Key Features of B.C.'s New Output-Based Pricing System (OBPS): A Guide for the Oil & Gas Industry

Introduction

The updated B.C. Output-Based Pricing System (OBPS) program and reporting guidance were published in January 2025. This guide provides an overview of the program and its implications for the oil and gas industry.

Background

The B.C. Carbon Tax Act, implemented in 2008, introduced a carbon tax on consumed fossil fuels in B.C. To support emissions reduction and industrial competitiveness for large industry, the voluntary CleanBC Industrial Incentive Program (CIIP) was developed in 2019. Under the CIIP, a portion of B.C.’s carbon tax paid under the B.C. Carbon Tax Act by industry could be directed into incentive payments if a facility’s emissions intensity was below the CIIP product-specific emissions benchmark.

To support B.C.'s climate goals (aiming for a 40% reduction in emissions by 2030, 60% by 2040, and 80% by 2050) and strengthen the province's carbon market (which includes the buying and selling of B.C. verified offset credits), the government has announced a new Output-Based Pricing System (OBPS). This newly designed OBPS replaced the CIIP starting April 1, 2024, and is mandatory for producers of regulated industrial products that emit over 10,000 tonnes of CO2e/year. However, industrial operations, being either a Single Facility Operation (SFO) or a Linear Facilities Operation (LFO), that emit less than 10,000 tonnes of CO2e/year, may choose to opt-in to the new B.C. OBPS program if they are eligible to do so.

Key Features of the B.C. OBPS

Regulated Products for the Oil and Gas Sector

The following products are regulated under the OBPS:

Processing sour gas (oil equivalent)
Processing sweet gas (oil equivalent)
Compression, centrifugal (consumed energy)
Compression, positive displacement (consumed energy)

Note: Products such as "Upstream oil/gas: Other" and "Purchased electricity," previously regulated under the CIIP, are not included in the OBPS.

Carbon Tax and Compliance

Regulated operations under the B.C. OBPS will be able to claim the carbon tax exemption on paying carbon tax (under the B.C. Carbon Tax Act) on their qualifying fuel use and combustibles regulated under the B.C. OBPS. Instead of paying carbon tax, a separate carbon price is determined based on the portion of their emissions which exceed a product-specific emissions limit. Regulated operations emitting below their emissions limit obtain credits that can be traded in the B.C. carbon market or banked for future compliance obligations.

A comparison between the B.C. OBPS and the B.C. CIIP for Oil & Gas industry is presented in Table 1.

Table 1 - B.C. OBPS vs B.C. CIIP: Application for Oil & Gas Industry

How to Register for the B.C. OBPS

Steps to Register:

The registration for the B.C. OBPS involves several steps and some of the steps may take anywhere from a few days to several weeks. Given that each step of the registration process may have designated deadlines, it is recommended to review the key dates on the B.C. government website.

Register for a Business BCeID: The first step before registration is to obtain a Business BCeID. Applications for a Business BCeID can be submitted year-round and it may take 3-5 weeks for applications to be processed and the ID to be provided.
Apply for a B.C. OBPS Regulated Operation (BORO) ID: One BORO ID will be issued to each Linear Facility Operation (LFO), which is a common designation in the oil & gas sector, and each Single Facility Operation (SFO) regulated under the B.C. OBPS. The application for a BORO ID is a multi-step process that requires varying process times for each step. The BORO ID can be used to complete a carbon tax exemption certificate which should be provided to fuel suppliers at or before the sale.
Submit additional Opt-in Application Form: This step only applies to industrial operations within a regulated sector that emit less than 10,000 tonnes CO2e/yr. The application forms are available on the B.C. OBPS website, in the “Opting in to the B.C. OBPS” section.

It is strongly recommended to be aware of all obligations under the B.C. OBPS and to conduct a self-assessment considering reporting, verification and compliance requirements before voluntary opt-in to the B.C. OBPS.

How to Comply with Annual Reporting Requirements

In addition to industrial operators participating in the B.C. OBPS, which are called Regulated Operations, certain large operations exempt from the B.C. OBPS are still required to report their GHG emissions and are classified as Reporting Operations.

All reporting operations, including regulated operations, are required to report data for activities which occurred during the previous compliance period following the new reporting requirements. The reports are submitted in the submission period which is defined as the year following the compliance period. The reporting will be done in the new B.C. Industrial Emissions Reporting System (BCIERS).

There are two types of reports in the BCIERS: (1) Annual Report; and (2) Compliance Obligation Report:

“Annual Report” is required to be completed by all Reporting Operations (including Regulated Operations) by May 31^st of the submission period. Reporting requirements are similar to previous years; however, Regulated Operations are required to submit additional data such as production data, emissions allocation, and methodologies used for emissions allocation.

Third party verification of the annual report is required for all B.C. OBPS Regulated Operations regardless of the magnitude of their annual GHG emissions. In addition, “Reporting Operations” that emit over 25,000 tonnes CO2e/yr GHG emissions are required to have their annual reports verified.
“Compliance Obligation Report” needs only to be submitted by Regulated Operations that exceed their emissions limit. The deadline to submit the report is November 30^st of the submission period.

Reporting Obligations Summary

Mandatory Reporting: For facilities emitting ≥10,000 tonnes CO2e/year and producing regulated products.
Voluntary Opt-in: Available for smaller operations emitting <10,000 tonnes CO2e/year.

Reporting is conducted via the B.C. Industrial Emissions Reporting System (BCIERS). Two key reports are required:

1. Annual Report: Due by May 31, detailing production data, emissions allocation, and methodologies.
2. Compliance Obligation Report: Due by November 30 for operations exceeding emissions limits.

Emissions Reporting for LFO Industrial Operations
For LFO (Linear Facilities Operation) industrial operations, emissions and production data for each regulated product need to be disaggregated by facility. Facilities are categorized into three types based on emissions:

Large facilities with emissions over 10,000 tCO2e (previously called IF_a),
Medium facilities with emissions over 1,000 tCO2e and less than 10,000 tCO2e (previously called IF_b), and
Small aggregates including all facilities with less than 1,000 tCO2e (previously called as L_c).

For operations with multiple products, emissions need to be allocated between each product and the methodology used for the allocation needs to be described. There are four (4) types of products regulated under the B.C. OBPS for the oil and gas sector:

Compression, centrifugal – consumed energy,
Compression, positive displacement – consumed energy,
Processing sour gas – oil equivalent (gas with 2 mole % H2S or greater), and
Processing sweet gas – oil equivalent.

The following additional information for facilities with fuel combustion, flaring, or natural gas pneumatic venting are required to be reported:

Type of substance combusted/vented/flared: sweet/processed or sour/unprocessed natural gas or other.
Volumes of each substance combusted/flared/vented.

How to Quantify Compliance Emissions

Quantification and reporting of GHG emissions must be consistent with the Western Climate Initiative (WCI) methodologies which comply with the GGIRCA (Greenhouse Gas Industrial Reporting and Control Act) and the GGERR (Greenhouse Gas Emission Reporting Regulation). The methodologies listed in WCI.020 (general stationary combustion), WCI.040 (electricity generation), WCI.350 (natural gas transmission and distribution), and WCI.360 (petroleum and natural gas production and natural gas processing) are typically applicable to the oil and gas sector.

The regulated emissions for B.C. OBPS compliance purposes may differ from the total emissions for annual reporting purposes. Similar to B.C. CIIP application, certain emissions are excluded from compliance calculations:

Combustion of fuel listed in Schedule C and C1 of GGER (eg. Biomass, biodiesel, renewable fuels).
Non-useful venting emissions, such as those from sources other than natural gas pneumatic devices.
Fugitive emissions, including leaks from equipment or infrastructure.

Formula for Compliance Emissions

The total attributed emissions for compliance purposes (Compliance Emissions) are determined as follows:

Total Compliance Emissions = Total emissions for reporting purposes – [Combustion of fuels listed in Schedule C and C1 of GGERR (such as biomass, biodiesel, renewable fuels, etc.) + Non-useful venting Emissions (venting emissions other than NG pneumatic devices venting) + Fugitive Emissions + Oil & gas-other (non-compression and non-processing) emissions]

Summary of Compliance Emissions

In summary, the compliance emissions include emissions from fuel combustion (excluding fuels listed in Schedule C and C1 of GGERR), flaring/incineration, and natural gas pneumatic devices (instruments and pumps) venting.

How to Quantify Compliance Production and Emissions Allocation

For operators with multiple B.C. OBPS products, emissions for each product need to be allocated and reported along with production data. There are three combinations of facility types and regulated products; the data required for emissions allocation for each case is listed in Table 2. Similar to the CIIP program, there is a calculation sheet, “B.C. OBPS Allocation Calculator”, available on the B.C. government website that can be used for quantifying production and emissions allocation. The records for an annual report and compliance report including but not limited to emissions quantification, fuel usage, product quantification and emissions allocation must be kept for at least 7 years after submission.

Table 2 – Data required for production and emissions allocation

How to Quantify an Annual Emissions Limit and Emissions Obligations

Under the B.C. OBPS, an operation’s compliance obligation is assessed against an operation-specific emissions limit. Regulated operations with emissions above their annual emissions limit will pay carbon tax on any excess emissions above the limit by making a monetary payment or using a limited number of offset credits and/or B.C. OBPS earned credits. On the other hand, if an operation’s annual emissions are below the emissions limit, credits will be earned. The earned credits can be traded in the B.C. carbon market or be banked for future B.C. OBPS compliance obligations. Figure 1 (taken from the B.C. OBPS guideline) represents different compliance scenarios.

Figure 1 - B.C. OBPS Compliance Scenario (B.C. OBPS Guideline, Jan 2025, Figure 7)

Determining Product-Specific Emissions Limits

Product-Specific Emissions Limit = Product Annual Production x Product-Specific Performance Standard

where the product performance standard for the oil & gas industry is calculated using the following equation:

Product-Specific Performance Standard = Production Weighted Average Emissions Intensity (PWAEI) x [Reduction Factor – (Tightening Rate x (Compliance Year – 2024)]

The final product-specific performance standards, considering 65% reduction factor and 1% tightening rate/yr, are reported in Table 3 for four (4) regulated oil and gas industry products by year (2024 to 2030).

Quantifying Compliance Obligations:

Finally, the compliance obligations are quantified as follows:

Compliance Obligations = Total Compliance Emissions – Emissions Limit

There is a calculation sheet, “B.C. OBPS Annual Calculator (last updated June 5, 2024)”, available on the B.C. government website, that can be used for annual compliance obligation quantification.

Table 3 - B.C. OBPS Details by Year for the Oil and Gas Industry

* The B.C. OBPS came into effect on April 1, 2024, and replaced the CIIP program. ** A regulated operation can only use an offset unit in the B.C. OBPS if the vintage year is less than 3 years before the beginning of the compliance period.

Next Steps for Oil and Gas Producers in B.C.

The new B.C. OBPS regulations provide new opportunities and challenges in emissions management. As this summary is not comprehensive, producers should review the most recent B.C. OBPS guidance, check the B.C. government website for any updates on the program, and consider how that will impact their operations.

This summary reflects the B.C. OBPS regulations as of January 2025. Regulations are subject to updates, and the information provided in this article may change. Please refer to the latest official sources for the most current details.

Process Ecology is here to help. Reach out to our team if you have questions about how these changes affect compliance and emissions management practices at info@processecology.com