The Mine Financial Security Program (MFSP) is used by the government and the AER to manage oil sands and coal liabilities in a consistent and transparent manner. The MFSP collects financial security from the oil sands and coal industry in an effort to protect the public from paying for end-of-life project closure costs. The program helps to strike a responsible balance between protecting the people of Alberta from these costs and maximizing industry’s opportunities for responsible and sustainable resource development. Effective March 29, 2014, the AER has assumed responsibility for this program, originally established by ESRD in 2010.
Purpose of the Mine Financial Security Program
By law, coal and oil sands mining companies are responsible for removal of all infrastructure and remediation and reclamation of the site. Standards for remediation and reclamation are set by the Government of Alberta.
The fundamental principle of the MFSP is that the Environmental Protection and Enhancement Act approval holder is responsible to have sufficient financial resources for carrying out suspension, abandonment, remediation, and surface reclamation work to the standards established by the province and to maintain care and custody of the land until a reclamation certificate has been issued.
The MFSP has been developed to take a comprehensive approach to managing liabilities associated with coal and oil sands mining operations. This includes
The MFSP takes an asset-to-liability approach to managing financial risks. It recognizes that the resource value associated with an approved project is an asset in terms of the cash flow generated by its operations. The program requires a base amount of security for each project which, among other things, would provide the funds necessary to place the site in a safe and secure state and maintain care and custody should the approval holder fail to meet its obligations. When a project has MFSP assets at least three times larger than its MFSP liability, is 15 years or more from the end of its reserves, and is keeping current with its reclamation plans, additional security above the base amount is not required. Otherwise, additional financial security is required.
Security for Land Reclamation Performance
Reclamation security is required under Alberta's Environmental Protection and Enhancement Act (EPEA) and the Conservation and Reclamation Regulation. Security funds are collected from operators who hold an EPEA approval under the Activities Designation Regulation, unless exempted in the Conservation and Reclamation Regulation.
Security must be provided before any new approval is issued. When an approval is amended or a change to the amount of security is required, security must be provided within 30 days of a request by the director (i.e., the AER).
The amount of security must cover the cost of reclamation in case the operator is unable to complete reclamation on the site. Security can be submitted in cash, bonds, or letters of credit. Interest on security submitted as cash is paid to the operator. Security is returned to the operator when the site is reclaimed and a reclamation certificate is issued. Part of the security may be returned when part of the site is reclaimed and the remaining security is sufficient to complete the outstanding reclamation.
Security will be forfeited if an operator fails to meet reclamation obligations, in which case, the AER uses the funds to reclaim the site. If these funds are insufficient to cover the cost of reclamation, the AER can complete the reclamation work and collect the additional money from the operator.
More information can be found in the Environmental Protection Security Fund: Annual Report (April 1, 2011 to March 31, 2012).
Type of Financial Security Deposits under the Mine Financial Security Program
The MSFP includes four types of financial security deposits, focusing on various potential risks in the life cycle of a mine:
New Mines – Mine Type
Base Security Deposit (BSD)
|Mine-mouth coal mine||$2 000 000|
|Export coal mine||$7 000 000|
|Oil sands mine with no EPEA approval
as of January 1, 2011
|$30 000 000|
|Oil sands mine and upgrader with no EPEA
approval as of January 1, 2011
|$60 000 000|
Note: The entire coal sector has chosen to provide full financial security.
MFSP submissions and supporting documentation can be submitted to the AER by e-mail to MFSPSubmissions@aer.ca.