Capturing wasted natural gas could be a windfall

Province losing potential royalities of $120M, Lucija Muehlenbachs says.

When Alberta Budget 2024 was released, Finance Minister Nate Horner touted that the province's fiscal plan was based on “the same priorities held by Albertans who create their own household budgets.” Much was made of the budget “striking the right balance,” being “responsible” and managing our resources “wisely.”

What might household-budget-creating Albertans want? The household might try to rein in spending, find savings and increase income. Perhaps stray coins that fell into the back of the couch would be retrieved. What if other previously discarded items could be tapped for income, as a way to ease the tough choices between saving, spending and paying down debt?

The province can increase income by wisely managing a resource often being discarded. In oil and natural gas production, a fraction of natural gas is often lost, from unintentional leaks to the atmosphere to intentional releases or combustion.

What might come as a surprise is just how much natural gas is being wasted in Alberta. A recent economic analysis estimated the magnitude of waste with some simple assumptions on gas prices, quantity of losses and royalty rates. In 2022 alone, the analysis found oil and gas operators in Alberta wasted $671 million in natural gas, which cost the province more than $120 million in lost royalties and corporate taxes. In 2021, Alberta's wasted gas was valued at $413 million, costing the province nearly $46 million in lost government royalties.

What could Alberta do with the revenue generated from currently wasted natural gas? The analysis estimated that in 2021 and 2022 alone, Alberta missed out on $168 million in revenue. While this amount wouldn't cover the $839 million the province paid for fighting wildfires from its contingency fund last year, it would be a decent down payment.

Looking forward, the province intends to spend $126 million over three years on rural physician expansion, which is easily affordable by capturing the royalties and revenue from currently wasted gas for the two years in question. Another credible option would be to put the funds back into the Heritage Fund, the pool of money generated by non-renewable-resource revenue for a time when those resources become depleted.

The tools needed to conserve this currently wasted natural gas are widely available, already in place in other oil-and gas-producing jurisdictions. From many sources, innovations to reduce natural gas leaks exist, whose implementation would meaningfully contribute to the province's finances.

The main component of natural gas is methane, a powerful climate pollutant. Alberta has already committed to reduce methane emissions by 75 to 80 per cent by 2030. Canada has proposed new methane regulations intended to curb emissions through enhanced leak inspections and new, tighter restrictions on venting and flaring, including the phaseout of outdated equipment.

It's hard to argue the economics of avoiding wasting methane, especially when the stakes are this high.

Albertans who balance their household budgets will understand and appreciate the common-sense approach of avoiding costly wasted gas.