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In Alberta, we live by a simple rule: if energy companies are going to profit from the province's energy resources, they must be responsible and properly abandon, remediate, and reclaim their sites.

As the regulator of one of the world's largest and oldest oil and gas industries, we work with companies to help manage energy development to make sure they are prepared to meet their obligations at the end of a project's life. Sometimes, we must manage the consequences of companies not being able to meet their responsibilities to safely abandon and reclaim their energy development sites.

We continue to develop innovative approaches, programs, and processes (listed below) to manage these liabilities and risks while supporting economic development in the province. Our approach to managing liability was built and continues to evolve to balance multiple interests: environmental protection, public safety, landowner interests, investment, royalties, jobs, and market volatility.

We also collaborate with jurisdictions across North America and the globe that face the same problems, and we're working together to find solutions.


Liability Management Programs and Processes

General

Our Licensee Liability Rating (LLR) Program is designed to ensure that companies, not Albertans, face the costs of abandoning oil and gas wells, facilities, and pipelines, and reclaiming the associated sites. The program is based on a comparison of assets (production) to liabilities (abandonment and reclamation costs). When a company's liabilities outweigh its assets, the company must provide us with financial security for the difference to help mitigate the risks posed by the company.

These payments help ensure that companies have a plan to meet their abandonment, remediation, and reclamation obligations; if they don't meet their obligations, the funds are forfeited and used towards the cleanup of the company's sites.

A company's LLR contributes to its liability management rating (LMR), which is a ratio of the company's assets to its liabilities that is used to assess the company's ability to meet its closure obligations. Our holistic assessment will replace the use of the liability management rating (LMR) over time. While we know that LMR is not an accurate measure of whether a company will be able to address its regulatory and liability obligations, it currently plays an important role in calculating the deemed liability in the oil and gas sector. The LMR is also integrated in several of our directives, as well as the Oil and Gas Conservation Rules, and cannot be easily or quickly removed without careful thought and consideration to impacts it could cause in other areas. As our first step towards removing LMR, the holistic assessment has replaced the use of the LMR for licence transfers and security collection for licence transfers. 

Requirements, Forms, and Guides
Directive 006: Licensee Liability Rating (LLR) Program and Licence Transfer Process sets out the methodology for calculating deemed assets and liabilities within the LLR program.

Directive 011: Licensee Liability Rating (LLR) Program - Updated Industry Parameters and Liability Costs provides updated industry parameters and regional abandonment and reclamation costs used in calculating liability under the program.

Directive 068: AER Security Deposits lists updates and consolidates our liability management security deposit requirements.

Our Large Facility Liability Management Program (LFP) helps protect Albertans from the costs to abandon and reclaim large upstream oil and gas facilities, such as sour gas plants, straddle plants, and in situ oil sands plants. When needed, we can issue an orphan fund levy to current licensees with facilities in the LFP to support the closure costs of large facilities with defunct licensees.

Details on the types of facilities included in this program are available in appendix 1 of Directive 024: Large Facility Liability Management Program. Additional information about the levy is available in Bulletin 2021-032: 2021/22 Orphan Fund Levy for Large Facilities.

Requirements, Forms, and Guides

Directive 024: Large Facility Liability Management Program sets out our requirements for liability management of sulphur recovery gas plants, standalone straddle plants, and in situ oil sands central processing facilities with a minimum production capacity of 5000 cubic metres per day of bitumen. Appendix 1 provides details on the types of facilities included in this program.

  • Appendix 6: Facility Netback Calculation Form [PDF] must be used by companies to report a facility netback, which is used in asset calculations. We will not accept any modifications to the wording of this document.
  • LFP List (September 2021) [PDF] provides a full list of facilities subject to Directive 024 requirements.

Directive 068: AER Security Deposits lists updates and consolidates our liability management security deposit requirements.

Our Oilfield Waste Liability (OWL) Program helps protect Albertans and the Orphan Well Association from the costs to abandon, remediate, and reclaim oilfield waste management facilities. Examples of these facilities include oilfield waste processing facilities, surface facilities associated with oilfield water disposal wells, and transfer stations.

A company's OWL rating contributes to its LMR, as defined above.

Requirements, Forms, and Guides
Directive 075: Oilfield Waste Liability (OWL) Program sets out our requirements for liability management of oilfield waste management facilities and associated wells and pipelines. Appendix 1 provides details on the types of facilities included in this program.

Directive 068: AER Security Deposits lists updates and consolidates our liability management security deposit requirements.

Directive 075: Appendix 6: Facility Netback Calculation Form [PDF] [DOC] must be used by companies to report a waste management facility netback, which is used in asset calculations. We will not accept any modifications to the wording of this document.

AER Approved Oilfield Waste Management Facilities list (June 2015) [PDF] provides a full list of waste management facilities subject to Directive 075 requirements. Note: Any approval that is not on the list is excluded from the OWL program because of the type or status of the facility.

Companies must conduct these assessments to estimate the cost to suspend, abandon, remediate, and reclaim certain energy sites in the LLR program and all sites in the LFP and OWL program. Companies must conduct this assessment every five years (unless required otherwise) if we have issued a licence for

  • facilities in the LFP,
  • facilities in the OWL program,
  • gas processing and gas fractioning plants in the LLR program,
  • a request for LLR variation, and
  • potential problem sites in the LLR program identified by us.

Requirements, Forms, and Guides
Directive 001: Requirements for Site-Specific Liability Assessments in Support of the AER's Liability Management Programs sets out our requirements for site-specific liability assessments to estimate the cost to suspend, abandon, remediate, or reclaim a site.

Directive 001: Appendix 2: Form 001-A to Form 001-F [PDF] [DOC] must be used by companies to update cost estimates for suspension and abandonment and for remediation and reclamation. We will not accept any modifications to the wording of these documents.