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Balancing Environmental Regulation and New Technologies

Posted On November 28th
By : EnergyNow Media
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Canada has often blazed the regulatory trail, opening the door to world markets for its innovative technology

BY NICK WILSON

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Love ’em or loathe ’em, international environmental regulators have been casting an ever-widening net in the area of emissions controls.  One company’s poison can be another’s meat. Many service firms are dining out on energy producers’ downturn-era mantra of ‘cut costs and cut emissions.’ The booths of environmental service firms at this year’s Global Petroleum Show (GPS) in Calgary demonstrated the industry’s response to the double challenge. GPS organizer, DMG, says of next year it is “continually working to add more elements such as carbon management to the GPS. This will certainly increase environmentally focused companies in the show.”

Grant Wilde, president of Alberta-based Spartan Controls says: “I like to think of it [regulations] as creative tension.” Governments protect people through environmental regulations, and industry develops our resources in the best and safest way possible, while still being competitive in a global market, he says. “In both cases, often that means leveraging technology.” The challenge is that regulations can create an uneven global playing field, so ideal technologies solve the environmental concern and reduce costs. “These objectives need to go hand-in- hand.  If the focus is on doing both, the tension goes down and the government and the industry’s objectives can be achieved in balance. If the prioritization of technology development is to meet the requirements of the regulation rather than balancing that with managing costs, the tension goes up,” he says.

“Then we told industry they had to clean up their act. For example, the Inco smelter at Sudbury was the biggest producer of SO2 emissions in Canada. When we told them they had to cut emissions by half, they told us they’d go out of business. But we held the line and guess what, they commercialized the sulfur and their profits went up instead!”

– Brian Mulroney, former Conservative prime minister

Oil sands producers eased this tension by founding the Canadian Oil Sands Innovation Alliance to collaborate on environmental technology. Its CEO, Dan Wicklum, says, “COSIA is driven to find and develop technologies and solutions that solve our biggest oil sands environmental challenges.” These are global challenges, so there is a global market for the solutions, he says.

Mark Salkeld, CEO of Petroleum Services Association of Canada agrees: “Canadian Oilfield services are at the leading edge of world-class environmental technology because they have to be. Their customers, the producers in Canada, expect nothing less in order to support the environmental aspect of their corporate social responsibility commitments. Canadian environmental and clean technology in the oil and gas sector is sought out by countries around the world.”

Canada has led North America on acid rain and GHGs, exporting its standards and technology. We take three snapshots of carbon, sulfur and methane regulations and the opportunities for service firms.

Sulfur

Environmental regulations are nearly as old as government market meddling. Back in 1985—before many of todays’ environmental protestors were born—Brian Mulroney’s Progressive Conservative government took action against acid rain in Eastern Canada. In an emissions-capping program, which sounds familiar to Albertans today, Mulroney slammed a 2.3-million-ton lid on H2S atmospheric pollution in the seven easternmost provinces.

But it was Western Canada that blazed the technological trail, providing many of the solutions it developed to address sour gas that used to kill up to five people per year in Alberta’s oil and gas industry. The industry helped develop H2S worldwide material standards for Houston-based, National Association of Corrosion Engineers, which develops global corrosion prevention and control standards.

Bob Bahniuk, an oil measurement consultant, who’s on the board of the Edmonton chapter of International Society of Automation, says H2S is an example of where regulations drove the technology. “Most major manufacturers sit on regulatory boards. They help steer regulations to achievable goals. Regulations and technology are a virtuous circle. Sometimes technology is developed to meet regulations, other times the government looks at currently available technology—NASA, for example leads high-temperature and severe-vibration-proof technology, so when the government wants to regulate this field it looks to products developed for NASA,” he says.

“The [climate change] plan will be flexible to the circumstances and policy approaches of the provinces and territories. From cap-and-trade to a ban on coal-fired electricity generation. From world leading innovation on carbon capture and storage to a revenue-neutral carbon tax.”

– Justin Trudeau, Liberal Prime Minister

Working hand-in-glove with the regulators, Albertan service firms design, test and export H2S equipment. Calgary-based Almont Emissions developed an H2S scrubber 10 years ago that removed the gas from oil and gas wells, exceeding the required standards. Monty Ravlich, CEO says: “Now the regulations are catching up.” The latest Alberta regulations ensure that odors can’t cross lease boundaries.

Even international maritime regulations can provide opportunities for land-lubber Albertans such as Neil Camarta, the CEO of Calgary-based Field Upgrading, who aims to turn bitumen into ultra-low sulfur marine fuel. He says the process involves “taking the dirty out of dirty oil” by lowering the sulfur content from 5 percent to 0.1 percent. He’s in tandem with the regulatory curve. In 2015, the International Maritime Organization slashed the maximum permitted sulfur content for marine fuels from 1.0 percent to 0.1 percent, and tightened specifications for vessels close to coastlines. Farther out to sea, the sulfur content limit is 3.5 percent, but the IMO aims to hack it down to 0.5 percent by 2020.

Capturing Carbon

Provincial governments sometimes lead the continent. Alberta’s former Progressive Conservative government in 2007 made the province the first North American jurisdiction to introduce a carbon levy, which was tied back into carbon capture technology. It wouldn’t have done this had the technology not been already available. Ian MacGregor, CEO of North West Upgrading, which is building the low carbon Sturgeon refinery near Edmonton, says the technology is not driven by regulations—North West took its final investment decision on becoming North America’s cleanest refinery in 2004 based on commercial demand for CO2 in enhanced oil recovery. The carbon pricing, increased under the current NDP government, will add to the refinery’s profitability and boost carbon capture projects that will feed CO2 into Alberta Carbon Trunk Line project being built by North West’s sister company Enhanced Energy. North West aims to stay ahead of the regulatory curve of other emissions too. Its plant sets new, more-stringent, future-directed, environmental standards, and service firms provide the technology. “We did it because we live here,” MacGregor says.

But sometimes regulations also drive carbon-grabbing technology, forcing other industries to adopt it. In Saskatchewan, state-owned Saskpower’s coal-fired power plant is adapting refinery CCS technology to meet rules set by another conservative government in Ottawa, which imposed emissions restrictions on provinces. In 2012, former Prime Minister Stephen Harper’s government targeted new power stations, ending new-build, coal-fired plants unless they capture carbon. Today it is a Liberal government imposing carbon pricing on the province and Premier Brad Wall is pushing back—he thinks it would hurt producers and the greater economy.

But it’s not grim news for service firms contracted by Saskpower, such as CCR Technologies, based in Brooks, Alberta, an inventor of key processes that boost the efficiency and bottom line of carbon capture. Todd Beasley, CCR’s COO says it is “Moving the technology from compliance to having the potential to unlock a king’s ransom in revenue for taxpayers from oil fields.”

CCR’s technology is a modification of Montreal-based Cansolv Technologies’ SO2 and CO2 stripping technology, which it developed in the ‘90s and demonstated at its first pilot project at a Suncor plant in Alberta`s oil sands. Shell bought the firm in 2007. Shell Cansolv says anticipated legislation to clean-up contaminants from flue gases throughout the developed world forces industries to meet increasingly strict emissions regulations.

Calgary-based Almont Emissions also expects to cash in by going with the flow of regulations. It is expanding its range of scrubbers beyond H2S to develop a CO2 and methane scrubber that will produce ammonia and methanol via a non-toxic, biodegradable, catalytic process. It can reduce CO2 by 35-40 percent and remove methane completely, and can be applied to venting wells, offgassing tanks and loading production facilities.

Methane

Ottawa, this time under the Liberals, is bringing in sweeping regulations that target the industry’s methane emissions, from venting wells to pneumatic devices. They follow Alberta’s 2014 regulations set under the conservative government covering venting and flaring. In 2020, the NDP provincial government’s tougher regulations to lower methane emissions 45 percent—which the U.S. government has modeled its methane targets on—kick in.

“In a very short period of time we changed the conversation from Barack Obama saying ‘I’m going to reject your Keystone XL pipeline due to your dirty oil’—his characterization—to this position where he was cutting and pasting our [methane reduction] policies. I’m tremendously proud of that.”

– Shannon Phillips – Alberta’s NDP environment minister

Alberta-based firms are anticipating the moves. DNOW Process Solutions Canada, which provides rotating equipment and services is revving up for 2017—not just because it hopes oil prices will help spark further development, but because federal regulations on methane take effect at the start of 2018. The firm rides the global trend of ever-tightening emissions regulations being applied to more and more sectors. DNOW is preparing to provide newly developed emissions control systems across Canada to oil and gas companies, utilities, municipalities and industries, including marine and pulp and paper.

DNOW Director, Mike Doepel says: “We’re providing a wide range of emissions control solutions, adding value not just for engines but also for all other products we distribute including pumps, actuation, process equipment where emissions can be identified and reduced or eliminated from entering the atmosphere.” The firm will continue to innovate, cutting emissions and maintenance costs, helping industries stay ahead of the regulations curve, he says.

Edmonton-based Industrial Engines makes units that capture vented gas to drive pump jacks and cogeneration systems. Al Dobler, the general manager, says if a well site was using $75,000 of grid power a year and venting 900 cubic meters of methane per day—current regulations permit venting only if the gas is too diluted for flaring—it could produce 116 kilowatts per hour worth around $ 135,000/year if fed into a cogeneration unit. “The methane is free to the oil company,” Dobler says, adding: “The increase in carbon tax and the coming methane regulations should give oil producers a push to stop the waste—the technology’s already there.”

Wilde says Spartan Controls has focused for years on energy efficiency, and GHG cutting has become a useful byproduct. “We’ve been ahead of regulations with some of our solutions,” he says, citing SlipStream technology as an example—it captures vented hydrocarbons to fuel industrial gas engines. It was originally developed to capture additional value for our customers but today it aligns with the GHG regulations, he says.

If governments get the regulations-technology balance right, then Wilde’s “creative tension” will help the industry emerge from the slump leaner, greener and in a pole position for the upswing.

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