Legal Header

The purpose of the inventory reduction program is to increase the amount of closure work occurring in Alberta, reduce liability, and increase the amount of land being returned to original or alternative uses. To do this, we are setting an industry minimum standard for annual closure work and encouraging companies to collaborate to increase efficiency of projects and complete more closure work. A program to nominate inactive infrastructure for closure will also be introduced.

Closure Targets

The AER is setting industry-wide mandatory closure spend targets. These mandatory targets will help increase the amount of closure work that is occurring in the province because companies will now be required to spend a minimum amount of money on closure work each year. The closure targets also allow licensees to take an area-based closure approach to abandonment and reclamation activity. Companies can also commit to higher voluntary closure spend targets, granting them access to incentives. 

Industry-wide closure spend targets will be published for a five-year period, with the first two years being set, and the final three years being forecasted.

Year

Industry-wide mandatory target

2023 (set)

$700 million

2024 (forecasted)

$764 million

2025 (forecasted)

$833 million

2026 (forecasted)

$909 million

2027 (forecasted)

$992 million

The AER reviewed recent closure spending, commodity pricing and market conditions in determining the 2023 target.   

Targets are reviewed annually and may be updated due to a variety of factors, such as a significant change in the amount of inactive oil and gas infrastructure, commodity pricing, amount of closure work completed in the previous year, or unforeseen exceptional circumstances. 

Mandatory Targets

As of 2022, all licensees with inactive inventory will be required to meet an annual mandatory closure spend target. The mandatory target will set minimum industry requirements for asset retirement in the form of spending. Licensees will find their mandatory target amount in OneStop. More details on target calculation and closure spend can be found in Directive 088: Licensee Life-Cycle Management and its associated Manual 023.

Voluntary Targets

The voluntary closure spend target will offer regulatory incentives in exchange for a higher closure target. Licensees can view and commit to their voluntary targets in OneStop. The regulatory incentives available to licensees who commit to their 2022 voluntary target include surface equipment removal extension and mineral lease expiry extension. More information on the optional voluntary target, requirements, and associated incentives can be found in Manual 023.

In addition to target information and commitment, licensees will submit closure spend details in OneStop as outlined in Directive 088. For more reporting information, see Manual 023 or OneStop Closure Reporting requirements.

Area-Based Closure Approach

An area-based closure (ABC) approach can reduce the cost of closure through better planning, industry-wide collaboration, and reduced equipment mobilization. This approach benefits industry and Albertans by improving closure cost efficiency and results in more closure work. The AER offers the ABC mapping tool to facilitate collaboration among licensees and oilfield service providers completing work in similar areas. The mapping tool is available for oilfield service companies and all licensees, regardless of their closure targets, to identify the areas they are planning to complete closure work and when. Providing licensees and oilfield service providers a map of current and future closure programs allows services to be shared and reduce overall unit cost.

Closure Nomination Program

Another component of the inventory reduction program is the closure nomination program. Starting in late 2022, those who qualify can nominate eligible inactive or abandoned oil and gas sites (wells, pipelines, and facilities) for closure through the program. Further details about this program will be released in 2022.

Closure Summary Reporting

Before the release of Directive 088, the former ABC program contained components of closure spend and reporting that are now part of the inventory reduction program. The ABC program and the closure work completed by those licensees that participated is highlighted below. 

2021 

In 2021, our preliminary data indicates about $628 million was spent on closure activity funded by industry and grants received from the Government of Alberta’s Site Rehabilitation Program. This represents a closure spend that is 48% higher than the industry-wide mandatory target set for 2022.  

66 licensees participated in the final year of the voluntary Area Based Closure program (ABC) and were collectively responsible for about 85% of the total 2021 closure spend. A detailed ABC highlight report will be published in the future.  

2020

In 2020, despite extenuating circumstances, ABC participants spent $297 million in closure work on over 18 400 licences. Check out the 2020 ABC program highlights report to learn more.

2019

In 2019, ABC participants conducted almost 70% of all abandonment and reclamation in Alberta, spending more than $340 million in the process. Check out the ABC Program 2019 Highlights report to learn more.

Details and requirements for the inventory reduction program can be found in Directive 088 and Manual 023. For more information, please submit your inquiry using the inquiry intake online form.