by providing information about potential developments to support their preparation for increasing activity.’ Other jurisdictions, including New Brunswick, are planning to monitor air quality specifically related to shale gas operations.” ( [14] , p. 12).

Lastly, land use is also regulated at the provincial level. These regulators decide on specific projects by using two main criteria, the cumulative impacts of all projects on the region and how the specific project’s development fits with the region’s land-use plans [14] .

2.1. The Scope of Shale Gas in Canada

Understanding the scope of the Canadian shale gas capacity is critical when identifying what exactly will be impacted with any potential regulation or policy. In their review of regional and global resource estimates, McGlade, Speirs and Sorrell conclude that Canada could have as much as 3.6 to 28.2 trillion cubic meters (Tcm) of shale gas within its borders [12] . Also in this study, McGlade, et al., indicate that the best estimate of the technically recoverable shale gas would be 12.0 Tcm, an amount equal to 122 years of natural gas supply for Canada using total annual natural gas consumption in 2015 of 98 billion cubic meters (Bcm) [15] . Technically recoverable gas is defined as the amount of shale gas which is economically recoverable given current technology and extraction methods as well as gas that is considered to be in undiscovered formations.

Taking a deeper look into Canadian shale gas production, Rivard et al. found that there were 14,000 (of Canada’s 500,000 total oil and gas wells) used for fracking, as of 2013 [11] . However, that 14,000 figure also includes wells drilled for all unconventional oil and gas plays (including shale liquids, tight oil and gas and coal bed methane). In this report, they summarize how many of the processes involved in the fracturing process―mainly around the liquid solution which is pumped into the ground―are not yet regulated. While companies operating within the industry are attempting to utilize processes that are environmentally friendly, many institutions, specifically governments and universities, are working to provide a scientific base for the impending regulations.

Figure 1. Canadian natural gas production capability. Source: International Energy Agency. *The sum of demand and net exports represents total production.

Figure 1. Canadian natural gas production capability. Source: International Energy Agency. *The sum of demand and net exports represents total production.

In addition to the current reserve estimates, the International Energy Agency (IEA) has projected Canada’s natural gas capabilities stretching out to 2035. Also included in these estimates is the amount of gas which could come from unconventional gas plays. See Figure 1 below. From this infographic, it can be seen that the IEA estimates unconventional gas to make up just less than 175 billion cubic meters annually, which would equate to nearly 70% of all natural gas production in Canada.

2.2. Scope of Shale Gas in Alberta

Much of Canada’s shale gas is located within the provincial borders of Alberta. In a recent geological survey of the shale gas formations located in Alberta, the Alberta Geological Survey (AGS) has determined there to be 15 to be identified as distinct formations [16] . In the same report this survey analyzed five formations, the:

  • Duvernay
  • Muskwa
  • Basal Banff/Exshaw
  • North Nordegg
  • Wilrich

Collectively these formations could contain as much as 1291 Tcf of gas-in-place [16] . In total, the Alberta Energy Regulator (AER) has estimated that the total shale gas in place within the province is 3424 trillion cubic feet [17] . From that amount, in 2013 0.02 billion cubic feet per day was being produced, which equates to just over 7 billion cubic feet of production annually. Furthermore, hydraulic fracturing has been incorporated into more than 10,000 wells from the 2008 to 2015 time frame. These 10,000 wells utilize a combination of multi-stage fracking and horizontal drilling techniques [18] .

3. Environmental Policy Analysis

As discussed in the introduction section, the goal of this paper is to determine the impact that environmental policy implemented in Canada and specifically, Alberta will have on the available shale gas production over the course of the current government’s term in office. Given that the Canadian parliamentary system does not have a fixed term, the time scale will be determined by the Constitutional requirement to hold an election within five years. Therefore, the effects of these policies will be measured until the year 2020. In this section two topics will be discussed, the current proposed policies by the federal government as well as Alberta, a key provincial government. The second topic will describe the model which will be used to determine the impact of these policies on available shale gas production.

Examining the Effects of Environmental Policy on Shale Gas Production: The Case of Alberta, Canada

The increase in natural gas production in North America resulting from the implementation of new technologies related to the fracturing (fracking) of natural gas-bearing shale reservoirs has enhanced the security of supply and lowered energy costs in the continent. Yet the environmental impact associated with shale gas development has raised concerns and debate among energy and environmental policy makers as to how best to address these concerns. As Canada’s largest producer of natural gas, the Province of Alberta is an example of a jurisdiction with numerous regulations for dealing with such environmental risks.This paper applies the CO/RE model of Konschnik and Bolingin examining Alberta’s environmental regulatory framework and the impact; it will have on further shale gas production in the province. Aside from the identification of risks associated with increased seismicity, the results of this examination suggest that the current regulatory environment does not appear to have any adverse effect on current and future shale gas production within the province.
Emanuel Martin
Emanuel Martin is a Petroleum Engineer graduate from the Faculty of Engineering and a musician educate in the Arts Faculty at National University of Cuyo.
http://www.allaboutshale.com

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