On 30 July 2020, the Alberta government announced a new liability management framework aimed at expediting the cleanup of orphan and inactive well sites. The framework signals a more active approach to reclamation and management of those sites, with the province seeking to reduce their number while providing flexibility and clarity to the oil and gas industry.
Significant Changes
The new framework, set to be implemented in the coming months, will include the following significant changes:
- Active site operators will have mandatory 5-year rolling spending targets for site reclamation.
- A new formal opt-in mechanism will allow landowners to nominate specific sites for cleanup.
- Struggling operators will have access to practical guidance and support to help manage their assets and maintain their operations to keep their sites active.
- The framework will replace the current licensee liability rating program of the Alberta Energy Regulator (AER)—a simplistic mechanism that determines an operator's eligibility to hold a licence based on their assets-to-liabilities ratio—with a more comprehensive system that considers a wider range of assessment criteria.
- A panel-led process will be established to determine how to reclaim legacy and post-closure sites to current standards, including reclamation exempt sites (i.e., those sites that were reclaimed before the legal requirement for reclamation certificates came into effect) and abandoned sites previously operated by now-defunct companies. There is currently no clear policy direction with respect to how to address these sites, and the approach taken by the AER has been criticized as being inconsistent, unpredictable, and, in some cases, unfair.
- The framework includes the expanded authority given to the Orphan Well Association (OWA) by Bill 12, the Liabilities Management Statutes Amendment Act, which came into effect on 15 June 2020.
Under the framework, the Alberta government sets the policy direction while the AER will administer the program through monitoring, enforcement, and working with industry. Many of the details regarding implementation have not yet been released.
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