An industry-wide mandatory closure spend requirement is set each year, then distributed among licensees to ensure closure activity is prioritized. The mandatory closure spend supports a net decrease in the overall amount of inactive oil and gas operator liability in the province.
Industry-Wide Closure Spend Requirement
The industry-wide closure spend requirement was introduced in 2022 and set at $422 million. In 2023, the requirement increased to $700 million and was maintained at $700 million for 2024. The 2025 requirement increased to $750 million, and it will remain at this level for 2026.
The AER reviews the industry-wide closure spend requirement each year. Before setting the requirement, we evaluate factors such 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.
Licensee-Specific Mandatory Closure Spend
A licensee’s mandatory closure spend spend amount is its proportional share of the industry-wide closure spend requirement. We set the spend requirement for the oil and gas sector. A licensee’s share is based on its total inactive liability, which is estimated using Directive 011 or site-specific liability assessments for inactive sites when required.
In 2026, licensee-specific amounts were calculated requiring every licensee to complete their proportionate share of inactive liability using a single-rate approach outlined in Manual 023: Licensee Life-Cycle Management.
From 2022 to 2025, we used a two-rate approach that considered a licensee’s level of financial distress as determined by the licensee capability assessment (LCA). A lower spend rate was applied to licensees with a high level of financial distress. Licensees that were not in financial stress were applied a higher spend rate.
| Year | Higher Spend Rate | Lower Spend Rate |
|---|---|---|
| 2024 | 6.6% | 3.6% |
| 2025 | 6.2% | 3.3% |
Licensees can view their annual mandatory closure spend requirements in the closure activity and spend report. Their respective inactive liability estimates are in the liability assessment report. Both reports are available in OneStop.
Small Dry Gas Producers
Since 2024, certain micro and junior dry gas producers have been exempted from their licensee-specific mandatory closure spend. The exemption will remain for 2026 for licensees that meet the 2026 exemption criteria. The total exempted closure spend amounts for 2024 and 2025 were not redistributed among the remaining licensees; however, it will be in 2026.
For information about eligibility for the 2026 exemption, see Bulletin 2025-27.
Area-Based Closure Approach
Closure quotas give licensees the flexibility to complete closure work independently or collaboratively with other licensees. An area-based closure (ABC) approach to abandon, remediate, and reclaim sites can be used for closure efficiency through industry-wide collaboration and planning.
Our ABC mapping tool in OneStop enables licensees and oilfield service providers to plan and coordinate work.
Closure Summary Reporting
Closure activity reporting enables us to better understand the costs for safely completing each closure stage (abandonment, remediation, and reclamation) of an energy development site at the end of its life cycle.
Licensees must provide detailed spending for each infrastructure type (e.g., wells, pipelines, or facilities) across the various closure stages. This information allows us to understand and estimate liability in every region of the province for all types of closure. With this information, we can track industry performance as it relates to liability management.
Our annual performance report is released in the fall with an analysis of data from the previous year. For more information on 2024 industry closure performance, see the Liability Management Performance Report.
Historical performance reports for the program are available below.
