The joint government/industry Liability Management Advisory Committee (LMAC)1 has recommended that the Alberta Energy and Utilities Board (EUB) obtain the views of stakeholders on a liability management program to replace the current full security deposit requirements of Part 16.6 of the Oil and Gas Conservation Regulations. To that end, the draft directive Oilfield Waste Liability (OWL) Program and Licence Transfer Process is available on the EUB Web site www.ercb.ca under Industry Zone : Rules Regulations and Requirements : Directives for review and feedback.
Proposed Oilfield Waste Liability Program
The proposed Oilfield Waste Liability (OWL) Program would replace the current full security deposit requirements in place for EUB-approved oilfield waste management facilities, with a risk-based industry backstopped liability management program. EUB-approved landfills held under an Oilfield Waste Management (WM) Approval would continue to be administered under Part 16.6 of the Oil and Gas Conservation Regulations and remain subject to full security deposit requirements.
The proposed program is very similar to the EUB's existing LLR Program. The EUB would compare a WM Approval holder's deemed assets in the OWL (as well as any assets it might have in the LLR and Large Facility Liability Management [LFP] programs) to its deemed liabilities in the OWL (as well as any liabilities it might have in the LLR and LFP programs) monthly and on receipt of an application to transfer a waste management facility. If a WM Approval holder's deemed liabilities exceed its deemed assets, it would be required to provide the EUB with a security deposit for the difference.
Additionally, for a nonproducer licensee (NPL) or a producer licensee having a liability management rating less than 1.0 (eligible producer licensee), the OWL Program compares the deemed assets of each facility in the OWL Program to its deemed liabilities and requires a facility-specific security deposit for the difference if the facility's deemed liabilities exceed its deemed assets. An NPL or eligible producer licensee acquiring a new or existing waste management facility would be required to provide a security deposit for the full deemed liability of the facility until such time as it has 12 calendar months of throughput on which to base a deemed asset calculation.
The proposed OWL Program would have the cost to suspend, abandon, remediate, and reclaim an "orphaned" oilfield waste management facility assumed by the Orphan Fund, while the total deemed liability of OWL sites would be included in the Orphan Fund Levy.
During the first five years of the program, NPLs would be subject to any levy(s) required to obtain funding for the first $2 million in costs associated with any orphaned NPL site, with the Orphan Fund assuming any costs above this amount. The total amount of funds raised through any NPL levy(s) would not exceed $2 million.
The proposed OWL Program is based on oilfield waste management facilities being licensed. The EUB proposes to license the existing waste management facilities and to grandfather the WM Approval holders from the requirements of Directive 067: Applying for Approval to Hold EUB Licences. Parties not already holding a WM Approval and intending to obtain a WM Approval must fully comply with Directive 067. The licensing of a waste management facility would occur in conjunction with the WM Approval process.
Proposed Change to LLR Program-Based Orphan Fund Levy
Should the OWL Program be implemented as proposed, the impact on licensees within the LLR Program is believed to be relatively minor. The marginal increase in the Orphan Fund's exposure to the costs to suspend, abandon, remediate, and reclaim an "orphaned" OWL site would be offset by an increase in its levy base equal to the total deemed liability of OWL sites.
Consultation Process
In conjunction with this bulletin, the EUB is directing information on the proposed OWL Program to all holders of EUB WM Approvals, all licensees included within the LLR Program, and identified industry associations, provincial government agencies, municipal government organizations, and nongovernmental organizations for their consideration and comment.
Comments on these documents are requested no later than Friday September 14, 2007, and parties are strongly encouraged to provide their comments electronically by e-mail to llr@ercb.ca. Written comments may be provided to Howard Fedorak, EUB Corporate Compliance Group, 640 - 5 Avenue SW, Calgary, Alberta T2P 3G4, or by fax to (403) 297-7168.
Implementation
The proposed OWL Program would require a number of legislative and regulatory changes to be made before it could be fully implemented. The nature and extent of these changes and their impact on the timing of program implementation will be considered on receipt and consideration of stakeholder comments.
The EUB will evaluate feedback received through the consultation process and determine required revisions to the proposed program. EUB approved changes will be reviewed with directly affected parties and LMAC. Please be aware that the final version of the directive may differ from the attached draft in response to the comments received during this consultation process and subsequent EUB Board consideration.
D. K. Boyler, P.Eng.
Executive Manager
Compliance, Environment, and Operations
Attachment
Draft Directive: Oilfield Waste Liability (OWL) Program and Licence Transfer Process
1 LMAC comprises senior representatives from the EUB, Alberta Environment, Alberta Energy, Alberta Sustainable Resource Development, Canadian Association of Petroleum Producers, Small Explorers and Producers Association of Canada, Gas Processors Association, Canada, and the Alberta Oilfield Treating and Disposal Association.
