On October 20, 2014 the British Columbia government introduced
new legislation to control greenhouse gas (GHG) emissions from
industrial operations. Bill 2, the Greenhouse Gas Industrial Reporting and Control
Act marks a significant shift in the province's
approach to GHGs and more closely aligns B.C. with the approach
taken by Alberta and the federal government. Of note, the bill
proposes intensity-based emission standards, and the broadening of
alternative compliance mechanisms to include credits from offsets,
payments to technology funds, and earned credits.
The new Act will repeal and replace the Greenhouse Gas
Reduction (Cap and Trade) Act, the legislation under which a
number of industries are currently required to report GHG
emissions. Like its predecessor, the new Act will also provide for
GHG reporting by industries that will be prescribed by regulation,
however, the Act itself will set intensity-based targets for GHG
emissions. While the manner in which the bill is drafted allows it
to apply emissions targets to any industry producing GHGs, the
government's current intention is to apply it to LNG
production, which, for the most part, has not yet been developed in
Typically, GHG regulations have the effect of imposing standards
on existing industries and through the use of the ramping down of
targets, offsets, carbon capture, and cap and trade, encourage such
industries to reduce GHG emissions. The emissions target currently
proposed for LNG is 0.16 CO2e tonnes for each tonne of LNG
produced. According to the B.C. government, this target is lower
than targets set in other developed countries such as Australia,
and will ensure B.C. has the "cleanest liquefied natural gas
facilities in the world." Thus, this legislation will impose
strict standards on plants not yet built, which presumably is
intended to inform the design of the plants. The government has
indicated an intention to establish what it refers to as the
"LNG environmental incentive program," which will be an
escalating incentive to the industry based on their compliance
Entities will be required to report GHG emissions attributable
to an operation for a prescribed period, however, emissions that
are subject to carbon capture and storage will not be included. All
reporting is subject to verification and audits in accordance with
protocols to be established by regulation. Activities included in
the reporting requirements will include the plants themselves as
well as waste water and waste collections systems, petroleum and
natural gas storage facilities and mobile equipment.
If an entity cannot meet the prescribed emissions target, it may
apply compliance units to avoid penalties. Compliance units will
come from offsets, funded units or earned credits, and can be used
or traded. Offset units are issued by the government and will be
based on accepted and verified offset projects. Funded units are
essentially payment of monies into a prescribed account. Credits
can be earned if emissions in a reporting period are less than the
The principal compliance tools to be used are administrative
penalties, which in some cases are mandatory. For example, the
failure to meet emissions targets that cannot be compensated by
compliance units, results in an automatic penalty which will not be
appealable. In addition, there are mandatory penalties for failing
to report, unless the operator can show a reasonable excuse for not
submitting the required reports, and discretionary penalties for
non-compliance with other provisions in the Act or regulations.
These penalties can be appealed to the B.C. Environmental Appeal
Board. Administrative penalties can be imposed on directors and
officers who authorize, permit or acquiesce in the non-compliance,
regardless of whether the company is subject to the penalties. The
bill also imposes offences, with maximum penalties of C$1.5-million
per day that the non-compliance continues.
The Canadian Environmental Protection Act (CEPA) allows
for equivalency orders if provincial regulations are equivalent to
federal counterparts. However, a requirement of such orders is that
the provincial law contains public investigation provisions similar
to those in CEPA. Bill 2 contains provisions allowing the public to
request an investigation into the compliance of a reporting
operation, which substantially mirror part 2 of CEPA, which we
assume is to enable discussions with the federal government on
equivalency orders in relation to the GHG regulations for natural
gas that are currently under development by Environment Canada.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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