Closure spend quotas specify the minimum amount of money licensees are required to spend on closure work in a given year which helps increase the amount of closure work occurring in the province.
The AER sets annual mandatory closure spend quotas for each licensee.
Industry-Wide Closure Spend Requirement
The industry-wide closure spend requirement was introduced in 2022 and set at $422 million. In 2023, the requirement increased to $700 million. The 2024 requirement was maintained at $700 million. For 2025, the requirement will be $750 million.
The AER reviews the industry-wide closure spend requirement each year. Before setting the requirement, the AER will evaluate such factors as market conditions and the results of the previous year’s closure spend to ensure licensees are meeting their spend quota and continuing to close oil and gas infrastructure.
Mandatory Closure Spend Quota
The licensee's mandatory closure spend quota is based on the industry-wide closure spend requirement that the AER sets for the oil and gas sector.
A licensee’s share of the industry-wide closure spend requirement—their mandatory closure spend quota — is calculated using a two-rate approach, which includes the licensee's proportion of the industry-wide inactive liability and level of financial distress as determined by the licensee capability assessment (LCA). A lower spend rate will be applied to licensees with a high level of financial distress, and a higher spend rate will be applied to those not in financial distress.
Inactive liability is estimated using Directive 011 and site-specific liability assessments for inactive sites.
A licensee’s mandatory closure spend quota is the value of their total inactive liability multiplied by the spend rate. Spend rates are reviewed annually.
| Year | Higher Spend Rate | Lower Spend Rate |
|---|---|---|
| 2022 | 4.0% | 3.3% |
| 2023 | 6.7% | 3.6% |
| 2024 | 6.6% | 3.6% |
| 2025 | 6.2% | 3.3% |
Some small dry gas producers received a deferral from their assigned 2024 and 2025 mandatory closure spend quotas, detailed in Bulletin 2024-19.
Licensees can view their annual mandatory closure spend quota in OneStop within the Closure Activity & Spend report. More details on closure spend calculations can be found in Directive 088: Licensee Life-Cycle Management and its associated Manual 023: Licensee Life-Cycle Management.
Licensees are required to submit closure activities and closure spends in OneStop as outlined in Directive 088. For more information about reporting requirements, see Manual 023 or OneStop Closure Reporting.
Area-Based Closure Approach
Licensee-specific closure quotas allow licensees to take an area-based closure (ABC) approach to abandonment, remediation, and reclamation activities. An ABC approach can reduce the cost of closure through better planning, industry-wide collaboration, and reduced equipment mobilization. This approach benefits industry and Albertans by improving closure cost efficiency and results in more closure work. The AER offers the ABC mapping tool to facilitate collaboration among licensees and oilfield service providers completing work in similar areas. The mapping tool is available within OneStop to oilfield service companies and all licensees to identify areas planned for closure work and the corresponding timing.
Closure Summary Reporting
From 2019 to 2021, a voluntary program included components of closure spend and reporting that only applied to licensees who participated in that program. Now, all licensees are required to participate in the Inventory Reduction Program introduced in December 2021. More information regarding industry performance as it relates to liability management, including the closure quotas, can be found in the Liability Management Performance Report.
Historical performance reports for the program are available below.
