Liability Management Programs and Processes

In Alberta, we live by a simple rule: if energy companies are going to profit from the province’s energy resources, they must be responsible and properly abandon, remediate, and reclaim their sites.

As the sole regulator of one of the world's largest and oldest oil and gas industries, we work with companies to help manage energy development to ensure they are prepared to meet their obligations at the end of a project's life cycle. Sometimes, we must manage the consequences of companies not being able to meet their responsibilities to safely abandon and reclaim their energy development sites.

We continue to develop innovative approaches, programs, and processes (listed below) to manage these liabilities and risks while supporting economic development in the province. Our approach to managing liability was built and continues to evolve to balance multiple interests: environmental protection, public safety, landowner interests, investment, royalties, jobs, and market volatility.

We collaborate with jurisdictions across North America and the globe with the same problems. We are working together to find solutions.

Liability Management Framework

Liability Management Rating Programs

Our Licensee Liability Rating (LLR) Program is designed to ensure companies, not Albertans, face the costs of abandoning oil and gas wells, facilities, and pipelines and reclaiming the associated sites. The program is based on comparing assets (production) to liabilities (abandonment and reclamation costs). When a company’s liabilities outweigh its assets, it must provide us with financial security for the difference to help mitigate the risks posed by the company.

These security payments help ensure that companies have a plan to meet their abandonment, remediation, and reclamation obligations; if they do not, the funds are forfeited and used for cleaning up the company’s sites.

A company's LLR contributes to its liability management rating (LMR), which is the ratio of a company’s assets and liabilities, which is used to assess the company’s ability to meet its closure obligations. Our holistic assessment will replace the liability management rating (LMR) over time. While we know that LMR is not an accurate measure of whether a company can address its regulatory and liability obligations, it plays an important role in calculating the deemed liability in the oil and gas sector. The LMR is integrated into several of our directives and the Oil and Gas Conservation Rules; it cannot easily or quickly be removed without careful thought and consideration of the effects it could cause in other areas. As our first step towards removing LMR, the holistic assessment has replaced the LMR for security collection for licence transfers.

Requirements, Forms, and Guides

Directive 006: Licensee Liability Rating (LLR) Program and Licence Transfer Process sets out the methodology for calculating deemed assets and liabilities within the LLR program.

Directive 011: Licensee Liability Rating (LLR) Program - Updated Industry Parameters and Liability Costs provides updated industry parameters and regional abandonment and reclamation costs used in calculating liability under the program.

Directive 068: AER Security Deposits lists updates and consolidates our liability management security deposit requirements.

Our Large Facility Liability Management Program (LFP) helps protect Albertans from the costs of abandoning and reclaiming large upstream oil and gas facilities, such as sour gas plants, straddle plants, and in situ oil sands plants. When needed, we can issue an orphan fund levy to current licensees with facilities in the LFP to support the closure costs of large facilities with defunct licensees.

Details on the types of facilities included in this program are available in appendix 1 of Directive 024: Large Facility Liability Management Program. Additional information about the levy is available in Bulletin 2022-11: 2022/23 Orphan Fund Levy for Large Facilities.

Requirements, Forms, and Guides

Directive 024: Large Facility Liability Management Program sets out our requirements for liability management of sulphur recovery gas plants, standalone straddle plants, and in situ oil sands central processing facilities with a minimum production capacity of 5000 cubic metres per day of bitumen. Appendix 1 provides details on the types of facilities included in this program.

Appendix 6: Facility Netback Calculation Form [PDF] must be used by companies to report a facility netback, which is used in asset calculations. We will not accept any modifications to the wording of this document.
LFP List (April 2022) [PDF] provides a full list of facilities subject to Directive 024 requirements.

Directive 068: AER Security Deposits lists updates and consolidates our liability management security deposit requirements.

Our Oilfield Waste Liability (OWL) Program helps protect Albertans and the Orphan Well Association (OWA) from the costs of abandoning, remediating, and reclaiming oilfield waste management facilities. Oilfield waste management facilities include oilfield waste processing facilities, surface facilities associated with oilfield water disposal wells, and transfer stations.

A company's OWL rating contributes to its LMR, as defined above.

Requirements, Forms, and Guides

Directive 075: Oilfield Waste Liability (OWL) Program sets out our requirements for liability management of oilfield waste management facilities and associated wells and pipelines. Appendix 1 provides details on the types of facilities included in this program.

Directive 068: AER Security Deposits lists updates and consolidates our liability management security deposit requirements.

Directive 075: Appendix 6: Facility Netback Calculation Form [PDF] [DOC] must be used by companies to report a waste management facility netback, which is used in asset calculations. We will not accept any modifications to the wording of this document.

The AER-approved oilfield waste management facilities list (June 2015) [PDF] provides a full list of waste management facilities subject to Directive 075 requirements. Note: Any approval not on the list is excluded from the OWL program because of the type or status of the facility.

Companies must conduct assessments to estimate the cost to suspend, abandon, remediate, and reclaim certain energy sites in the LLR program and all sites in the LFP and OWL programs. Companies must conduct this assessment every five years (unless required otherwise) if we have issued a licence for

facilities in the LFP,
facilities in the OWL program,
gas processing and gas fractioning plants in the LLR program,
a request for LLR variation, and
potential problem sites in the LLR program identified by us.

Requirements, Forms, and Guides

Directive 001: Requirements for Site-Specific Liability Assessments in Support of the AER's Liability Management Programs sets out our requirements for site-specific liability assessments to estimate the cost of suspending, abandoning, remediating, or reclaiming a site.

Directive 001: Cost estimate forms [XLS] must be used by companies to update cost estimates for suspension, abandonment, remediation, and reclamation. We will not accept any modifications to the wording of these documents.

Liability Management Programs and Processes

Liability Management Framework

Oil and Gas Specific

Mining Specific (Oil Sands and Coal)

Liability Management Rating Programs

Licensee Liability Rating Program

Large Facility Liability Management Program

Oilfield Waste Liability Program

Site-Specific Liability Assessments