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Bulletin 2009-20

June 30, 2009

2009 ERCB Administration Fees (Industry Levy)

1          Energy Regulation

The Energy Resources Conservation Board (ERCB) focuses on regulating energy resource development within Alberta. The 2009/10 net revenue requirement for the ERCB is $168.2 million as approved by the Government of Alberta. This money is needed to carry out the ERCB mandate. The ERCB’s strategic priorities are public safety and regulatory compliance, new and unconventional energy resources, stakeholder engagement, technical expertise, information technology reinvestment, and geological mapping strategy. For further information, the ERCB 2009/12 Business Plan can be found on the ERCB Web site (www.ercb.ca/docs/eubinfo/BusinessPlan_2009-12.pdf).

The ERCB’s net revenue requirement is funded partially by a government grant ($69.0 million, or 41 per cent) and partially by an industry levy ($99.2 million, or 59 per cent). The 2008/09 net revenue requirement of $167.0 million was funded $70.4 million (42 per cent) by government grant and $96.6 million (58 per cent) by an industry levy.

2          2009 Administration Fees (Industry Levy)

The ERCB’s net revenue requirement affects operator levy invoices. In addition, other factors contribute to the fee determination at an operator level, including an increase or decrease in wells or entities within the sector, ownership transfer and amalgamations, new entrants, and volume fluctuations. Invoices vary according to individual operations and are based on operating statistics for the calendar year. Invoices to operators detailing the fee calculations will be mailed on June 30, 2009, and payments are due July 30, 2009.

The Energy Resources Conservation Act ( ERCA ) authorizes the ERCB to make regulations to levy the administration fee on the sectors that it regulates. The ERCA also authorizes the imposition of a late-payment penalty, which is set at 20 per cent on any portion of the fee that remains unpaid after July 30, 2009. The ERCB can also initiate action to close producing facilities for failure to pay an invoice or late-payment penalty.

Oil and gas, oil sands, and coal mines sector invoices for 2009 administration fees are sent to and are payable by the party that was the operator as at December 31, 2008. For conventional wells and oil sands schemes, “operator” means the entity that files well production and/or injection/disposal data with the Petroleum Registry of Alberta. If the operator fails to pay the fee, the licensee is responsible for payment of the invoiced amount plus any penalty.

If an entity is buying a well or other asset subject to an administration fee, it is important to agree with the seller as to who will be responsible for payment of the 2009 administration fee.

3          Oil and Gas

3.1          Determination of Administration Fees

The administration fee in the conventional oil and gas sector is based on individual well production of oil/ bitumen or gas and the number of production and service wells for the year ended December 31, 2008.

All operating wells are classified into one of eight base fee classes, as set out in the Energy Resources Conservation Board Administration Fees Regulations ( ERCB AFR ) and illustrated in the table below. In addition, an adjustment factor is specified and applied to each base fee. This adjustment factor ensures that the total administration fee collected for the sector satisfies the net revenue requirement for the ERCB with respect to that sector not funded by the Government of Alberta.

The adjustment factor is set at 1.380553 of the rate specified for wells in all classes in the ERCB AFR .

3.2          Broad Industry Initiatives

The Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association of Canada (SEPAC) have jointly requested that the ERCB’s administration fee process be used to collect $4 005 000 to fund Broad Industry Initiatives (BII) in 2009 (see attached CAPP/SEPAC letter). The Board has agreed to this request and includes an additional charge for this purpose in the 2009 oil and gas well administration fee invoices, increasing the adjustment factor used for invoicing from 1.380553 to 1.451637.

The dollars collected for BII are a pass-through of funds from industry entities to the two main industry associations. The ERCB is not involved in the evaluation, selection, or monitoring of these initiatives.

Fees are levied in five categories based on operating information for the calendar year 2008. An operator may have activity in more than one category. Each category is subject to an adjustment factors as identified below.        

5          Coal

The administration fee for coal is based on each mine’s share of total production volumes for the year ended December 31, 2008. It is set at $0.045976 per tonne of marketable coal, as specified in the ERCB AFR .

6          Contact

If you have questions about the 2009 administration fees, please contact

Ms. Kris Klimczuk
Energy Resources Conservation Board
Finance Branch
640 - 5 Avenue SW
Calgary, Alberta  T2P 3G4
Telephone: 403-297-4289
Fax: 403-297-3195
E-mail: kris.klimczuk@ercb.ca  

7          Appeals

Appeals should be made to

Mr. Tom Heywood
Energy Resources Conservation Board
Finance Brance
640 - 5 Avenue SW
Calgary, Alberta  T2P 3G4

Notwithstanding the filing of an appeal, payment of all invoices is required by July 30, 2009. Subsequent adjustments may be applied, if needed, following consideration of the appeal. 

<original signed by>

John Giesbrecht
Chief Financial Officer 

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