Impact on Liability Estimates and Compliance

December 2024

Total estimated liability changes every year (see figure 20). Liability is added each year with new activity, just as it is reduced through closure work. The net impact for 2023 estimated liability (from January 2023 to January 2024) is an overall reduction of $202 million. This was accompanied by a reduction of over 4000 inactive wells, an increase of 1400 decommissioned wells, and over 5600 reclamation-certified wells. Shifts in facility life-cycle status were focused on decommissioning (+700) and reclamation-certified (+100). 

Figure 20. Change in life-cycle status, 2021–2023

  
^{Note: Data as of December 31 of each year.} 

There is not a one-to-one linkage between closure spend and reduction of liability estimates. A $700 million quota does not mean a $700 million decrease in the liability estimate. This is because liability estimates only decrease once a closure milestone is achieved (e.g., after decommissioning work is complete and submitted or after a reclamation certificate is issued). Closure work is progressive, working towards a milestone, but milestones are not always achieved within a reporting year (e.g., to achieve a reclamation certificate, local vegetation sometimes takes several seasons to re-establish). When we examine the milestones achieved and the amount of estimated liability reduced, we see that $483 million of estimated liability was removed in decommissioning and $109 million of estimated liability was removed from reclamation.

Table 2 breaks down closure spend that is still in progress versus sites that have reached a closure milestone (i.e., decommissioned or reclaimed). Remediation and reclamation activities take longer to complete; therefore, most of this spend is on sites that have yet to reach a milestone and are still in progress. 

Table 2. Industry closure spend in progress and achieving a milestone, 2022–2023

Closure Spend Compliance

Each licensee with inactive liability has a mandatory closure spend requirement. Licensees that met the requirement spent equal to or more than their mandatory spend or provided security in lieu of closure work. Licensees that did not meet their mandatory spend were able to come into compliance by providing security for the difference between their mandatory closure spend quota and their closure spend reported. Licensees that did not provide security are still noncompliant. 

When we reported on the 2022 mandatory closure spend, 90% of licensees were compliant. There were 51 noncompliant licensees with an outstanding amount of $4.2 million in missed quotas (1% of the industry-wide closure spend requirement). Since then, ten licensees have come into compliance, with a remaining outstanding amount of $3.4 million owing from the 39 remaining noncompliant licensees.

For the 2023 mandatory closure spend, 91% of licensees were compliant. There are 54 noncompliant licensees with an outstanding amount of $5.0 million in missed quotas (less than 1% of the industry-wide closure spend requirement). More information can be found on the licensee dashboard where stakeholders can review individual licensee information. Table 3 summarizes the amount still owing in security for 2022 and for 2023.

Table 3: Outstanding closure quota compliance and security owing, 2022-2023

^{Note: Data as of October 2024, data continues to change as compliance activities are undertaken.} 

Of the 54 noncompliant licensees for the 2023 mandatory closure spend quota, 18 licensees are noncompliant for the first time and 36 have an outstanding noncompliance with the 2022 mandatory spend. Licensee-specific compliance actions can be found on the AER Compliance Dashboard.

Table 4 lists those licensees who were non-compliant for both 2022 and 2023 for closure spend quota.

Table 4: Licensees noncompliant with 2022 and 2023 mandatory spend 

See “Additional Information” on the Liability Management Performance Report webpage for the following:

• Interactive dashboards for licensee-specific information and regional-specific information. Only active licensees are included in this year’s report. 
• A list of companies and their compliance with 2023 closure quotas and any outstanding administrative and orphan levies from 2022 to 2024. Only licensees with inactive well or facility licences receive closure quotas.