The energy sector in Alberta is currently experiencing tremendous upheaval. The massive changes caused by the COVID-19 crisis, in addition to the low price of oil, have led to an unprecedented level of uncertainty in the industry and in daily life across the province. Learn more in this article about the latest developments affecting Alberta's energy sector.
Alberta Energy Regulator
- On April 2, the Legislative Assembly
of Alberta passed multiple emergency bills aimed at providing
industry relief. These include changes to the Oil and Gas
Conservation Act and the Pipeline Act through Bill 12 that grants the Alberta Energy
Regulator (the "AER") new powers and funding to manage
the expected rise in suspended or abandoned oil and gas projects.
The AER may now make rules respecting suspension, abandonment,
remediation, and reclamation costs of wells, facilities and
pipelines.
- The Government of Alberta also announced it would fund the operation of the AER for the first half of 2020 by making the entire contribution typically levied from industry, saving energy producers some $113 million.
Federal aid
- On April 17, the Federal Government
announced $1.7 billion to clean up orphan wells in Alberta,
Saskatchewan and British Columbia. In addition, the government will
establish a $750 million emissions reduction fund, with a focus on
methane, to create jobs through efforts to cut pollution. The fund
includes $75 million to help the offshore industry cut emissions in
Newfoundland and Labrador.
- While it is unclear at this time if
additional financial aid is forthcoming, suggestions from industry
include:
- Purchasing accounts receivable at a
discount, which would provide instant cash flow and enable the
federal government to collect these debts at a profit as oil prices
recover;
- Working with government agencies and
financial institutions to ensure companies are provided with
continued access to existing or new credit support;
- The Federal Government buying crude
volumes from producers now for delivery at a later date, keeping
industry afloat and providing profit to the Federal Government if
the price of oil recovers; and
- Imposing a tariff wall around North America that would tax incoming barrels to effectively include the levy already paid by Canadian producers (such as the carbon tax), thereby increasing the price for North American oil compared to global prices.
- Purchasing accounts receivable at a
discount, which would provide instant cash flow and enable the
federal government to collect these debts at a profit as oil prices
recover;
Mineral rights and leases
- Crown leases expiring in 2020 may be
extended by one year upon application by the leaseholder under
Section 14 of the Petroleum and Natural Gas Tenure Regulation. The
application must be made prior to expiration of the lease.
Information Letter 2020-09 Tenure Extensions for Petroleum and Natural Gas Agreements, Oil Sands.
- Alberta Energy deferred all public
offerings and direct purchases of Crown petroleum, natural gas and
oil sands mineral rights for a minimum of 90 days from April 9,
2020.
Information Letter 2020-14 - Deferring Public Offerings and Direct Purchase Requests of Petroleum
Orphan Wells
- The Government of Alberta announced
it would provide a $100 million loan to the Orphan Well Association
(the "OWA") to kick-start the reclamation and abandonment
of up to 1000 wells and commence over 1000 environmental
assessments.
- The changes to the Oil and Gas
Conservation Act through Bill 12 now enable the OWA to continue
production and sell oil and gas from orphan wells through
associated pipelines, a power the OWA previously did not
possess.
- OWA funds can now be used for broader purposes, such as paying for facility monitoring operations, hiring and retaining staff for monitoring and risk management purposes, and covering the cost of receivers, receiver-managers, trustees and liquidators.
Pipelines
- The Government of Alberta is investing $1.5 billion in
the Keystone XL pipeline to accelerate construction, ensuring
it is operational by 2023. The province will also provide a further
$6 billion in loan guarantees for the project.
- Keystone XL will carry 830,000 barrels per day of crude oil and will be a significant step towards increasing Alberta's takeaway capacity. Construction begins April 1, 2020.
Reporting obligations
- Alberta Energy suspended certain
reporting requirements under the Coal Conservation Act,
the Oil and Gas Conservation Act, and the Oil Sands
Conservation Act until August 14, 2020.
- Reporting obligations related to
royalty calculations and collection, as well as any requirements
with health and environmental impacts, are NOT suspended.
Information Letter 2020-13 - Postponing Regulatory Reporting for Industry
- The Minister of Environment and Parks
suspended reporting requirements for most environmental monitoring
data in the province until August 14, 2020. The suspension applies
to reporting obligations required by licenses, approvals and
registrations under the Environmental Protection and
Enhancement Act, the Water Act and the Public
Lands Act. The requirement to monitor and collect
environmental data remains in place.
- Reporting obligations related to
drinking water and reporting required by legislation such as the
release of substances under Section 110 of the Environmental
Protection and Enhancement Act are NOT suspended.
Ministerial Order 17/2020 - Suspension of Reporting Obligations
- Reporting obligations under the
Technology Innovation and Emissions Reduction Regulation and the
Renewable Fuels Standard Regulation are suspended until June 30,
2020.
Ministerial Order 16/2020- Technology Innovation and Emissions Reduction Regulation
Ministerial Order 15/2020 - Renewable Fuels Standard Regulation
"Read the original article on GowlingWLG.com".
Originally published 16 April, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.