More questions regarding the Liability Management program and processes will be added as they become available. There are Q and A's for the following areas:

General

Digital Data Submission (DDS)

Licence Transfer

Security Deposits

Orphan Levy

LLR / LMR Assessments

Site-Specific Liability Assessments

Non-producer Licensee Netback

Oilfield Waste Liability  

Enforcement

General

Question: What is the purpose of the Licensee Liability Rating (LLR) Program?

The purpose of the LLR Program is to minimize the risk to the Orphan Fund posed by unfunded well, facility, and pipeline abandonment and reclamation liability. The Orphan Fund pays for the abandonment and reclamation of wells, facilities, and pipelines included within the LLR Program if a licensee or working interest participant defaults on its obligations to abandon and reclaim or to pay the costs associated with those activities. The Orphan Fund is fully funded by the oil and gas industry through a levy administered by the ERCB.

Question: Where can I update well name changes?

The ERCB does not use well names and encourages licensees not to submit well name change notifications. A licensee is, however, able to submit well name change notifications to the ERCB through DDS. Select the subsystem ERCB / Notifications / Licence / Submit Well Name Change Notification. Well names can also be changed during well licence transfers. Proposed well name changes must be consistent with the Oil and Gas Conservation Regulations . The ERCB does not accept notification of facility name or facility name changes.

Question: What are the conditions and benefits of filing a multiwell pad notification?

A licensee may establish a multiwell pad for those sites on which it has more than one well on a single surface lease. Both the well licences and the surface lease must be held by the same licensee. The establishment of a multiwell pad provides for a reduction in the reclamation liability of the wells located on the pad.

Question: When do I notify the ERCB of my facility abandonment?

A licensee must notify the ERCB within 30 days of the completion of the abandonment of a licensed facility.

Question: I am the licensee of a well and there has been a change to one of the working interest participants (WIP). Can I update this information?

Yes; however, WIP information is only required by the ERCB during four stages in the life of a well (when licensed, transferred, suspended, and abandoned).

To update the WIP information outside of the four stages, the licensee of record may submit the following on company letterhead:

• Licence number;
• Surface location;
• New WIPs with the full corporate/individual names identified and the percentages (percentage must add up to 100%); and
• Any supporting documentation with the removal of any confidential information.

The above information will be included in the well file, but the ERCB database will not be updated..

Question: Is there a help line number that I can access that can provide assistance when needed?

Yes. The help line number is (403) 297-3113; if calling long distance, contact the RITE operator (310-0000) for toll free access. You can also e-mail the Liability Management Group at LiabilityManagement@ercb.ca

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  DDS - Digital Data Submission

Question: What is the Digital Data Submission (DDS) system?

This system supports the transmission of digital data from authorized ERCB customers to the ERCB via an Internet connection.

Question: Where do I find the DDS system on the ERCB Web site?

From the ERCB home page, follow the path: ERCB Home : Industry Zone : Data Submission and Reporting OR you can find it in the drop-down menu under Quick Links on the ERCB home page.

Question: How do I logon to the DDS system if I don not know our logon identification code and password?

It is recommended that you contact your system administrator. If your system administrator is unavailable, go to the DDS help screen and request a new username and password (subject to meeting DDS set-up requirements) from the ERCB's DDS Administrator.

Question: Why am I not allowed access to certain DDS screens even though I have a valid login identification code and password?

The system administrator in your company assigns the access privileges for each individual or account.  

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Licence Transfer

Question: Do licence transfer applications have to be submitted via DDS?

Yes, licence transfer applications can only be filed electronically via DDS.

Question: How do I create a licence transfer application?

Access the ERCB's DDS system and select subsystem Applications / Licence Transfer / Submit Licence Transfer Application. Enter all required information and when completed, click the 'Submit' button. The applicant is responsible for contacting the other party to notify that the application has been submitted, as the application requires second party acceptance before it is electronically submitted to the ERCB. Before a licence transfer application will be accepted by the Licence Transfer subsystem, both parties must confirm that the information contained within the application is correct and accept a declaration stating they have complied with a list of specified ERCB requirements.

An online demonstration is available. Select either link: [Small-size] [Full-size]

Question: How do I accept a licence transfer application as the second party?

Access the ERCB's DDS system and select subsystem Applications / Licence Transfer / Submit Licence Transfer Application. Retrieve the existing application from the drop-down menu and review the application information. If the application is acceptable, click the 'Approve' button for the application to be submitted to the ERCB.

An online demonstration is available. Select either link: [Small-size] [Full-size]

Question: If I have a number of licences to transfer from the same transferor or transferee, do I have to enter each licence into separate licence transfer applications or can I enter them all into one single transfer application?

It is recommended that all licences be entered into a single application.

Question: Is there another method of submitting an application with numerous licences other than through the ERCB's standard licence transfer system?

Yes, an alternative for submitting licence transfers is the file upload process. Access DDS and select subsystems Applications / Licence Transfer / Submit Licence Transfer Application . From this screen, identify if your company is the transferor or transferee and then select ‘Upload File.' This will direct you to the requirements for the Upload File process. Files that are to be uploaded MUST be in XML format. Samples of the required format are shown on this screen. Once you have the file prepared, select browse to retrieve the file and then select upload. Once the file has been uploaded, you will get a submission acknowledgement screen. Print this for your records. Go back into subsystems Applications / Licence Transfer / Submit Licence Transfer Application and select the existing submission. Review to ensure that all information within the application is correct and then 'Submit' the transfer.

Question: I am trying to transfer a licence, but it isn't showing up in DDS. Why is that?

The licence number may be incorrect; the transferor may not be the licensee of record for that licence; or the status of the licence is either reclamation exempt or reclamation certified.

Question: Can a well or facility with a reclamation certificate be transferred?

No, a well or facility with a reclamation certificate cannot be transferred.

Question: Can a well or facility that is abandoned and reclamation exempt be transferred?

No, a well or facility that is reclamation exempt cannot be transferred.

Question: Do I enter the licence’s current working interest participants (WIP)?

The WIP on the licence transfer submission should indicate the post-transfer WIP where it must add up to 100% and the full corporate/individual names.

Question: How long does a licence transfer application take to process?

A licence transfer application with no deficiencies will be approved in 2 business days. An application that is deficient will be approved within 2 days of deficiency resolution. 

Question: Will I receive a notice of approval when my licence transfer application is approved?

Yes, a copy of the approval notification letter will be mailed to both the transferor and transferee .

Question: I submitted the wrong licence number to be transferred. How can I fix this?

Contact the other party and ask them to 'Reject' the application via the DDS system. Once the submission is rejected, it will be sent back to the applicant. The applicant can then log into DDS to retrieve the submission and make any revisions to it .

Question: How do I obtain copies of ERCB approved licence transfer applications?

Copies of approved licence transfer applications can be ordered and purchased from the ERCB Information Services at (403) 297-8190.

Question: How do I acquire a list of all our licences?

A licence list can be ordered and purchased from ERCB Information Services at (403) 297-8190.
 

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Security Deposits

Question: Why are we required to establish a security deposit with the ERCB?

A licensee is required to establish a deposit when it is determined that its liabilities exceed its deemed assets. Deposits are equal to the difference between the licensee's deemed liabilities and its deemed assets (refer to Directive 006: Licensee Liability Rating (LLR) Program and Licence Transfer Process [Directive 006]).

Question: What forms of security deposit does the ERCB accept?

The ERCB will accept only cash or letters of credit that meet the requirements of Directive 068: ERCB Security Deposits to satisfy security deposit requirements .

Question: How do I know if the ERCB has received my security deposit?

Once the ERCB receives the required deposit amount, the ERCB's Finance Branch will send a confirmation letter to the licensee. 

Question: Can I establish a security deposit on behalf of another party?

The ERCB will only accept a security deposit from a licensee required to submit the security deposit or from a trustee, receiver, or receiver manager acting on behalf of that licensee. A security deposit submitted on behalf of a licensee by any other party will not be accepted.

Question: What conditions does our company need to meet in order to be eligible for the return of our security deposit?

Licensees that have an LMR value (deemed assets/deemed liabilities) above the threshold of 1.0 are eligible for a full refund of their security deposits. Incremental (partial) refunds are also available for cash security deposits when the difference between the deemed liabilities and deemed assets is less than the security deposit held in trust by the ERCB. No partial refund can be made for letter of credit security deposits unless a new letter of credit has been submitted for the reduced security deposit amount. In this instance, the letter of credit held for the larger amount, which would no longer be required, would be returned to the licensee.

Question: What is the method for requesting a refund of our security deposit?

A written refund request must be submitted on company letterhead and contain appropriate contact information. The request must be sent to the attention of the security deposit administrator of the ERCB's Liability Management Group.

Question: How long does it take to refund security deposit?

You should receive your security deposit refund from the ERCB Finance Branch within two to three weeks.

Question: How do I know the total amount of security that is held in our name?

Monthly account statements are sent by the Royal Bank to each licensee that has established a security deposit.
Question: We have not received an account statement for a number of months. Who should we notify to get this corrected, the bank or the ERCB?
Your company will need to call the ERCB Finance Branch at (403) 297-8790 to have the address corrected with the bank. Companies are not authorized to make changes directly with the bank.

Question: We have not received an account statement for a number of months. Who should we notify to get this corrected, the bank or the ERCB?

Your company will need to call the ERCB Finance Branch at (403) 297-8790 to have the address corrected with the bank. Companies are not authorized to make changes directly with the bank.

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Orphan Levy

Question: How can I find out what wells and facilities were assessed in the levy?

Assessments can be viewed by accessing the DDS system and selecting subsystem Reports / Liability Rating / View Liability Rating. Go to the History tab and choose the February 04, 2012 monthly assessment. The Wells and Facilities tabs will provide the liability assessed for each licence for the 2012 Orphan Levy.

Question: Why are we assessed a levy when we transferred all our wells and facilities?

At the time the levy was assessed, the wells and facilities were still licensed to your company.

Question: Can a third party pay the levy invoice on behalf of the licensee?

Yes, third party payment will be accepted, but must be submitted with a copy of the invoice.

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LLR / LMR Assessments

Question: How can I view our monthly LLR / LMR assessment?

Assessments can be viewed by accessing the DDS system and selecting subsystem Reports / Liability Rating / View Liability Rating. These assessments can be downloaded.

Question: Why is the status indicator for my well showing active when my well has not produced in the last few months?

A well is considered active if it has reported an operation (production or injection) in the last 12 calendar months.

Question: What conditions do I need to meet in order to receive a 50 per cent reduction in the reclamation liability determined for my abandoned well or facility?

A licensee may request a 50 per cent reduction in the reclamation liability determined for an abandoned well or facility by the LLR formula if all of the work required to obtain a reclamation certificate from Alberta Environment and Water or Alberta Sustainable Resource Development has been completed, and the delay in obtaining a reclamation certificate is solely related to the re-establishment of vegetative cover.

Question: What is the formula for calculating the LLR?

The LLR calculation is provided under Appendix 4 of Directive 006.

Question: Can I view the detailed monthly assessment of another company?

No, the monthly assessment is only accessible to the licensee.

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Site-Specific Liability Assessments

Question: What are the differences among Types A, B, C, and D suspension and abandonment costs?

Type A - Suspension and abandonment cost estimates fully meet Directive 001: Requirements for Site-Specific Liability Assessments in Support of the EUB's Liability Management Programs (Directive 001). These estimates must be based on the full current day estimate to suspend, abandon, remediate and reclaim based upon third-party unit costs, with no credit applied for salvage value. These estimates are based on sites-specific information including on-site inspections, as built construction diagrams, materials inventory, and intrusive environmental assessments of contaminant issues. These types of assessments may be based solely on Phase I Environmental Site Assessments only where a complete historical and current day assessments clearly indicates that assessment of contaminant and similar issues is not warranted.

Type B - An estimate based on partial or full site-specific construction or environmental data. Partial site-specific component may include assessment based on plot plans rather than as-built construction diagrams, or partially completed intrusive environmental assessments. A contingency budget must be provided for the liability issues identified but not quantified as required. Full site-specific component would include Phase II Environmental Site Assessment providing full contaminant delineation and characterization.

Type C - An estimate based on preliminary site-specific construction or environmental information and supplemented as needed with information from other sources. Suspension and abandonment estimates are based on typical component costs for that that type of facility rather than a site-specific inventory and materials assessment. Environmental issues identified using a Phase I Environmental Site Assessment but contaminant issues not characterized or delineated.

Type D - The best corporate cost estimate possible of outstanding suspend, abandon, remediate and reclaim obligations based on similar types of facilities. This estimate must be based on the undiscounted current day assessment of asset retirement obligations provided in financial reports.

Question: When is a liability assessment based on a phase I environmental site assessment acceptable (Type C liability estimate)?

When a complete Phase I Environmental Site Assessment that thoroughly assesses both historical and current conditions of the site indicates that there are no contaminant concerns, physical disturbance, or reclamation issues warranting further assessment.

A completed Phase I Environmental Site Assessment must include the following:

a) Review of past records regarding operations, waste management, and environmental impacts of the facility or well from when the facility was first built to until it was decommissioned. This includes records, correspondence, notes, plot plans, and, where available, as-built construction diagrams. A complete record review must examine records as described above from both company and government sources and, to the extent available, third party sources to develop a detailed understanding of the past operations of the site and assessment of potential liability issues associated with that.

b) A review of time series air photographs from before facility construction to decommissioning with regular intervals (approximately 5 years) being assessed. Air photos must be of good quality and of sufficient resolution to allow identification of site features.

c) Interviews with staff familiar with operations from when the facility was first operated until it was decommissioned.

d) An on-site visual inspection to identify environmental issues warranting further assessment conducted prior to facility decommissioning, regarding, resurfacing, or other significant disturbance that would impair the visual assessment.

Contaminant issues warranting further assessment include, but are not limited to; releases of regulated substances such as vessel or pipe leaks or drips of liquid, soil staining or cumulative operational staining, damage or flaws of spill contaminant systems (e.g., cracks in floor sumps, hole in tank liner), documentation of past spills of regulated substances for which a remediation report with confirmatory sampling has not been prepared, documentation of operational practices likely to result in remaining environmental concerns (e.g., on-site disposal of gas plant filters, use of degreasers to clean floors, etc.).

Question: If a phase I site assessment finds evidence of contamination can we estimate liability based upon the phase I investigation?

No, the requirement in Directive 001 states, "Contaminant and similar environmental issues warranting further assessment identified in the phase I report must be further evaluated...." This sentence makes it clear that by definition, contaminants warrant further assessment. It does leave open to professional judgment what are "similar environmental issues warranting further assessment;" however, the requirement for further intrusive investigation of contamination is clear.

The evaluation of contaminant concerns based upon observation alone is not acceptable. Observation alone cannot be used to evaluate the significance of contaminant issues nor quantify the effects. Visual observation, smell, texture, etc. may indicate the minimum areas of concern. For example soil staining may show the top few centimeters of soil are affected (e.g., release of crude oil will stain soil). But these observations alone cannot be used to determine the extent of contamination that has leached from the original source and is not detectable to human observation (e.g., migration of BTEX constituents). It is the regulatory limits that determine the extent of liability issues and regulatory limits cannot be assessed by observation.

Question: When estimating volumes of affected soil, do we need to develop a "polygon diagram"?

Yes, you must develop a polygon diagram of affected spatial areas which illustrates the location of soil samples and the analytical results used to define plume dimensions. A polyhedron diagram must also be prepared to document the three dimensional nature of the plume when soil contamination at depth has been found.

Question: Do we need to provide a copy of the polygon diagram?

Yes, the polygon or polyhedron diagram is an integral part of the liability assessment and must be provided if the ERCB elects to audit the liability data provided and requests the complete liability assessment report.

Question: What is a 'plume irregularity factor" and why is it needed?

A "plume irregularity factor" is referred to in Appendix 2 of Directive 001 and is a multiplier to adjust preliminary soil volume estimates to account for the irregular and curvilinear nature of plume boundaries (plume fingers). The extrapolation techniques used to define the boundaries of the plume result in a polyhedron with smooth edges connecting the data points; however, contaminant plumes rarely, if ever, have straight edges as contaminants migrate irregularly and follow preferential flow pathways. The plume irregularity factor compensates for the underestimated plume volume resulting from using a straight edged figure.

Question: Why do we need to apply a plume irregularity factor when we already make generous estimates of affected soil volumes?

Considerable experience of both industry and government indicates that predictions of affected soil volumes made during remediation planning almost invariably underestimate the actual soil volume requiring treatment. Overestimates of affected soil volumes do occasionally occur but these are relatively rare and generally small. Underestimates of affected soil volumes are common. They can result in underestimates of costs that are orders of magnitude less then the original estimate made. The required inclusion of a plume irregularity factor that is transparent and easily verified is one means of improving the estimation of soil volumes.

Question: What do you mean by contaminant treatability study?

A treatability study is a series of laboratory tests used to assess the efficacy of a proposed remediation approach and to estimate the time required to meet remediation end points. These tests may evaluate biodegradation potential of hydrocarbons but can also be used to evaluate if chemical oxidation or physical stabilization will similarly meet desired remediation end points.

Question: Why is there no place to report salvage value on Form 001-A Suspension and Abandonment Cost Estimate Report? 

As ownership of equipment on a facility site can be held by a party other than the licensee, there is no provision for claiming its salvage value on Type A site-specific liability assessments.
However, a scrap metal value can be claimed, provided that is based on third-party quotes and reflects only its undiscounted, current value.

Question: How can I report the value of saleable sulphur?

For most sites, sulphur inventory is considered to be a liability as its value has been less than the costs associated with removing, loading, and transporting it. If there is currently value for part of the sulphur inventory, this should be reported as part of the facility-specific asset value and not as a discount to the liability value.

Question: Do leased buildings and equipment need to be included in abandonment cost estimates?

Yes, the costs for abandonment of leased buildings and equipment must be included in the liability estimate submitted for the purpose of the ERCB's Liability Management Programs. There is a legislative obligation to abandon all buildings, equipment, and appurtenances, etc. subject to an ERCB approval or license. That obligation makes no reference to ownership and the ERCB holds the licensee or approval holder and working interest participants fully responsible for the liabilities on sites approved by the ERCB. Leased buildings (including those which existed prior to the approval) or leased equipment that must be returned are governed by contractual arrangements between lessor and lessee and the ERCB is not privy to these contracts. Therefore, the abandonment cost estimate submitted to the ERCB must include all equipment or buildings associated with that facility licence.

Question: We recently submitted a site-specific liability assessment and are now modifying that facility. Do we need to “redo” the liability assessment?

A significant change to the facility, such as the addition of a new process unit or a new landfill cell, requires that the site-specific liability assessment be updated if those changes materially affect the associated liability. When the assessment report is very recent, a supplement to that report is sufficient rather than rewriting the whole report.

The liability assessments submitted for ERCB Liability Management Programs must include liability estimates for all phases of the final retirement of the facility: suspension, abandonment, decontamination, and reclamation. Modifying the facility typically would require a re-assessment of the suspension and abandonment liabilities or for landfills, the cell closure and long term monitoring costs. The need to re-assess the liability for decontamination and reclamation after facility modification depends on the effect of construction on the outstanding decontamination and reclamation obligations. If the construction does materially affect (10% or greater of the facility’s current liability) the cost of the outstanding decontamination and reclamation obligation, then the liability attributed to those tasks needs to be updated.

Question: Why does the ERCB require submission of decommissioning reports or environmental reports (e.g. soils and groundwater monitoring) in addition to the estimate of liability?

A detailed evaluation of the site is essential to ensure that all potential liability issues have been identified, verified and where needed, quantified. It has been the experience of the ERCB that identification and quantification of liability issues has as much effect on the accuracy of liability estimates as the actual method used to estimate the associated costs. In order to validate the liability estimates provided, the ERCB first reviews the most critical aspects of the assessment which includes historical file and air photo review, interviews, on site assessments, sampling program design (if needed), analytical treatment and interpretation of results. These details are provided in the environmental monitoring or abandonment planning reports which the ERCB requires be submitted with the liability assessment. Once we are satisfied the issues are reasonably quantified, then we examine how the associated costs to address them are estimated.

Question: Why not apply a net present value (NPV) to the deemed liability of new facilities?

The intent of applying a deemed liability value in the LLR/LMR is to 'crystallize' the existing liability. For sites subject to site-specific liability assessments, the age and condition of the facility is inherently taken into consideration when evaluating site conditions. The deemed liability is an estimate of the current day costs to suspend, abandon, remediate, and reclaim whereas an NPV is applied in financial reporting to reflect the current value of a cost to be realized in the future.

Question: Where do I find facility Site Specific Liability Cost Estimates on DDS and where is the expiry date?

Search in the ERCB’s Digital Data Submission (DDS) System; under the company BA Code and go to ERCB, Reports, Liability Rating, View Liability Rating, views and searches of all properties licensed to the company can accessed. For example: Click on the facilities tab, there will be a list of Facilities with Licence numbers. For each Facility, cost estimates can be viewed by clicking on the view button at the far right hand side of the screen which will indicate expiry date and other relevant data.

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Non-producer Licensee Netback

Question: How do I become a Nonproducer Licensee (NPL)?

Pursuant to Directive 006, a NPL is a licensee whose deemed assets from midstream activities in the Licensee Liability Rating (LLR), Large Facility Program (LFP), and Oilfield Waste Liability (OWL) programs exceed its deemed assets from production volumes reported to the Petroleum Registry of Alberta (PRA) or a licensee having only facilities included in the LFP or OWL programs.

Question: What is a netback? What items should be included or excluded?

• Netback is net revenue generated from midstream activities per a unit of third-party volume processed.
• For the purposes of a netback submission, net revenue is earnings before interest, taxes, depreciation, and amortization and is equal to gross margin (midstream revenue less cost of goods sold) less direct operating costs and applicable general and administrative expenses.
• Net revenue is that a similar midstream licensee could achieve if it operated the same midstream facility. Net revenue is generated from conducting the day-to-day midstream operations. Therefore, revenue and expense items that would not be typical of facility operations should be excluded from the netback calculations.
• Production volumes refer to the 12 months of total received inlet volumes reported to the PRA against the reporting facility ID codes attached to a facility’s license. Report only third-party volumes from which revenue is generated. Volumes from a licensee’s own production are not to be included. The 12-month reported volumes must correspond to the same accounting period as the licensee’s most recent fiscal year.

Question: What documentation is required to support an Appendix 13 - Nonproducer Licensee Netback calculation form (Directive 006) and an Appendix 9 - Facility Netback calculation form (Directive 024)?

Below is a list of required documentation:

• An annual report containing an independent auditors’ report, audited financial statements and its notes for the most recent fiscal year end; or unaudited financial statements with an accountant’s report and its notes accompanied by an income tax return for the same most recent fiscal year.
• The ERCB must verify the information submitted on the netback calculation form to the financial information provided. Where this verification is not evident, an in-house profit and loss statement, any additional supporting documents, and an explanation of the methodology are required.
• All furnished information including netback calculation form, financial statements, income tax return, production volumes, and additional supporting documents must have the same reporting period which is consistent to the most recent fiscal year. For example, a licensee whose fiscal year is a calendar year, the accounting period is from January to December.
• Netback information submitted should be marked "confidential". The Appendix 10 submissions are protected by the Freedom of Information and Protection of Privacy Act . Appendix 6 submissions are protected under the Oil and Gas Conservation Regulations for 5 years absolutely and after the 5 years it is protected by the Freedom of Information and Protection of Privacy Act.
• If the licensee's net revenue is negative for all the facilities that would be recorded on the Netback Calculation Form, then the submitted netback will be amended to zero because an asset value will not be generated for a negative net revenue value.
• Netback calculation form and its supporting documents must be provided within 6 months of the licensee’s fiscal year end.

Question: How are the production volumes reported differently when we are not the 100% owner of the facility? \

The licensee needs to provide the financial information for the third party volumes that they receive revenue from. They also need to indicate what percentage of the overall third party volumes represents for the facility and whether this netback value would be representative of the netback for the facility as a whole.

Question: Straddle Plants - The netback for straddle plants according to Directive 024 is based on the licensees most recent five fiscal years. How should this information be provided?

Please submit a 5-year average netback using Appendix 6 of Directive 024 and mark the form as "5 year average - confidential". All relevant information is only required for the most recent fiscal year rather than all most recent five years information. Please supply the 5 year average in the following format:

	2007	2008	2009	2010	2011	5 Year Average
(A) Revenue ($)
(B) Operating costs ($)
(C) Specific G&A costs ($)
(D) Net Revenue ($)
(E) Production volumes (10 3 m 3 )
(F) Netback (10 3 m 3 ) (F=D / E)

Question: Straddle Plants – How can a licensee provide a 5-year average netback of a straddle plant being owned less than 5 years?

If a licensee has owned a straddle plant for less than five years, the ERCB will use the average for the number of years that the licensee have owned the facility until such time as a five year average is available.

Question: How are the deemed asset values associated with a netback application handled when those facilities are being transferred to another licensee?

Please refer to the section “Deemed Asset on Transfer, Appendix 2 of Directive 024.

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Oilfield Waste Liability (OWL) Program and Licence Transfer Process

Question: How is the Orphan Fund involved in the OWL Program?

Waste Management (WM) approval holders included within the OWL Program will pay into an Orphan Fund levy administered by the ERCB. A licensee is assessed based on its proportionate share of any Orphan Levy based on its deemed liability in the OWL and LLR Programs to the total deemed liability within the OWL and LLR Programs.

Should an OWL non producer licensee (NPL) become defunct within the first five years of the effective date of the OWL Program, the remaining OWL NPLs will be subject to a separate OWL NPL levy to address up to the first $2 million of any suspension, abandonment, decontamination and surface land reclamation costs. Any remaining costs over $2 million will be an expense of the Orphan Fund. These costs will be recovered in the same manner as any other Orphan Levy cost, which will be payable by licensees in both the LLR and OWL Programs.

Question: Are deemed assets calculated differently in the OWL Program than in the LLR Program?

Yes. A 0.5 multiplier is used in the facility deemed asset calculation to establish a minimum asset-to-liability ratio of 2.0. An oilfield waste management facility’s deemed assets is the sum of the previous 12 months of NPL volumes multiplied by the ERCB approved netback for these volumes, multiplied by 3 years, multiplied by 0.5.

Question: My Liability Management Rating (LMR) is greater than 1.0, but I am being asked to pay a security deposit on specific WM approval facility. Why?

NPLs in the OWL Program will have their LMR calculated monthly on both a corporate and a facility-specific basis. If the deemed liabilities exceed the deemed assets for a specific WM approval facility, a security deposit must be paid for the difference for that facility.

Question: I have an LMR greater than 1.0 and recently received approval for a new WM facility. Will I be required to pay a security deposit for this new facility?

If you are a NPL, you will need to pay a security deposit until such time as the new facilities has had a minimum of 12 months of volumetric throughput. The facility’s deemed asset value is based on the previous 12 months of NPL volumes. In the absence of 12 months of throughput, the asset value is zero. New facilities in the OWL Program will thus initially be required to pay a security deposit for the full amount of the deemed liability of the facility, based on a site-specific liability cost estimate. A licensee can request a netback and provide the required financial back-up for the ERCB to review once they have had a minimum of 12 months of NPL volumetric throughput.

Question: Why are licensees in the LLR and OWL Programs treated differently?

The differences are based on feedback from industry stakeholders and their level of risk tolerance. In transitioning from a full security Program to a risk based Program, it was decided that more stringent Program guidelines were to be implemented until the Program was proven effective in protecting the public of Alberta from bearing the costs should a licensee become defunct, and to minimize the risk to the Orphan Fund posed by the unfunded liability of facilities, wells, and pipelines included within the Program.

Question: How will my Waste Management (WM) approval number be represented in the OWL Program?

In the manual tracking sheet, WM approval numbers will be used.

Question: How will the Oilfield Waste Management Facility Full Security Program be amended into a risk based Program?

Part 16.6: Security of the Oil and Gas Conservation Regulations will be amended to be consistent with the requirements of the OWL Directive. Licensees who are eligible for a full or partial refund of their security deposit make a written request for a refund on company letterhead. Corporate eligibility criteria include the licensee having an LMR equal to or greater than 1.0, and compliance with ERCB security deposit requirements. Facility-specific eligibility criteria includes the licensee being compliant with ERCB security deposit requirements, a facility having reported 12 calendar months of throughput to the Petroleum Registry of Alberta (PRA), and the facility’s OWL ratio is equal to or greater than 1.0.

Landfills approved by the ERCB are excluded from the OWL Program and will remain subject to the full security requirements outlined in Part 16.6: Security of the Oil and Gas Conservation Regulations.

Question: How is the deemed liability for 1b disposal wells located on the same surface lease as a WM approval calculated?

The deemed liability for 1b disposal wells located on the same surface location as a WM approval is split between the LLR and OWL Programs. The abandonment liability is to be calculated and only reflected in the LLR Program. Decontamination and surface land reclamation liability is to be calculated and only reflected in the OWL Program. Licensees should notify the ERCB of any 1b disposal wells located on the same surface location as a WM approval to ensure the liability for these wells is captured properly.

Question: I have already provided a Type A Liability Assessment for my WM facilities as part of the Oilfield Waste Management Security Program. I am proposing to transfer this facility. Do I need to provide a new Liability Assessment?

If the assessment currently held on file by the ERCB is less than 5 years old, an update consisting of an assessment of any changes to site conditions, inflation, incidences, and any remediation or reclamation activities that have occurred since the assessment was prepared must be provided by the transferor. A cost estimate based on a new assessment meeting the requirements of Directive 001, would be required if the transferor is aware of a cumulative increase in estimated liability equal to or in excess of either $1 million or 10 per cent of the facility’s current liability, or if the assessment on file is approaching 30 days prior to the expiry of the five-year period approved for the cost estimate used for the licence transfer application.

Question: How do I submit an application to transfer a licence in the OWL Program?

WM Approval holders seeking to transfer a facility included in the OWL Program apply to the ERCB’s Waste and Storage Section. The transferor can submit a transfer application via the ERCB Digital Data Submission (DDS) System for any licenses associated with WM approvals. The approval of the transfer of these licenses will coincide with the transfer of the WM Approval.

Question: How do I report a Waste Management approval facility that is no longer operational and has been suspended, abandoned, closed, etc.?

Contact the ERCB’s Waste and Storage Section as they will need to amend the facility’s approval to reflect the current status.

Question: One of my Waste Management approvals is for a facility which does not have any reporting requirements to the PRA. How will assets for this approval be calculated?

The asset calculation for a licensee not required to report volumetric data to the PRA is the same as for a licensee reporting volumes to the PRA. The only difference is that the licensee reports the volumes directly to the ERCB rather than through the PRA. If you have any further questions, please contact Camille Sojer at (403) 297-4875

Question: What is the deadline to populate the manual OWL Program spreadsheet?

The deadline date is the date set by the PRA for Waste Management Reporting for a given month. Data or amendments submitted after this date will not be accepted until after the monthly LMR run.

Question: What happens if I fail to submit volumetric data by the deadline?

If no value is submitted for volumetric data, the volume will be entered in as zero for that month, which will lower the assets of the subject facility.

Question: What happens if I make a reporting error on the manual spreadsheet?

If a reporting error is made on the manual spreadsheet, the ERCB must be notified immediately via email to LiabilityManagement@ercb.ca . If notification is submitted prior to the PRA’s deadline for Waste Management Reporting of that month, the correction will be made before the monthly LMR run. Otherwise, the correction will be reflected in the data for the next deadline date for Waste Management Reporting to the PRA.

The ERCB will be checking the volumetric data reported against what is reported to the Petroleum Registry of Alberta. If a discrepancy is noted, the licensee will receive a letter advising of the discrepancy and has until the PRA’s deadline for Waste Management Reporting of that month to make the change. Failure to do so will result in escalating enforcement.

Question: If I meet the eligibility criteria and have submitted a written request for a refund of a security deposit on corporate letterhead, how long can I expect it to take for that request to be processed?

The ERCB will endeavor to refund security deposits within 30 days of receipt of a written request from an eligible licensee.

Question: How do I submit new liability costs for WM approvals?

Currently, the WM approval holder must conduct a site-specific liability cost estimate for the costs associated with suspension, abandonment, decontamination and surface land reclamation in accordance with Directive 001. The WM approval holder must then provide the ERCB with a completed Directive 075: Oilfield Waste Liability (OWL) Program Appendix 7 form.

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Enforcement

Acronyms:
CORES – Alberta Corporate Registries
ERCA – Energy Resources Conservation Act
ERCB – Energy Resources Conservation Board
LLR – Licensee Liability Rating
LMG – Liability Management Group
LSD – Legal Subdivision
OFL – Orphan Fund Levy
OGCA – Oil and Gas Conservation Act
OGCR – Oil and Gas Conservation Act
OWA – Orphan Well Association
WIP – Working Interest Participant

Question: What is the Board Order enforcement process?

• A series of Orders with escalating consequences.

•  Board Orders are public documents:

  • Index of Board Orders – a summary Board Orders issued.

  • ST108 Report – a summary of Board Orders issued providing greater detail as to the basis for the Orders.

• Miscellaneous Order

  • Used primarily for financial noncompliances (e.g. failure to pay a security deposit in accordance with the Licensee Management Rating Program, the Orphan Fund Levy or the Administration Fees).

  • Consequence: a demand for payment, can be accompanied by the imposition of the Global REFER status.

  • Duration: 10 days provided for compliance to be achieved.

• Closure Order

  • Consequence: licences captured in the Order are ordered suspended and closed; no production allowed while Closure Order is in effect; ERCB suspension signs are placed at properties and equipment is locked and chained.

  • Duration: stays in effect until noncompliance is addressed - 30 days provided before enforcement is escalated.

  • Working Interest Participants: any working interest participants in the properties which are subject to a Closure Order will be given notice of the noncompliance and informed that if Abandonment Orders are issued, the working interest participants will be named as parties responsible for the abandonment.

• Abandonment Order

  • Consequence: properties listed in Orders are ordered abandoned

  • Duration: 30 days provided to abandon properties listed in Order or to address initial noncompliance.

  • Working Interest Participants: any working interest participants in properties which are ordered abandoned are named as parties responsible for ensuring the abandonment of the properties in which they have a working interest by the deadline provided in the Abandonment Order.

Question: Is there a process to appeal a Board Order?

• Appeals of Orders, decisions and directions of the ERCB may be made in accordance with either Section 39 or 40 of the Energy Resources Conservation Act (ERCA) or Part 4 of the ERCB’s Rules of Practice.

• Appeals under Section 40 of the ERCA require an application for a hearing be made within 30 days of the Order or decision for which the hearing is requested.

• Details of the information which is to be submitted within the application are outlined in Part 4 of the ERCB Rules of Practice.

Question: What is a Board Directed Transfer (BDT)? How do I request one?

a. Pursuant to Section 24(6) of the Oil and Gas Conservation Act (OGCA), the ERCB can direct the transfer of a licence to a party where one of the parties to a transfer is unable or unwilling to proceed with the transfer (e.g. A party would like to acquire a well which is licensed to an inactive company).

b. A BDT can be requested by sending an e-mail to Enforcement@ercb.ca – the e-mail should include the name of the current licensee, the name of the company requesting the licence be transferred to it and the LSD and licence number of the property(ies) in the transfer application. Upon receipt of a BDT request, the Liability Management Group will respond with the documentation required to proceed with a BDT.

Question: What is a non-routine Board Directed Transfer (BDT)?

A non-routine BDT occurs when the property which is the subject of a BDT Application is also the subject of a breached Abandonment Order. In these cases, a $10,000 fee is applied to every well and facility licence which is to be transferred. This fee must be provided before the transfer of properties will proceed.

Question: What happens to properties upon the breaching of an Abandonment Order?

a. If an Abandonment Order is not complied with by the deadline date provided in the Order, a review of the parties responsible for the abandonment (the Licensee and any working interest participants) is undertaken. The test set out in Section 70 of the OGCA is used to determine whether the ERCB or the Orphan Well Association will address the properties.

b. If the criteria set out in Section 70(2)(b) of the OGCA are met by a responsible party, that party will be deemed a defaulting working interest participant.

c. If all of the responsible parties for a property are deemed to be defaulting working interest participants, then the property will be designated orphan and sent to the Orphan Well Association to be addressed.

d. If some or all of the responsible parties do not fall within the criteria set out in Section 70(2)(b) of the OGCA, the ERCB will undertake the abandonment of the properties and pursue the responsible parties for the costs it incurs in doing so.

Question: As a WIP, how am I affected by enforcement processes?

• Definition of working interest participant in Section 1(fff) of the OGCA: a person who owns a beneficial or legal undivided interest in a well or facility under agreements that pertain to the ownership of that well or facility.

• WIPs will receive notice at the Closure Order stage that they are a responsible party according to the records of the ERCB.
  a. If, subsequent to the Closure Order, an Abandonment Order is issued, any WIP will be named as a party responsible for the abandonment of the properties listed in the Order in which it is named.
  b. WIPs are expected to comply with any Order in which they are named as responsible parties. Failure to do so may result in the imposition of the Global REFER status against the WIP.
  c. If the ERCB undertakes the abandonment of the properties captured in an Abandonment Order because a WIP fails to comply with the Abandonment Order, the WIP will be pursued for the costs of the abandonment incurred by the Board in accordance with its proportionate share in the abandoned properties.

Question: I am a WIP who completed suspension/abandonment/reclamation work and am looking to collect reimbursement for the costs I incurred that are above my proportionate share. How do I do this?

a. If the other WIP(s), that you are seeking to collect costs, has an active status on CORES, and you have not taken steps to attempt to collect the debt through the courts, you can apply under Section 30 of the OGCA for assistance from the ERCB in attempting to collect those costs
    i. Section 3.071(1) of the Oil and Gas Conservation Regulations (OGCR) sets out a detailed list of the information which must be provided in an application under Section 30 of the OGCA
    ii. An application under the above Section should be sent to the ERCB attention: LMG or e-mail to Enforcement@ercb.ca

b. If the WIP that you are seeking to collect costs from does not have an active status on CORES or you have pursued the working interest participant for its share of the costs through the court system to a minimum stage of registering a writ of enforcement, you can apply pursuant to Section 70(1)(c) of the OGCA to be reimbursed for costs from the OWA
    iii. Section 16.541(1) of the OGCR sets out a detailed list of the information which must be provided in an application under Section 70(1)(c) of the OGCA
    iv. An application under the above Section should be sent to the ERCB attention: LMG or e-mail to Enforcement@ercb.ca

Question: What is Global Refer and its implications?
 

• According to Directive 019: ERCB Compliance Assurance (Directive 019):
  Refer status – An enforcement status (focused or global) assigned to a licensee that is unable or unwilling to comply with the direction from the ERCB. Refer status results in a more rigorous review of the licensee’s pending and future applications, having regard for the compliance performance of the licensee. The Refer status is removed when compliance is achieved.

  • Focused Refer – An enforcement status that results in the processing of applications respecting a specific activity or operation (e.g., pipelines, commingling, waste facilities) as nonroutine, taking into consideration a licensee’s compliance performance in one or more compliance categories or ERCB groups, the licensee’s applications specific to this activity or operation being brought before the Board for disposition, and possible additional terms or conditions on business associate codes, licences, or approvals.

  • Global Refer – An enforcement status that results in all of the licensee’s applications being processed as nonroutine, all of the licensee’s applications and decisions being brought before the Board for disposition, and possible additional terms or conditions on business associate codes, licences, or approvals.

Question: What is Directive 019? Where can I get more information on the ERCB’s noncompliance enforcement?

a. Directive 019 specifically focuses on the prevention and enforcement aspects of compliance assurance and applies to all ERCB requirements and processes.

b. The ERCB publishes the monthly enforcement activity it has undertaken in a report called ST108: ERCB Monthly Enforcement Action Summary.

c. Other Enforcement FAQs can be found on the ERCB website.

d. If a member of the public has concerns regarding field noncompliances, please contact the local ERCB Field Centre first.

Question: What is the ERCB’s Section 106 process?

When a licensee, approval holder, or working interest participant has failed to comply with an Order of the Board or has an outstanding debt to the Board/OWA for suspension, abandonment, or reclamation costs and the Board considers it in the public interests to do so, the Board can make a declaration against the person(s) in control of the licensee, approval holder, or working interest participant. This could result in sanctions in accordance with Section 106(3) of the OGCA against any oil and gas company that person(s) controls or prevent that company from doing business routinely with the ERCB. The sanctions could include suspending operations, refusing to grant a BA Code to be a licensee, refusing to approve applications, and/or requiring security deposits for abandonment and reclamation of licensed properties.

Question: What if a licensee wants to meet with ERCB Liability Management staff to discuss a noncompliance or the enforcement process?

a. If a licensee has already been in contact with a member of LMG, please make requests through that staff member.

b. For general inquiries, please contact the LMG at Enforcement@ercb.ca.

Question: What is the ERCB’s Receivership (also Monitor, Manager, Trustee) process?

a. If a receiver has been assigned to a licensee in Alberta that holds ERCB licences or approvals, the LMG asks that the receiver contact the LMG at Enforcement@ercb.ca.

b. The ERCB will work with the Receiver to dispose of all oil and gas properties (assets and liabilities) to the extent possible. Remaining oil and gas properties will be subjected to the OGCA Section 70 test and, if no WIPs are found, the remaining oil and gas properties are transferred to OWA for abandonment and reclamation.