Advancing Alberta's New Liability Management Framework

Written By Keely Cameron, Brad Gilmour, Kenneth T. Lenz, Q.C., and Stephanie Ridge

Amendments to the Oil and Gas Conservation Rules and Pipeline Rules to advance the Government of Alberta's new Liability Management Framework and address Alberta's inventory of abandoned wells, facilities and pipelines came into effect on December 3, 2020. 

As we noted in our April 2020 blog on Alberta's approach to liability management, earlier amendments to the Oil and Gas Conservation Act and Pipeline Act received Royal Assent on April 2, 2020, and were  implemented in part to address growing concerns related to oil and gas liabilities following the release of the Supreme Court of Canada's decision in Orphan Well Association et al v. Grant Thornton Limited et al. 

On July 30, 2020, the Government of Alberta announced that it would be introducing further changes through a new oil and gas Liability Management Framework. In furtherance of this new framework, on December 17, 2020, the Government of Alberta approved amendments to the Oil and Gas Conservation Rules and Pipeline Rules.

Particularly notable amendments to the Oil and Gas Conservation Rules include:

• introducing a definition of "closure" which encompasses both abandonment and reclamation;
• expanding the Alberta Energy Regulator's (AER) authority to require abandonment  by enabling the AER to implement timelines through directives related to closure published by the AER;
• providing the AER with authority to establish closure quotas that are applicable to some or all licensees with respect to the required amount of closure work or the amount to be spent, or both;
• providing the AER with authority to require a closure plan regarding some or all of a licensee's wells and facilities upon request;
• permitting an "eligible requestor" to request that a licensee prepare a closure plan with respect to a well or facility where a well or facility has remained in either an inactive or abandoned state for five or more years. An "eligible requester" is defined to include the landowner where the well or facility is situated, the holder of a disposition or the Minister with respect to public land; the counsel of a band as defined in the Indian Act with respect to a well or facility on an Indian reserve; or a Métis Settlement with respect to a well or facility on a Métis Settlement; or,
• granting authority to require a licensee to provide financial and reserves information and keep the collected information confidential for a prescribed period.

The Pipeline Rules amendments are more limited and do not include the ability of an "eligible requestor" to request that a closure plan be submitted nor does it enable the AER to request financial information.  However, it is noted that section 33 of the Pipeline Act has previously been utilized by third parties to seek to have pipelines abandoned and in certain cases removed.

The AER has yet to publish any directives to further specify how these measures will be used going forward.

The impact of these amendments will depend on how the AER exercises its discretion regarding timelines, closure plans and closure quotas. However, those licensees who have sought the transfer of licenses with a proposed post transfer liability management ratio below 2.0 will already be familiar with a number of these measures as closure plans and quotas seem to be a common condition of AER discretionary approval under Bulletin 2016-21: Revision and Clarification on Alberta Energy Regulator’s Measures to Limit Environmental Impacts Pending Regulatory Changes to Address the Redwater Decision.

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