Liability Management FAQ

This page answers commonly asked questions about our liability management programs and processes.

General

What are the conditions and benefits of filing a multiwell pad notification?
A licensee may establish a multiwell pad on an individual surface lease that the licensee has more than one well on. The same licensee must hold the well licences and the surface lease. Establishing a multiwell pad reduces the reclamation liability of the wells on the pad.

I am the licensee of a well, and there has been a change to one of the working interest participants (WIPs). Can I update this information?
Yes. Licensees can update WIP information at any time in OneStop and will be prompted to update this information when a well is licensed, transferred, suspended, and abandoned.

The above information will be included in the well file, but our database will not be updated.

Licensee Liability Rating and Liability Management Rating Assessments

How can I view our monthly licensee liability rating (LLR) and liability management rating (LMR) assessment?
LLR and LMR assessments can be viewed by accessing the Digital Data Submission (DDS) system and selecting Subsystem Reports > Liability Rating > View Liability Rating. These assessments can be downloaded.

What is the formula for calculating the LLR?
The LLR calculation is provided in appendix 4 of Directive 006: Licensee Liability Rating (LLR) Program.

Can I view the detailed monthly assessment of another company?
No. The monthly assessment is only accessible to the licensee.

Site-Specific Liability Assessments

What must I submit if my company qualifies for a 50% reduction in reclamation liability?
The following documents are required for an application for a 50% reduction in reclamation liability:

cover letter describing the nature of the request
Phase I Environmental Site Assessment (ESA)
Phase II ESA, if applicable
remediation reports, if required
reclamation assessment (soil, landscape, and vegetation; the vegetation assessment will show that re-establishment of vegetative cover is required)
signed professional declaration forms

If approved, the changes in liabilities are valid for one year after the reclamation assessment, after which the licensee must resubmit a request.

Are deemed assets calculated differently in the Oilfield Waste Liability (OWL) program than in the LLR program?
Yes. A multiplier of 0.5 is used in the facility-deemed asset calculation to establish a minimum asset-to-liability ratio of 2.0. An oilfield waste management facility’s deemed assets are the sum of the previous 12 months of nonproducer licensee (NPL) volumes multiplied by the AER-approved netback for these volumes, multiplied by 3 years, multiplied by 0.5.

One of my waste management approvals is for a facility that does not have Petrinex reporting requirements. How will assets for this approval be calculated?
The asset calculation for a licensee not required to report volumetric data to Petrinex is the same as for a licensee reporting volumes to Petrinex. The only difference is that the licensee reports the volumes directly to us. If you have any further questions, please contact our Customer Contact Centre.

If a Phase I ESA finds evidence of contamination, can we estimate liability based on the Phase I investigation?
No. Observation alone cannot be used to evaluate the significance of contaminant issues or quantify the effects. A phase II ESA is required.

Where do I find facility site-specific liability assessment cost estimates in the DDS system? Where is the expiry date?
Search the DDS system under the company BA code and go to AER > Reports > Liability Rating > View Liability Rating. Views and searches of all properties licensed to the company can be accessed. Click on the facilities tab; there will be a list of facilities with licence numbers. For each facility, cost estimates can be viewed by clicking on the view button on the right-hand side of the screen, which will indicate the expiry date and other relevant data.

Large Facility Liability Management Program

How is the large facility orphan levy calculated?
A licensee in the Large Facility Liability Management Program (LFP) is responsible for its percentage of any LFP orphan levy. A facility's share of the levy is calculated as the sum of the deemed liability of facilities in the program (for which it is the licensee to the total liability of all facilities in the LFP), less the liability of any facilities licensed to a defunct licensee as of the date the levy is calculated, in accordance with the following formula:

Facility's share of levy = A/B Ã— required levy amount, where

A is the facility's deemed liability on the date the levy is calculated, and
B is the deemed liability of all facilities in the LFP, less the liability of any facilities licensed to a defunct licensee on the date the levy is calculated.

Nonproducer Licensee Netback

How do I become a nonproducer licensee (NPL)?
Under Directive 006: Licensee Liability Rating (LLR) Program and Licence Transfer Process, an NPL is a licensee whose deemed assets from midstream activities in the LLR Program, Large Facility Liability Management Program (LFP), and Oilfield Waste Liability (OWL) Program exceed its deemed assets from production volumes reported to Petrinex or a licensee having only facilities included in the LFP or the OWL program.

What is a netback? What items should be included or excluded?
Netback is the net revenue from midstream activities per unit of third-party volume processed. For a netback submission, net revenue is earnings before interest, taxes, depreciation, and amortization and is equal to the gross margin (midstream revenue less the cost of goods sold), less direct operating costs and applicable general and administrative expenses.

Net revenue is that which a similar midstream licensee could achieve if it operated the same midstream facility. Net revenue is generated from conducting the day-to-day midstream operations. Therefore, revenue and expense items that would not be typical of facility operations should be excluded from the netback calculations.

Production volumes refer to the 12 months of total received inlet volumes reported to Petrinex against the reporting facility ID codes attached to a facility's licence. Report only third-party volumes from which revenue is generated. Volumes from the licensee's production are not to be included. The 12-month reported volumes must correspond to the same accounting period as the licensee's most recent fiscal year.

Security Deposits

How do I request a refund for a security deposit?
Submit a written refund request on company letterhead and include the appropriate contact information. The request must be sent to the attention of the security deposit administrator of our Liability Management Group at Directive068@aer.ca.

How do I know the total amount of security held in our name?
The Royal Bank of Canada provides a monthly account statement to each licensee who has paid a security deposit to us.

We have not received an account statement for some months. Who should we notify to correct this?
Call our Finance Branch at 403-355-4574. Licensees may not make changes directly with the bank.

Which financial institutions are eligible to issue letters of credit?
The Alberta Treasury Board and Finance have developed guidelines for acceptance of letters of credit (LCs). Under the guidelines, the Treasury Board highly recommends (but does not require) that the financial institution have a physical branch in Alberta. Under AER requirements, the bank issuing the LC must appear in Schedule 1, 2, or 3 of the Bank Act of Canada. We will not accept LCs from credit unions in amounts greater than two million dollars.

We will not accept LCs that do not conform to these requirements.