Alberta Energy Regulator Announces 2024 Closure Spend Requirement
CALGARY, AB, August 28, 2023 – The AER today announced the industry-wide closure spend requirement for 2024 will remain at $700 million, mirroring the 2023 requirement. Details are outlined in Bulletin 2023-31.
The industry-wide closure spend requirement is reviewed annually. Before adjusting the spend, factors such as market conditions and the results of previous year’s closure spend will be evaluated to ensure licensees are meeting their spend quota and continuing to close oil and gas infrastructure.
The industry-wide closure spend requirement was first introduced in 2022 and was set at $422 million. In 2023, the industry-wide closure spend requirement was increased to $700 million. In April, the AER published preliminary results indicating that the oil and gas industry spent about 40 per cent more than required in 2022 to close oil and gas sites. Finalized figures will be published at the end of September.
Under the Government of Alberta’s Liability Management Framework, AER implemented an Inventory Reduction Program (described in Directive 088: Licensee Life-Cycle Management), which involves setting industry-wide closure spend requirements. Closure spend requirements increase the amount of closure work that is occurring in the province as licensees are required to spend a minimum amount annually on abandoning, remediating, and reclaiming inactive oil and gas sites. (These requirements are referred to as closure quotas in section 3.014 of the Oil and Gas Conservation Rules.)
In addition to the Inventory Reduction Program, the AER issues an orphan fund levy to licensees to fund the Orphan Well Association (OWA), an entity concerned with the closure of orphaned oil and gas infrastructure. The levy for 2023/24 is $135 million. The funds help prevent closure costs from being borne by Albertans.
About the Alberta Energy Regulator
The AER ensures the safe, efficient, orderly, and environmentally responsible development of energy resources in Alberta through our regulatory activities. For more information visit aer.ca.
Notes
The Orphan Well Association (OWA) is responsible for the decommission of Orphan oil and gas infrastructure and to reclaim the land similar to its original state in a safe, principled, and cost-efficient manner. Infrastructure is deemed “orphan” if there is not a legally responsible or financially viable entity associated with it.