Under the Government of Alberta’s Liability Management Framework, the AER’s Inventory Reduction Program (described in Directive 088: Licensee Life-Cycle Management) includes setting an annual industry-wide closure spend requirement. We review the closure spend amount each year and adjust it based on several factors, such as market conditions and the previous year’s closure spending by licensees. We also consider the closure work completed by the industry-funded Orphan Well Association.
Closure spend requirements increase the amount of closure work in the province as licensees are required to spend a minimum amount annually on decommissioning, remediating, and reclaiming their oil and gas sites. These requirements are referred to as closure quotas in section 3.014 of the Oil and Gas Conservation Rules.
The industry-wide closure spend requirement for 2026 is $750 million.
Starting in the 2026 closure spend year, we are discontinuing the two-rate approach for assigning a licensee’s mandatory closure spend. Instead, each licensee will be assigned its proportionate share of the industry-wide closure spend requirement.
Manual 023: Licensee Life-Cycle Management has been updated to reflect this change.
Exemption from Mandatory Closure Spend
Licensees meeting all of the following criteria on September 2, 2025, will be exempt from the 2026 mandatory spend requirement:
- Peer group of Producer, Micro, or Junior Dry Gas (refer to section 2.1.2.1 of Manual 023).
- Total magnitude of estimated liability is low (refer to section 2.1.1.2 of Manual 023).
- Are compliant with the financial submission requirements set out in section 4.4 and 5 of Directive 067: Eligibility Requirements for Acquiring and Holding Energy Licences and Approvals.
- Not involved in a Companies’ Creditors Arrangement Act process.
This exemption is an exceptional circumstance resulting from continued low natural gas prices. We will directly contact all micro and junior dry gas producers that qualify for this exemption.
Banked Spend
We will allow licensees who exceed their minimum mandatory spend by 20% to “bank” this exceedance between 2025 and 2027. To bank excess eligible closure spend, the licensee must meet both of the following criteria:
- A licensee must be compliant with AER requirements.
- A licensee’s eligible reported spend must exceed their minimum mandatory spend by 20% in either 2025 or 2026.
If the licensee exceeds the minimum mandatory spend in 2025, the banked spend can be applied in either 2026 or 2027. If the licensee exceeds the minimum mandatory spend in 2026, the banked spend can be applied in 2027.
If a licensee amalgamates or transfers licences during the mandatory spend year, we will adjust the licensee’s mandatory spend to account for the licensee’s updated inactive liability. Licensees that received an exemption as a micro and junior dry gas producer for the 2025 and 2026 mandatory spend years will not be able to bank spend.
We will assess the banked spend approach in early 2027 to determine whether the Inventory Reduction Program objectives are being achieved and decide on extending banked spend beyond 2027.
Additional information will be made available related to processes and reporting for banked spend in the coming months.
Licensee-Specific Mandatory Closure Spend
Licensees with inactive liability as of September 2, 2025, will receive their licensee-specific mandatory closure spend for 2026. Later in September, licensees can access through OneStop their
- liability assessment report to understand the estimated inactive liability used to calculate their mandatory spend, as well as
- the closure activity and spend report for their assigned 2026 mandatory closure spend.
Consequently, we are unable to answer any specific questions regarding the 2026 mandatory closure spend until after the information is in OneStop. Email any other questions regarding the Inventory Reduction Program to InventoryReduction@aer.ca.
For more information on the Inventory Reduction Program, see Directive 088 and Manual 023.
