The Alberta Energy Regulator Released Directive 088: Here is What You Need to Know

By - David
07.01.22 01:59 PM

On December 1, 2021, the Alberta Energy Regulator (AER) released Directive 088: Licensee Life-Cycle Management. That same day, it came into effect. Directive 088 will implement the Alberta government's Liability Management Framework.

 

An Overview of the Alberta Energy Regulator's Directive 088


The finalized version of Directive 88 sets out the changes to Alberta's liability management regime for oil and gas assets.

This directive:

  • Introduces a holistic assessment of a licensee’s capabilities and performance across the energy development life cycle, which will be supported by the licensee capability assessment (LCA);
  • Introduces the Licensee Management Program, which determines how licensees will be managed throughout the energy development life cycle;
  • Introduces the Inventory Reduction Program, which sets mandatory closure spend targets;
  • Updates application requirements related to the licence transfer process;
  • Outlines security collection under this directive; and
  • Manual 023: Licensee Life-Cycle Management was developed alongside Directive 088 to provide further details and clarity.


This directive outlines how information, particularly financial, reserves, closure, and compliance information, will be used to enable the AER to assess the capabilities of licences to meet their regulatory and liability obligations through energy development life cycle; administer our liability management programs; and ensure the safe, orderly, and environmentally responsible development of energy resources in Alberta throughout their life cycle.


In the following section we will discuss the holistic licensee assessment, the licensee management program, the inventory reduction program and the licence transfer.

 

Holistic Licensee Assessment


The AER will comprehensively assess the licensee to inform regulatory decisions regarding the licensee. This assessment uses a multi-factor approach to assess the capabilities of licensees to meet their regulatory and liability obligations throughout the energy development life cycle: initiate, construct, operate, and close.


This includes the following:

•  The factors listed in section 4.5 of Directive 067: Eligibility Requirements for Acquiring and Holding Energy Licences and Approvals for determining whether a licensee poses an unreasonable risk

• Licensee capability assessment factors (outlined in section 2.2)

• Any other factors as appropriate in the circumstances


The AER may also consider additional information provided by the licensee throughout the life

cycle, including applications, amendments, reports, and other submissions to the AER.

This assessment is to ensure the responsible management by the licensee of their liability from their collective wells, facilities, pipelines, and sites. The holistic licensee assessment will reoccur at various times as the licensee moves through the energy development life cycle.

 

The Licensee Management Program


The Licensee Management Program is how the AER will proactively monitor licensees to support the responsible management of energy development. Under this program, the results from the holistic licensee assessment will be used to identify those licensees that are or are likely to be at risk of not meeting their regulatory and liability obligations throughout the energy development life cycle.


The AER may specifically engage and use appropriate regulatory tools or conduct compliance assurance activities with the licensee. This may involve providing education or recommendations to follow industry best practices and, where appropriate, initiating specific regulatory actions.


The Inventory Reduction Program


In the Oil and Gas Conservation Rules (OGCR) and the Pipeline Rules, the AER has the authority to establish “closure quotas,” meaning set minimum amounts of closure work, money to be spent on closure activities, or both. The Inventory Reduction Program will enable the AER to monitor licensees and adjust the program to ensure progress towards reducing their liability by setting these closure quotas. The AER will set mandatory closure spend targets (mandatory targets) and voluntary closure spend targets (voluntary targets) for each licensee annually. They will not be adjusted during the calendar year.


The Licence Transfer

 

Agreements for the purchase and sale of AER-licenced wells, facilities, and pipelines do not result in a transfer of the associated licences until a licence transfer application is submitted to and approved by the AER. AER licences with a licence status of Issued, Amended, Discontinued, Suspension, Abandoned, RecCertified, or RecExempt are eligible to be transferred. Licences with a licence status of Cancelled or Re-Entered are not eligible to be transferred.


A licence transfer application will trigger a holistic licensee assessment of both the transferor and transferee. This assessment will include reviewing abandoned, reclaimed, and reclamation-exempt sites to ensure they are held by a responsible party that can address, manage, and monitor current conditions or future issues related to public safety or the environment should they arise.


Further information

 

Directive 088 will result in several positive changes, including: risk reduction for defunct licences, improved flexibility in establishing licence eligibility, duction of certainty for oil and gas companies, increase reporting requirements and ongoing closure expenses for oil and gas companies, etc.


Those license transfer applications not decided by the AER before December 1, including the pending ones, must be re-submitted under the new requirement and trigger a holistic assessment. As the AER continues to be implemented, future phases might include changes to other AER directives related to liability management.


These are the future dates in which the AER will be giving information about the new requirements :

·  January 25, 2022 : Overview of Directive 088

·  February 3, 2022: Overview Directive 088

·  February 8, 2022 : Licensee capability assessment

·  February 10, 2022: Licence transfer process and security

·  February 16, 2022: Inventory Reduction Program

 


                                                                                                 

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