Government of Saskatchewan Refers Federal Oil and Gas Cap and 'Methane 75' Regulations to Saskatchewan Economic Impact Assessment Tribunal

Released on April 8, 2024

Today, the Province referred the federal oil and gas emissions cap and federal 'Methane 75' regulations to the Saskatchewan Economic Impact Assessment Tribunal (Tribunal) to analyze their anticipated, wide-ranging impacts on Saskatchewan's economy.

In December, 2023, at COP28 in Dubai, federal Minister Steven Guilbeault announced a national cap-and-trade system for the upstream oil and gas sector, as well as 'Methane 75,' which mandates the reduction of methane emissions by 75 per cent by 2030, along with fines and penalties.

"These measures, which constitute a production cap by default, are duplicative and inefficient," Justice Minister and Attorney General Bronwyn Eyre said. "They ignore local realities and diversity of production methods across the country. Their imposition, with no consultation, is another example of gross federal overreach into provincial jurisdiction and flies in the face of growing momentum against federal regulation of specific provincial industries by the courts. It is also our position that a cap-and-trade system does not fit under the federal criminal law power."

Under the Saskatchewan First Act, findings by the independent Tribunal can be used as evidence in court. Panel members will review the economic impact of implementing the regulations, including the anticipated impact on investment, production, and royalty tax revenues, costs required to comply with the new federal regulations, and overall economic impact.

“These policies are unnecessary, costly and create enormous uncertainty for business,” Energy and Resources Minister Jim Reiter said. “The unfortunate reality is that these policies will restrict and shut-in Canadian oil and gas production, increasing our reliance on imported energy products.”

Emissions from Saskatchewan’s upstream oil and gas sector are already fully provincially regulated. Since 2019, the provincial energy sector has reduced greenhouse gas emissions from reported venting and flaring at oil facilities by 64 per cent below 2015 levels. This includes an overall 70 per cent reduction in methane emissions.

“The Explorers and Producers Association of Canada remains fundamentally opposed to the imposition of an emissions cap on Canadian oil and gas production," The Explorers and Producers Association of Canada President and CEO Tristan Goodman said. "This is unnecessary and unacceptable given Canada’s oil and gas producers are already achieving significant emissions reductions as shown in the federal government's own data. A federal emissions cap introduces further uncertainty, including likely constitutional challenges. To ensure Canadian producers can continue to responsibly produce the affordable and reliable energy that Canada and the world needs, while continuing to advance clean technology projects, our sector must compete for investment – this requires balance, pragmatism, and incentives instead of punitive measures that further damage Canada's reputation as a place where projects are far too expensive, goalposts are uncertain, and environmental performance is not recognized.”

As the Government of Saskatchewan has formally indicated to the Government of Canada, it is anticipated that ‘Methane 75’ will hit Saskatchewan disproportionately harder than other Canadian jurisdictions. In addition, the premise of the federal oil and gas emissions cap is that a tonne of emissions from the oil and gas sector is different than one from any other sector. The framework also fails to outline how emissions allowances will be calculated and allocated, which makes it extremely challenging to estimate the price of traded emissions and impact of the cap.

Preliminary estimates from the Ministry of Energy and Resources suggest that compliance for the oil and gas cap and 'Methane 75' will cost Saskatchewan’s energy sector between $7-9 billion dollars by 2030, which does not take into account the broader economic impact on jobs, investment and GDP.

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