Towards “Holistic” Assessment – Part II: Public Comment Period for Draft Directive Changes

As set out in our earlier update, the Alberta Energy Regulator (AER) continues to move towards implementing its new Liability Management Framework (LMF).

On October 8, 2024,[1] the AER released proposed changes to four Directives:

• 001: Requirements for Site-Specific Liability Assessments;[2]
• 011: Estimated Liability;[3]
• 068: Security Deposits;[4] and
• 088: Licensee Life-Cycle Management.[5]

(collectively, the Directives)

The AER has requested that public comment on these revisions be provided by November 8, 2024.

Proposed Changes to Draft Directives

The revised Directives are aligned with the AER’s goal of better estimating liability by replacing the existing Liability Management Rating (LMR) system with the revised LMF (discussed in our earlier update). This is reflected in the revised Directives having removed all references to the LMR system and its associated components (including the LLR, LFP, and OWL Program).

Significant revisions include removing the provisions for calculating liabilities from a number of different directives and consolidating this information in Directive 011. For example, while Directive 001 continues to outline the requirements and procedure for submitting site-specific liability assessments (SSLAs), it no longer includes methods for calculating estimated liability, nor does it prescribe criteria for determining when SSLAs are required.

The revised Directive 011 now includes: the definition of estimated liability; methods for estimating regional costs vs costs determined by SSLA; when an SSLA is required; the means of reducing estimated liability through reporting; a description of the Conditional Adjustment of Reclamation Liability (CARL) Program (relocated from Directive 088 and Manual 023); and the means of calculating orphan fund levies using licensee estimated liability.[6] As a result, Directive 011 will take on increased importance under the new LMF.

While Directive 068 remains focused on security requirements for oil and gas operations, it now incorporates many provisions that were previously outlined in Directives 075, 088, and the Oil and Gas Conservation Rules (OGCR).

Directive 088 received very minor changes, principally related to removing calculations now set out in the revised Directive 011. However, one noteworthy change includes the ability to combine oilfield waste management approvals with well and facility transfer applications,[7] which may reduce the need for multiple applications by licensees.

Increased Transparency

The proposed changes suggest more transparent AER reporting under the revised LMF, where three of the draft Directives have been revised to include new sections specifically outlining information availability.[8] These changes would mark a departure from the broad confidentiality clauses in the OGCR and the Pipeline Rules related to the release of licensees’ financial and reserve information,[9] and it is expected these clauses will be revised at a later date.[10]

Under Directive 011, total estimated liability for both industry and licensees will be made available through public reporting, while information submitted for SSLAs will remain confidential except for transfers or insolvency proceedings. Under Directive 068, security held for both industry and licensees will be made public, and these amounts will be summarized according to industry sector and program under which security was required. While the financial and reserves information provided by licensees will remain confidential, certain findings or results generated by AER assessments will be public under Directive 088, such as licensee capability and compliance with regulatory and liability obligations.

Next Steps in LMF Implementation

The AER will collect public comment on these proposed changes until November 8, 2024 through the AER’s Public Comment Form.[11] The AER will then review public feedback and issue the final Directives and associated rule changes by March 2025.[12] We expect that these changes will include the rescission of Directives 006, 024, and 075.[13]

We will continue to monitor further AER updates and the implementation of the LMF closely. McLennan Ross’ Environmental & Energy group has extensive experience with standards and proceedings before the AER.

If you have any questions regarding these developments, please contact a member of the McLennan Ross Environmental & Energy group.

With special thanks to Articling Students, Josie Britton and Kate Wegscheidler, for assistance and research in the preparation of this article.