AER finalizes new requirements to manage oil and gas liability
December 1, 2021… The Alberta Energy Regulator (AER) has finalized new requirements to manage oil and gas liability. The introduction of these new tools marks a major milestone for Alberta in implementing a new approach to manage liability in the province.
"The Government of Alberta has given us the tools we need to begin to move the needle on liability in Alberta," said AER President and CEO Laurie Pushor. "With these new requirements, we're pushing industry to clean up their sites sooner and ensuring the cost and responsibility of the clean-up rests on the shoulders of industry – where it should be."
The AER's new Directive 088: Licensee Life-Cycle Management is now in effect and introduces new requirements to better identify if companies have the means to clean up throughout the life of their projects. The directive includes the following:
- A holistic assessment of the licensee: considers more than 40 different factors, including those listed in section 4.5 of Directive 067, and the licensee capability assessment, which includes the remaining lifespan of the resource, the company's financial and liability risk, and the company's administrative, operational, and closure performance.
- Inventory reduction program: sets mandatory industry-wide closure spend targets (including a target of $422 million in 2022) and company-specific targets to complete closure work.
- Licensee management program: identifies companies at risk of not being able to meet their responsibilities, including site cleanup, and intervenes when necessary to ensure their obligations are addressed.
The new directive strengthens the AER's application requirements for transferring oil and gas licences between companies. Going forward, applications to transfer licences will trigger a holistic assessment of both companies by the AER to ensure the receiving company can safely operate the infrastructure and reclaim it when it is no longer in use.
With these new requirements, the AER can also require a company to pay security at any point during the life cycle of energy development to ensure the cost of closing infrastructure remains with industry. The AER is also working on a new approach to collecting security that will replace existing requirements. Additional details on the new approach will be shared in 2022.
"Historically, liability has not been managed sufficiently to slow the growth of inactive sites, and requirements have been largely reactive – coming in at the end of development," said David Hardie, AER's director of liability management. "The programs we are introducing now apply throughout the entire life cycle, which allows us to proactively identify potential issues, develop timely solutions, and increase closure work done at all stages of development."
In June, the AER released a draft version of Directive 088 for feedback. A summary of the feedback received is available on our website.
The AER ensures the safe, efficient, orderly, and environmentally responsible development of hydrocarbon resources over their entire life cycle. This includes allocating and conserving water resources, managing public lands, and protecting the environment while providing economic benefits for all Albertans.
Background
As of November 2021, the AER regulates
- 156 926 active wells,
- 95 524 inactive wells,
- 76 372 decommissioned ("abandoned") wells,
- 92 205 reclamation certified wells, and
- 36 758 reclamation certificate exempt wells.
In 2020, industry closed 6503 wells and 625 facilities while 2666 sites were reclamation certified by the AER. In addition, 61 companies participated in the AER's voluntary Area Based Closure Program in 2020, representing $291 million in closure work.
In April 2021, the AER released a new edition of Directive 067, which increases the scrutiny the AER can apply when determining if a company has the financial capacity to hold a licence and properly close their energy infrastructure.
The release of these requirements is the latest step taken by the AER to implement the Government of Alberta's Liability Management Framework. Visit the AER's website to learn more about liability management, well classification, and how wells are suspended.
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