Bulletin 2012-11

Bulletin 2012-11: 2012 ERCB Administration Fees (Industry Levy)

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2012 ERCB Administration Fees (Industry Levy)

Jun 15, 2012

1 Energy Regulation

The Energy Resources Conservation Board (ERCB) is focused on regulating energy resource development within Alberta. The 2012/13 revenue requirement for the ERCB is $157.5 million as approved by the Government of Alberta ($44.8 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 2012 Administration Fees (Industry Levy)

Allocation ($000)
Sector
2012
2011
Oil and gas
81 443
83 298
Oil sands
29 059
27 946
Coal
2 203
1 461

Total
112 705
112 705

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 June 15, 2012, and payments are due July 16, 2012.

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 the due date. 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 2012 administration fees are sent to and are payable by the party who was the operator as at December 31, 2011. 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, 2011.

All operating wells are classified into one of eight base fee classes as set out in the Energy ResourcesConservation 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 1.618717 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 $4 540 000 to fund broad industry initiatives in 2012 (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 2012 oil and gas well administration fee invoices, increasing the adjustment factor used for invoicing from 1.618717 to 1.708952. 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 2011. An operator may have activities in more than one category. Each category is subject to an adjustment factor as identified below.

Category
Allocation ($000)
Adjustment Factor
Primary ongoing
2 382
1.229147
Thermal ongoing
10 242
2.863215
Thermal growth
7 622
2.145199
Mining ongoing
5 002
1.307779
Mining growth
3 811
7.991624

29 059

5 Coal

The administration fee for coal is based on each mine’s share of total production volumes for the year ended December 31, 2011. It is set at $0.072014 per tonne of marketable coal as specified in the ERCB AFR.

6 Contact

If you have questions about the 2012 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 July 16, 2012. Subsequent adjustments may be applied, if needed, following consideration of the appeal.

<original signed by>

Tom Heywood
Chief Financial Officer


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