Oil and gas activity disturbs the land as infrastructure is installed below the surface and on it; cleaning up this infrastructure incurs costs. We refer to these costs as liability, and industry is responsible to pay for the closure of each of their energy development sites.
To increase the amount of closure work being done, reduce liability exposure to Albertans, and increase the amount of land being returned to “equivalent capabilities” (a state similar to what it was in before development took place), the AER uses both proactive and reactive methods, including the following:
- requiring that a certain amount of money be spent on closure work annually, which we refer to as closure spend
- an opportunity for certain groups and individuals to nominate an inactive site for closure
We also administer a unique-to-Alberta levy, called the orphan fund levy, that funds the Orphan Well Association (OWA).
Completing closure work benefits licensees. By completing and achieving a closure milestone, like abandonment or reclamation certification, a licensee’s estimated liability decreases to directly reduce the amount it must pay into the orphan fund levy each year and the amount of municipal taxes owed; it also decreases mandatory closure spends for future years.
Licensees are required to pay for the closure of their own sites and are also responsible to pay for the orphan fund levy, which funds the OWA to clean up orphaned sites left behind by their former peers. These closure-specific requirements are part of doing business here, and while licensees continue to make good progress, reducing liability takes time, and consistency is key.
Closure Quotas
A proactive measure aimed to ensure that licensees fulfil their own closure obligations while they are operational. The AER sets an amount each year that industry as a whole must spend (the industry closure spend requirement). That amount is then divided proportionally among licensees based on the amount of inactive liability they individually hold. This results in each licensee receiving a mandatory closure spend, which is the minimum amount they must spend on closure activity that year.
Closure Nomination
A proactive opportunity for eligible requesters to nominate a well or facility site for closure if it has been inactive or decommissioned for five or more years. This component of the inventory reduction program is a way for landowners, municipalities, and Indigenous communities to have a say in what sites get closed.
