Written By Brad Gilmour, Keely Cameron, Stephanie Ridge and Kassandra Devolin
On July 17, 2020, the Government of Alberta opened applications for Period 3 of the Site Rehabilitation Program. As described in our previous blog post, subsequent update and discussion of Period 2 of the Program, the Program administers grant funding to eligible oil field service contractors completing reclamation and abandonment work in Alberta.
Along with the launch of Period 3, the Government of Alberta has also announced it will review applications for abandonment work that were previously denied in Period 1. As of July 17, 2020, over $100 million in funds from Periods 1 and 2 remain unallocated (i.e., more than half of the $200 million available in those Periods), which has prompted the Government of Alberta to reassess prior applications.
Overview of Period 3
Period 3 of the Program will allocate up to $100 million in funding to eligible applicants. Applications will be accepted until March 31, 2021, or until funding has been completely allocated.
Unlike Periods 1 and 2, in Period 3 the Program has preemptively made up to $139,000 available to active oil and gas licensees for site closure activities. Projects are eligible for 100% funding, up to the limit of $139,000. The funding can be used for a single site project or multiple projects up to the $139,000 limit. A list of eligible licensees is posted online. As in Periods 1 and 2, oil field service contractors must negotiate contracts with licensees to complete closure work and must apply for Program funding once a contract is signed. However, the allocation of funding between licensees is intended to allow licensees and contractors to strategically plan their closure projects and to sequence work appropriately by allowing licensees to budget costs and contractor requests as each stage of work performed.
Licensees are responsible for ensuring that contractor requests do not surpass their grant amounts. In addition, licensees are responsible for organizing all site closure work. Licensees must make sure contractor applications are submitted and approved in the appropriate order, as separate applications are required for each stage of work. Per the Program website, the work sequence begins with abandonment projects, and continues with Phase I Environmental Site Assessments (ESAs), Phase II ESAs, remediation, and finally, reclamation.
Closure work approved in Period 3 may be 100% grant-funded. Applications from multiple contractors, or multiple applications from one contractor, are allowed for a single site. When the funding limit for a licensee has been reached, all subsequent contractor applications will be denied. It is unclear as to what will happen if the program is undersubscribed.
Changes from Periods 1 and 2
Four notable changes and clarifications were announced in Period 3 of the Program.
Notably, oil field service contracts can include “subject to receipt of grant funding” clauses. In changing these guidelines, the Program noted site closure work should be submitted sequentially. Therefore, subject to clauses relating to abandonment work or Phase 1 ESAs are allowed in Period 3. In addition, contracts which incorporate termination clauses shorter than the minimum 30-day notice period are now eligible for grant funding.
Second, the Program made a point of clarifying that identical closure activities on the same site are ineligible for Program grants. Licensees are unable to request grants for work activities on a site if those activities previously received Program funding.
In addition, the Program noted site closure work completed either prior to or in development before May 1, 2020, will be ineligible for Program funding. However, work performed after this date will be eligible for subsequent Program application periods. Projects completed after May 1, 2020, may qualify for retroactive funding, as long as the work conducted complies with relevant period requirements.
Finally, the Program has updated its invoice reporting and payment process as part of Period 3. All Program work is to be invoiced either on or before December 31, 2022. Interim and final invoice reports may be submitted through the Electronic Transfer System (ETS) Site Rehabilitation Program once this process is established. With regards to payment, contractor applications which are signed and approved will receive an initial 10 percent of the grant amount. Contractors may apply for a second disbursement after incurring 60 percent of project costs. A final payment will occur when the project is complete.
Contractors can negotiate with site licensees to cleanup a nominated site. A list of nominated sites is posted on the Program’s website, and includes sites nominated by landowners, First Nations reserves and Métis settlements. Contractors can identify licensees in charge of a site by searching a site location for wells and pipelines using the Alberta Energy Regulator ST37 website, or searching for facilities using the Petrinex report.
While a contractor may apply to perform site closure work, the licensee ultimately determines whether work is completed on a site. A nominated site does not guarantee site closure activities will be completed or that a Program grant will be provided. The grant application review process will apply to all sites, although priority may be given to nominated sites if they meet the relevant Program period requirements.
As noted above, the Program will also reassess applications previously denied for abandonment work in Period 1. The Site Rehabilitation Program Period 1B (SRP 1B) will not accept new applications. Only existing applications from Period 1 will be examined and those applicants will not be required to reapply for SRP 1B. Prior applicants are not permitted to revise their applications. Reviews will be conducted using original Program submissions.
SRP 1B will first review abandonment applications that were denied for a site where grants were approved for surface work. This will allow abandonment work to take place before remediation and reclamation. Following this review, the Program will review and reassess all other denied abandonment applications from Period 1. The appraisal of previous submissions will be conducted using the reassessment criteria. Applications will be reviewed for particular factors, including whether there was a “subject to receiving SRP grant funding” clause in the oil field service contract, as many applications were denied for this reason. Applications which do not fall within the reassessment criteria are advised to apply to future SRP application periods.
Applicants will be informed whether their submission is denied or approved for a grant by the end of August 2020. Successful applications may receive up to $30,000 in grant funding.
Period 3 demonstrates a move towards a more coordinated and strategic approach to funding closure activities as the Program approaches its third month of operation. While demand for Program funding continues to be high, the more structured Period 3 may assist Alberta Energy to clear the application backlog.
We continue to monitor Program developments and assist clients with navigating the application process in Alberta, as well as Saskatchewan's Accelerated Site Closure Program and British Columbia's Reclamation Programs. Please reach out to our Regulatory group should you have any questions. In addition, please visit our COVID-19 Resource Centre for other COVID-19-related materials.