December 2024
The Inventory Reduction Program (IRP) focuses on reducing liability by bringing sites to full closure and increasing the amount of land being returned to equivalent capabilities. The program has two components: closure nomination and closure quotas.
Closure Nomination
Eligible requesters can nominate certain sites for closure. To be eligible for the program, the well or facility must be in an inactive or decommissioned state for five or more years. Some sites that met these criteria that were not fully closed from the Government of Alberta’s Site Rehabilitation Program (SRP) were transferred to closure nomination.
Almost 1300 sites have been nominated since the closure nomination program was launched in April 2023. These sites have approximately $57 million in liability. To date, licensees have reported over $12 million in closure spend on 287 sites. Nominated sites have up to three years to complete decommissioning work.
Closure Quotas
The AER sets a minimum amount of money that industry must spend on closure activities each year to ensure that licensees are focusing on their closure obligations. The industry-wide closure spend requirement is then divided among licensees (their mandatory closure spend). When closure work (decommissioning, environmental site assessment, remediation, and reclamation) is completed, industry reports the costs to the AER. This information is used to assess whether licensees meet the minimum requirement, assess compliance actions (if necessary), and to support updates to estimated liability values. In 2023, the industry-wide closure spend requirement was set at $700 million.
Prior to closure quotas, the AER collected industry closure spend data through the voluntary area-based closure (ABC) program from 2019 through 2021. See below for links to the previous highlight reports.
Closure Activity Summary 2019–2023
Figures 14 and 15 show decommissioning completed by industry and the Orphan Well Association (OWA). Between 2019 and 2021, closure work was primarily driven by the licensees participating in the voluntary ABC program, whereas activity since 2022 is related to closure quotas.
Funding from the SRP began in 2020 and continued into 2023 (see figure 16). The majority of SRP funding (75%) was provided in 2021 to 2022. Figure 14 shows that the most wells decommissioned by industry was during this two-year period, with a decrease in 2023. The reduction in the 2023 total spending led to fewer decommissioned wells. However, industry focused more on higher-liability infrastructure as more was spent on remediation activities in 2023 (see figure 17). The OWA also decommissioned fewer wells in 2023 but saw increases in their reclamation activity (see figure 15).
Figure 14. Industry and OWA decommissioning, 2019–2023
Note: 2023 data as of October 2024. Data from previous years sourced from both ABC Highlights Reports and Closure Quotas Highlights Report.
While the number of industry licences receiving a reclamation certificate in 2023 dipped from 2022, the OWA has continued to increase its reclamation certification over the past five years (see figure 15).
Figure 15. Industry and OWA reclamation certification, 2019–2023
Note: 2023 data as of October 2024. Data from previous years sourced from both ABC Highlights Reports and Closure Quotas Highlights Report.
Closure Spend Summary 2022–2023
Closure spend is the money spent on different closure activities. This section focuses on the eligible closure spend (defined in Manual 023) since the introduction of closure quotas in 2022. Previous spends through the ABC program can be found in the ABC highlights reports.
In 2023, industry reported eligible spending of $769 million, exceeding the requirement by 10%. The industry-funded OWA completed a further $149 million in closure work and an estimated $174 million in funding came from the Government of Alberta’s SRP grants (see figure 16).
In total, over $1 billion was spent on closure work in 2023.
Figure 16. Total closure spend and future industry-wide spend requirements, 2020–2023
Notes:
1. Data as of October 2024.
2. SRP funding ended in 2023.
3. OWA spend sources from OWA.
In 2023, licensees continued to focus closure work on decommissioning activities, as shown in figure 17. The distribution of closure spend was 56% on decommissioning and 19% on remediation activities, up from 14% the previous year; however, less was spent on reclamation activities. Whereas the OWA, as shown in figure 18, slightly increased its focus on remediation and reclamation for 2023.
Figure 17. Distribution of industry spend by closure category, 2022–2023
Note: Data of October 2024. These spends include all eligible spends reported in OneStop and may not reflect all SRP funding provided.
Figure 18. Distribution of OWA spend by closure category, 2022–2023
Note: Data sourced from OWA and only includes spend on sites with completed decommissioning work.
Figure 19 shows the closure spend by infrastructure type. In 2023, the spending on wells and pipelines was mostly for decommissioning, whereas for facility closure activities, it was mostly for remediation. Across all types of infrastructure, we see a decrease in decommissioning spend and an increase in remediation spend.
Figure 19. Industry spend by infrastructure type by closure category, 2022–2023
Note: Data as of October 2024.