Enhanced Production Audit Program

 

Enhanced Production Audit Program

The Alberta Energy Regulator (AER) implemented the Enhanced Production Audit Program (EPAP) on January 4, 2010, through AER Directive 076: Operator Declaration Regarding Measurement and Reporting Requirements (Directive 076). The program was created to
  • raise the level of compliance with the AER measurement and reporting requirements and
  • raise the level of assurance with these requirements.

The term measurement as used in AER directives generally means measurement, accounting, and reporting. While measurement is the determination of a volume, accounting and reporting are integral components of measurement in that after a fluid volume is measured, mathematical procedures (accounting) may have to be employed to arrive at the desired volume to be reported. Notwithstanding this all-encompassing definition, for emphasis, this Operator's Handbook refers to “measurement and reporting,” recognizing that separate functions take place in the field and in the office.

EPAP has been designed to take advantage of current audit best practices. The model followed by the AER in the design of EPAP follows already-established Canadian and United States (US) auditing standards by which publicly-traded corporations provide assurance over the effectiveness of controls relating to financial reports and corporate disclosures. These standards highlight the importance of corporate ethical standards and use of nationally accepted internal control definitions.

Previously the AER-conducted substantive based audits. The AER designed EPAP to make the process of auditing an operator’s measurement and reporting practices more cost-effective and sustainable for both the AER and operators. It is believed that operator-conducted evaluations of controls may save operators significant resources consumed by intensive substantive audits. This new approach is also expected to help the operators avoid the costs associated with enforcement activities initiated through the AER Directive 019: Compliance Assurance—Enforcement process. Further benefits of EPAP appear in Appendix V of this Handbook.

The program encompasses all measurement and reporting requirements contained in various AER directives and the Alberta Oil and Gas Rules and Regulations. Primarily, but not exclusively, this includes:

Who is applicable to EPAP?
EPAP applies to the following:

  • all operators who are designated as the operator of record on PETRINEX for facilities reporting volumetric activity to PETRINEX and subject to AER measurement and reporting requirements
  • conventional oil, heavy oil, crude bitumen, and natural gas facilities, but not mineable oil sands facilities

A facility is defined as any building, structure, installation, equipment, or appurtenance over which the AER has jurisdiction and that is connected to or associated with the recovery, development, production, handling, processing, treatment, or disposal of hydrocarbon-based resources or any associated substances or wastes, including wells. Note that for the purposes of EPAP, the definition of facility

  • focuses on facilities for which data are reported to PETRINEX or the AER and
  • includes wells.

An operator is defined as the person or organization who keeps records and submits production reports (volumetric activity) to PETRINEX or the AER for a facility, whether or not that organization is the sole licensee or approval holder for all parts of the facility. “Operator” is synonymous with “operator of record” as used at PETRINEX. Note that for the purposes of measurement and reporting, the emphasis is on the organization that reports to PETRINEX or the AER, not the organization that may control or undertake the day-to-day operations and activities at all or part of a facility.

The operator of record for a facility is responsible for declaring for the entire facility, even when another licensee operates some portion or all of that facility. Therefore, it is up to the operator of record to assure that all licensees who participate in operating various portions of a facility are in compliance with AER measurement and reporting requirements.

In following this approach, EPAP is not introducing change from the current practice in effect in other areas of the AER.

If an operator of record is not willing or not able to obtain assurance that all licensees operating portions of a facility in question are in compliance with AER measurement and reporting requirements, the operator may choose an alternative course of action, such as one of the following:

  • The operator of record assumes operatorship of the entire facility and the other licensees become nonoperating joint venture partners.
  • The other licensees invest in the components required to operate under separate facility codes.

The second alternative is viewed as undesirable by the AER because it requires avoidable investments, adds to the proliferation of facilities, and may adversely affect land owners.

If neither of these alternatives is taken and the operator of record is not willing or able to obtain assurance that all licensees are operating in compliance with AER requirements, the operator of record assumes the risks of noncompliance.