Closure Spend Quotas

Closure spend quotas specify the minimum amount of money licensees are required to spend on closure work in a given year to help increase the amount of closure work occurring in the province.

The AER sets annual mandatory closure spend quotas for each licensee.

Industry-Wide Closure Spend Requirement

The industry-wide closure spend requirement was introduced in 2022 and set at $422 million. For 2023, the requirement increased to $700 million and will be $700 million for 2024.

The AER reviews the industry-wide closure spend requirement each year. Before setting the requirement, the AER will evaluate such factors as market conditions and the results of the previous year’s closure spend to ensure licensees are meeting their spend quota and continuing to close oil and gas infrastructure.

Mandatory Closure Spend Quota

The licensee's mandatory closure spend quota is based on the industry-wide closure spend requirement that the AER sets for the oil and gas sector.

A licensee’s share of the industry-wide closure spend requirement—their mandatory closure spend quota—is calculated using a two-rate approach, which includes the licensee's proportion of the industry-wide inactive liability and level of financial distress as determined by the Liability Capability Assessment (LCA).

A lower spend rate will be applied to licensees with a high level of financial distress than those not in financial distress. The intent is for all licensees to conduct closure work; the AER enables this by assessing their capability to complete closure work and providing oversight and performance managed through other Liability Management Framework (LMF) programs in addition to closure spend quotas.

Inactive liability is estimated using Directive 011: Licensee Liability Rating (LLR) Program: Updated Industry Parameters and Liability Costs and site-specific liability assessments for inactive sites.

A licensee’s mandatory closure spend quota is the value of their total inactive liability multiplied by the spend rate. Spend rates are reviewed annually.

Licensees can view their annual mandatory closure spend quota in OneStop using the dropdown menu and selecting “closure spend” or through the Closure Activity & Spend report found in the top-right-hand corner. More details on closure spend calculations can be found in Directive 088: Licensee Life-Cycle Management and its associated Manual 023: Licensee Life-Cycle Management.

Licensees are required to submit closure quota details in OneStop as outlined in Directive 088. For more information about reporting requirements, see Manual 023 or OneStop Closure Reporting.

Supporting initiatives

Site Rehabilitation Program (SRP) Funding
The AER will subtract SRP funding amounts provided by the Government of Alberta from the licensee’s submitted closure spend. These numbers will be uploaded into OneStop and viewable by licensees.

Area-Based Closure Approach

Licensee-specific closure quotas allow licensees to take an area-based closure (ABC) approach to abandonment, remediation, and reclamation activities. An 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 to oilfield service companies and all licensees to identify areas planned for closure work and the corresponding timing. The mapping tool enables licensees to share services and reduce overall unit costs.

Program Updates

Supplemental Closure Spend

Beginning in 2024, licensees will no longer be able to commit to a supplemental closure spend quota. The AER will continue to explore opportunities to improve the Inventory Reduction Program, including looking at the efficiency and effectiveness of the closure requirements as part of ongoing program development. Directive 088 and Manual 023 will be updated in the future to reflect these changes.

In 2022 and 2023, two alternative requirements were offered in exchange for committing to spend above the mandatory closure spend quota, providing extensions to deadlines for surface equipment removal and expired Crown mineral lease rights. Any licences that received these extensions will keep them, provided the licensees holding them committed to, and are compliant with, the 2023 supplemental closure spend and the alternative requirements. As of January 2024, no new licences will receive alternative requirements.

Closure Summary Reporting

From 2019 to 2021, the ABC program included components of closure spend and reporting that only applied to licensees who participated in that program. Now, all licensees participate in the Inventory Reduction Program introduced in December 2021. The closure work completed by licensees is highlighted below.  

2022

In 2022, more than $1 billion was spent on closure activity on over 50 000 licences, which includes grant funding received through the Government of Alberta's Site Rehabilitation Program. Check out the 2022 closure quotas highlights report to learn more. 

2021   

In 2021, $550 million was spent on closure activity on over 28 800 licences by ABC participants. Check out the 2021 ABC program highlights report to learn more.

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.