Bulletin 2011-15

Bulletin 2011-15: 2011 ERCB Administration Fees (Industry Levy)

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2011 ERCB Administration Fees (Industry Levy)

May 31, 2011

1 Energy Regulation

The Energy Resources Conservation Board (ERCB) is focused on regulating energy resource development within Alberta. The 2011/12 revenue requirement for the ERCB is $159.7 million as approved by the Government of Alberta ($47 million government grant and $112.7 million industry levy). This money is needed to support the ERCB’s operations which in turn support our mandate to ensure that the discovery, development and delivery of Alberta’s energy resources take place in a manner that is fair, responsible and in the public interest.

2 2011 Administration Fees (Industry Levy)

Allocation ($000)
Sector 2011 2010
Oil and gas 83 298 78 498
Oil sands 27 946 22 864
Coal 1 461 1 343
Total 112 705 102 705

The ERCB’s revenue requirement affects operator levy invoices. In addition, other factors contribute to the fee determination at an operator level, including an increase or decrease in wells or entities within the sector, ownership transfer and amalgamations, new entrants and volume fluctuations. Invoices vary according to individual operations and are based on operating statistics for the calendar year. Invoices to operators detailing the fee calculations will be mailed on May 31, 2011, and payments are due June 30, 2011.

The Energy Resources Conservation Act (ERC Act) authorizes the ERCB to make regulations to levy the administration fee on the sectors that it regulates. The ERC Act also authorizes the imposition of a late-payment penalty, which is set at 20 per cent on any portion of the fee that remains unpaid after July 12, 2011. The ERCB can also initiate action to close producing facilities for failure to pay an invoice or late-payment penalty.

Oil and gas, oil sands and coal mines sector invoices for 2011 administration fees are sent to and are payable by the party who was the operator as at December 31, 2010. For conventional wells and oil sands schemes, “operator” means the entity that files well production and/or injection/disposal data with the Petroleum Registry of Alberta. If the operator fails to pay the fee, the licensee is responsible for payment of the invoiced amount plus any penalty.

3 Oil and Gas

3.1 Determination of Administration Fees

The administration fee in the conventional oil and gas sector is based on individual well production of oil/bitumen or gas and the number of production and service wells for the year ended December 31, 2010.

All operating wells are classified into one of eight base fee classes as set out in the Energy Resources Conservation Board Administration Fees Regulations (ERCB AFR) and illustrated in the table below. In addition, an adjustment factor is specified and applied to each base fee. This adjustment factor ensures that the total administration fee collected for the sector satisfies the net revenue requirement for the ERCB with respect to that sector not funded by the Government of Alberta.

Class

Min Production

(m3/yr)

Max Production

(m3/yr)

Base Fee
1 Service Wells $100.00
2 0.01 300.0 $100.00
3 300.1 600.0 $125.00
4 600.1 1200.0 $312.00
5 1200.1 2000.0 $750.00
6 2000.1 4000.0 $1250.00
7 4000.1 6000.0 $1625.00
8 6000.1 > $1875.00

The adjustment factor is set at 1.622372 of the rate specified for wells in all classes in the ERCB AFR.

3.2 Broad Industry Initiatives (BII)

The Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association of Canada (SEPAC) have jointly requested that the ERCB’s administration fee process be used to collect $4 304 000 to fund broad industry initiatives in 2011 (see attached CAPP/SEPAC letter). Consistent with prior years, the Board has agreed to this request and includes an additional charge for this purpose in the 2011 oil and gas well administration fee invoices, increasing the adjustment factor used for invoicing from 1.622372 to 1.7062. BII funds collected by the ERCB are passed through to CAPP and SEPAC.

Payment of the BII is voluntary. Further, the 20% late payment penalty referenced in section 2 does not apply to unpaid BII amounts. The ERCB is not involved in and does not make any decisions regarding the manner in which BII funds are spent or to whom BII funds are disbursed. On request, the Board may provide information to CAPP and SEPAC regarding paid and unpaid BII amounts by operator.

4 Oil Sands

Fees are levied in five categories based on operating information for the calendar year 2010. An operator may have activities in more than one category. Each category is subject to an adjustment factor as identified below.

Category Allocation ($000s) Adjustment Factor
Primary ongoing 2 956 1.710099
Thermal ongoing 9 674 3.015840
Thermal growth 6 986 2.141773
Mining ongoing 5 105 1.364806
Mining growth 3 225 3.829231
27 946

5 Coal

The administration fee for coal is based on each mine’s share of total production volumes for the year ended December 31, 2010. It is set at $0.046003 per tonne of marketable coal as specified in the ERCB AFR.

6 Contact

If you have questions about the 2011 administration fees, please contact:

Kris Klimczuk
Energy Resources Conservation Board
Finance Branch
Suite 1000, 250 – 5 Street SW
Calgary, Alberta T2P 0R4
Telephone: (403) 297-4289
Fax: (403) 297-3195
E-mail: kris.klimczuk@ercb.ca

7 Appeals

Appeals should be made to:

Tom Heywood
Energy Resources Conservation Board
Finance Branch
Suite 1000, 250 – 5 Street SW
Calgary, Alberta T2P 0R4
Telephone: (403) 297-2133
Fax: (403) 297-3195
E-mail: tom.heywood@ercb.ca

Notwithstanding the filing of an appeal, payment of all invoices is required by June 30, 2011. Subsequent adjustments may be applied, if needed, following consideration of the appeal.

<Original signed by>

Tom Heywood
Chief Financial Officer


Within this section


Attachments

March 31, 2011

To All Operators

Re: 2011 Broad Industry Initiatives Funding

Dear 2011 ERCB Administrative Levy Recipient,

Background

In addition to the annual ERCB administration fee, as in previous years you are being asked to contribute funding for a number of important projects and initiatives that support broad industry interests, policy positions, and communications strategies. This Broad Industry Initiatives program (BII) was launched in 1995 by CAPP and SEPAC as a means by which to fund programs and projects that are deemed to be of general benefit to the upstream oil and gas industry. BII program funding is limited to non-oil sands initiatives in the province of Alberta. While it has no involvement in and does not make any decisions regarding the manner in which BII funds are spent, the ERCB continues to assist CAPP and SEPAC with this program by collecting BII funds on our behalf via its annual well levy invoicing process.

BII Program Scope and Value Proposition

The BII program consists of several discrete elements, although funding is for the aggregate program.

A key focus area for the BII program is environmental research focused on air, water, biodiversity and surface impacts arising from oil and gas activity. This environmental research provides an important scientific foundation for industry positioning on government policy and regulation. It also facilitates technical collaboration between industry and the Alberta government. The various research projects are managed by Petroleum Technology Alliance Canada (PTAC) on behalf of the industry funders. PTAC is paid a modest fee for project management. Industry representatives are also actively involved in these projects on an ongoing basis.

Also funded by BII are several organizations focused on developing and delivering information in support of broad public and stakeholder engagement. The entities funded by BII include the Canadian Centre for Energy Information, the Canadian Energy Research Institute, Inside Education and Synergy Alberta. These components of the BII program are increasingly important for both our overall industry and for the Alberta government, as we work to ensure our social license to operate.

BII Governance

The parties requesting funding from the BII program submit proposals in Q4 to CAPP and SEPAC, providing accountability for prior funding and proposals for the upcoming year. A BII Panel comprised of SEPAC and CAPP Board Members plus the Presidents of CAPP and SEPAC meets annually to review submissions for funding. The BII Panel then makes funding recommendations to the Boards of CAPP and SEPAC. Once the projects and the funds are approved by the respective Boards, the request for funding is forwarded to the ERCB. The ERCB then collects the funds for CAPP and SEPAC via its annual well levy invoicing process.

BII Program 2011Project Funding

For 2011, the funding requested by CAPP and SEPAC is $4,304,000 (2010 - $3,575,000) as detailed below:

2011
Research & Innovation
Environmental Research Projects $ 1,760,000
Petroleum Technology Alliance Canada (PTAC) 264,000
Public and Stakeholder Engagement
Alberta Is Energy Campaign 875,000
Canadian Centre for Energy Information (CCEI) 400,000
Inside Education 375,000
Synergy Alberta 100,000
Small Explorers and Producers Association of Canada (SEPAC) -
Canadian Energy Research Institute (CERI) 500,000
4,274,000
Administration fee 30,000
Total funding $ 4,304,000

The BII well levy represents the amount required to provide the funds noted above. While the BII levy is voluntary, this funding has been firmly endorsed by the CAPP and SEPAC Boards. These projects benefit all of the non-oil sands industry in Alberta and we strongly encourage you to remit the BII portion of the well levy along with the required ERCB levy.

Significant leverage is gained for your company’s interests through the BII program. We appreciate your assistance in funding those projects that benefit the broader industry in Alberta and would like to thank you for you continued support.

For additional information or if you have any questions, please contact Sylvia Galarneau, the BII Administrator for CAPP and SEPAC, at (403) 267-1127 or at sylvia.galarneau@capp.ca.

Sincerely,

<Original signed by> <Original signed by>
Dave Collyer Gary Leach
President President
Canadian Association of Petroleum Small Explorers and Producers
Producers (CAPP) Association of Canada (SEPAC)
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