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Bulletin 2006-20

June 6, 2006

1    General

The Alberta Energy and Utilities Board (EUB) announces the 2006 administration fees.

The EUB has a net revenue requirement, which is funded through a government grant and an administration fee. The administration fee, collected from each sector, reflects the EUB’s estimated operating costs associated with regulating that sector.

The government has approved a $19.3 million funding increase for the EUB.  As a result, the 2006 Administration Fees and General Assessment will increase. While the government/industry funding ratio remains unchanged from the prior year at 43 per cent government and 57 per cent industry, the industry portion of the funding increase is $10.5 million. This amount has been distributed across all industry sectors regulated by the EUB. 

The $10.5 million increase brings the total Administration Fee and General Assessment to $72.5 million for 2006. The allocation to industry sectors is based on EUB staff effort and budget allocation applicable to each sector. The following is the distribution among the various sectors.

Administration Fee Revenue ($000)

It is important to note that many factors contribute to fee determination at a company level, including increase or decrease in wells or entities within the sector, ownership transfer and amalgamations, new entrants and, where applicable, volume fluctuations. For this reason, the actual impact at a company level is not directly proportionate to the percentage increase at the sector allocation level. As a result, invoices will vary according to individual company operations and are based on operating statistics for the 2005 calendar year. Invoices to operators and utilities detailing the fee calculations will be mailed on June 15, 2006, and payments are due July 17, 2006.

The Oil and Gas Conservation Act and the Alberta Energy and Utilities Board Act, authorizing the EUB to levy the administration fee in the oil and gas, oil sands, electric generation, and coal sectors, provide for the application of a late-payment penalty of 20 per cent on any portion of the fee that remains unpaid after July 17, 2006. The EUB can initiate action to close producing facilities for failure to pay an invoice or late-payment penalty.

Late-payment penalties for the gas retail, gas transmission, gas distribution, electric transmission, electric retail, and electric distribution sectors will apply as stipulated in the Public Utilities Board Act.

Note that oil and gas and oil sands sector invoices for 2006 administration fees are sent to and are payable by the operator. For conventional wells and oil sands schemes, “operator” means the company 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 or general assessment, it is important to agree with the seller as to who will be responsible for payment of the 2006 administration fee.

2    Oil and Gas

2.1    Administration Fees

The administration fee in the conventional oil and gas sector is based on individual well production for the year ended December 31, 2005. It is set at 88.9667 per cent of the rate specified for wells in all classes of Section 16.070 of the Oil and Gas Conservation Regulations.

2.2    Broad Industry Initiatives (BII)

The Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association of Canada (SEPAC) have jointly requested that the EUB’s administration fee process be used to collect $3 065 000 to fund broad industry initiatives in 2006 (see attached CAPP/SEPAC letter). The Board has agreed to this request and includes an additional charge for this purpose in the 2006 well administration fee invoices, increasing the adjustment factor used for invoicing from 0.889667 to 0.945241.

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

3    Oil Sands 

The 2006 fees remain split into five categories. The five categories are subject to the adjustment factors identified below.

4    Utilities

The general assessment payable in the categories listed below is calculated using an allocation factor which gives 75 per cent weight to the operating utility’s actual revenue and 25 per cent weight to its average number of customers.  These fees offset the cost of EUB operations relating to determination, administration, enforcement of applicable tariffs, and terms and conditions of service.

The 2006 assessment remains split into five categories:

5    Electric Transmission

The electric transmission sector levy offsets the costs of EUB operations relating to Alberta Electric System Operator (AESO) tariffs and “need” applications, Transmission Facility Owner (TFO) tariffs and facility applications, operations and enforcement.

6    Coal

The administration fee for coal is based on each mine’s share of total production volumes for the year ended December 31, 2005. The rate is $0.036398 per tonne of marketable coal.  

7    Electric Generation

The 2006 electric generation administration fee is based on each generator’s share of total production for 2005. The production base for 2005 includes all marketed production by electric generators. Marketed production is the electric energy, generated in Alberta by each operator of a power plant, which is exchanged through the Power Pool of Alberta in the 2005 calendar year. The 2006 administration fee is $0.012206 per megawatt hour (MWh).

8    Regulatory Changes

Amendments have been made to Sections 16.080, 16.081, and 16.100 of the Oil and Gas Regulations (under the Oil and Gas Conservation Act), as well as the Administration Fee Regulation (under the Alberta Energy and Utilities Board Act) and the General Assessment Order (under the Public Utilities Board Act), to reflect the foregoing.

9    Contact

If you have questions about the 2006 administration fees, please contact

Mr. Tony Rosgen 

Alberta Energy and Utilities Board

Finance Branch

640 - 5 Avenue SW

Calgary, Alberta  T2P 3G4

Telephone: (403) 297-6985 

Fax:  (403) 297-3195

E-mail: tony.rosgen@gov.ab.ca .

10   Appeals

Any appeals should be sent to the attention of

Ms. Dianne Schaeffer

Alberta Energy and Utilities Board

Finance Branch 

640 - 5 Avenue SW

Calgary, Alberta  T2P 3G4

Notwithstanding the filing of an appeal, payment of all invoices is required by July 17, 2006. Subsequent adjustments will be applied, as needed, following consideration of the appeal.

J. Giesbrecht

Chief Financial Officer

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