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WHAT IS EVERYONE TALKING ABOUT

IN THE ENVIRONMENTAL INDUSTRY IN ALBERTA?

 

In mid-2022, under the Government of Alberta’s new Liability Management Framework, the Alberta Energy Regulator (AER) implemented an Inventory Reduction Program (described in AER Directive 088: Licensee Life-Cycle Management).  The program involves setting industry-wide closure spend targets or the so called “Mandatory Spend”. The bulletin provided the following additional details paraphrased below:

• “Closure spend targets increase the amount of closure work occurring in Alberta as licensees are required to spend a minimum amount annually on abandonments, remediation, and reclamation of oil and gas sites.
• (These targets are referred to as closure quotas in section 3.014 of the Oil and Gas Conservation Rules.) To determine closure targets, the AER uses the liability associated with inactive wells (as per Directive 013: Suspension Requirements for Wells) and inactive facilities (no activity for 12 months), collectively referred to as “inactive liability.”
• Every year, the AER releases by July 31 industry-wide closure spend targets for a five-year period on www.aer.ca > Regulating Development > Project Closure > Liability Management Programs and Processes > Inventory Reduction Program.
• The 2022-2023 target is set, while the remaining four years are forecast. This is a change from what the AER completed last year.
• In Bulletin 2021-23, targets were set for both 2022 and 2023. Targets are reviewed annually and are subject to change due to a variety of factors, such as market conditions and previous years’ closure spending.
• When reviewing the 2023 closure target, the AER opted to increase the target based on three considerations:
  • Preliminary data suggested the 2021 spend was about $628 million on closure activity, funded by industry and grants received from the Government of Alberta’s Site Rehabilitation Program (SRP) This amount represented a closure expenditure 48% higher than the industry-wide mandatory target set for 2022.
  • Higher commodity prices created financial conditions where licensees were able to increase closure spending.
  • The oil and gas service sector is experiencing growth for the first time since 2014, supported by the Site Rehabilitation Program. Increasing the closure target helps maintain that growth.

The 2022 and 2023 target and the forecast spend for the following years is as follows:

• 2022-23 Year Industry-wide mandatory target 2023 (set) $700 million
• 2024 (forecast) $764 million
• 2025 (forecast) $833 million
• 2026 (forecast) $909 million
• 2027 (forecast) $992 million

Each oil and gas licensee in Alberta with inactive wells and facilities is required to meet an individual annual mandatory target. In setting licensee-specific targets, the AER considers the licensee’s proportion of the total industry inactive liability and the licensee’s financial health, determined using financial information provided under Directive 067: Eligibility Requirements for Acquiring and Holding Energy Licences and Approvals. The AER reminded licensees that financial submissions under Directive 067 (Schedule 3) must be submitted within 180 days after fiscal year end.

Licensee-specific targets for 2023 were visible by July 31, 2023, within the AER OneStop online utility. Licensees were permitted to commit to a voluntary closure spend target more than their mandatory target to qualify for incentives.

Further information about the Inventory Reduction Program, closure targets (mandatory and voluntary), and incentives for committing to a voluntary target is available in the AER Directive 088 and Manual 023: Licensee Life-Cycle Management.

 

HOW CAN WE HELP YOU AS A LICENSEE?

With respect to the Mandatory Spend Targets, we have a number of significant, specific areas of expertise where we can provide assistance. Cogent is very experienced with all of types of environmental project work which will qualify toward mandatory spend targets. We can complete all aspects of project, field and reporting work as well as cost tracking and cost reporting and can specifically provide support to smaller and medium size producers as follows:

• In-house, contract environmental and reclamation coordination support for oil and gas companies who do not maintain a full time environmental coordinator.  We have provided part-time and contract in-house and remote support for several Calgary based producers for the past twenty plus years.  This avoids overhead costs, reduces burdens on operations and executive staff and ensures the work is conducted in a cost effective, technically correct and efficient manner;

• Environmental services including setup of reclamation programs for smaller and medium-sized oil and gas companies, assigning priorities for the mandatory spend based on property locations, ages of properties, surface rentals, landowner relations, environmental risks and deemed liabilities;

• Preparation of Asset Retirement Obligation (ARO) information; ARO program development, support, review and maintenance;

• Preparation of end-of-life liability estimates during acquisition and divestitures projects;

• Completing detailed Liability Management Reviews and maintenance including Site Specific Liability Assessments;

• All aspects of Environmental Site Assessments, remediation, and reclamation

• In-house capability completing electromagnetic (EM) surveys (Geonics EM 31 and 38), GPS and total station surveying and mapping, high resolution drone photography;

• Significant experience conducting Phase 1 and 2 projects including historical reviews, field program design, execution of drilling and sampling programs and reporting,

• Completion of Conceptual Site Models (CSMs), Tier 2 criteria adjustments and site specific risk assessments, application of the Subsoil Salinity Tool (SST), remedial action plans (RAPs), and Record of Site Condition (ROSC) documents;

• Conducting large scale soil remediation projects and operating in situ groundwater recovery and remediation systems;

• Supervision of site reclamation projects on cultivated, native prairie, pasture, natural areas and forested site on both Freehold and Crown, white and green area locations across Alberta.  

If you would like to discuss your environmental programs and how to achieve mandatory spend targets, or get a review of ARO numbers or current liability status, please contact Peter Rose at 403-681-2972 or peter.rose@cogentenv.ca.