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 for paying for and completing 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 before development took place), we
- require industry to spend a certain amount of money on closure work annually, which we refer to as the industry closure quota, and
- provide an opportunity for certain groups and individuals to nominate an inactive site for closure.
Completing closure work benefits licensees. By completing and achieving a closure milestone—such as abandonment (also known as decommissioning) or reclamation certification—a licensee’s estimated liability is decreased. Closure activity often directly reduces the amount licensees must pay into the orphan fund levy each year and the amount of municipal taxes owed; it also reduces their licensee quota amount for future years.
Licensees must pay for the closure of their sites while also paying into the orphan fund levy, which funds the Orphan Well Association (OWA). The OWA performs closure work on orphaned sites that have no active licensee. These closure-specific requirements are part of doing business in Alberta, and while licensees continue to make good progress in reducing liability, it takes time, and consistency is key.
Closure Quotas
A proactive measure aimed at ensuring licensees fulfil their closure obligations while they are operational. Each year, we set an amount that industry, as a whole, must spend ( i.e., the industry closure quota). That amount is divided proportionally among licensees based on the amount of inactive liability they individually hold. This results in each licensee receiving a mandatory licensee quota, which is the minimum amount they must spend on closure activity in a given year.
Closure Nomination
A proactive opportunity for eligible requesters to nominate a well or facility site for closure if it has been inactive or abandoned (i.e., decommissioned) but not yet reclaimed for five or more years. This component of the Inventory Reduction Program allows landowners, municipalities, and Indigenous communities to have a say in which sites get closed.
