Canada: Alberta Energy Regulator Licensing Requirements - Who May Hold A Licence And How To Transfer A License

Who can Hold a Licence: (AER Directive 067 and the Oil and Gas Conservation Act and Pipeline Act):

Parties wishing to be licensees with a Licence Eligibility Type to hold AER Licences may either first acquire a Business Administrative, or BA code through the Petroleum Registry of Alberta and then apply to the AER through the appropriate schedule in Directive 067, or submit the appropriate schedule in accordance with this directive, and the AER will acquire the BA code on behalf of the party. The entity must then apply for access to the Electronic Transfer System ("ETS").  The ETS provides secure access to do business electronically with Alberta Energy, and registration with this system is mandatory. In order to hold AER licences, a party must meet the licensee requirements set out in Section 5 of Directive 067 and have their BA code approved with an appropriate Licence Eligibility Type.  The AER is responsible for designating the licence eligibility. (Page 2).

A potential licensee applying for a BA code that allows it to hold licences must remit a one-time non-refundable fee of $10,000 to the AER (OGC Regulations s. 17.01(1.1)). (Pg 6).  Exempt from this requirement are licensees that only hold water well licences, mineral test well licences, public educational institutions or government, and agents that are not licensed in their own right.

Parties that require a BA code must sign the declaration in Part E of the Schedule 1.  This requires a declaration formally acknowledging that a party understands its obligations and responsibilities as a licensee under all applicable provincial acts and regulations and must be signed by one of the corporate officers specified in the corporate profile on Schedule 1. (Page 6).

Licence Eligibility:

The AER has developed LETs to apply to a BA code.  These designate the eligibility of a party to hold licences and indicate which type the party may hold.  Parties seeking to hold well, facility or pipeline licences must submit a completed Schedule 1 with an application fee to the AER.  If the potential licensee is resident outside of Alberta, then it must also submit Schedule 2 to declare an agent.  Licensee requirements are set out in Section 3 of Directive 067. 

Requirements to Become an AER Licensee:

Section 20 and 21 of the Oil and Gas Conservation Act and Section 21 and 22 of the Pipeline Act set out the specific requirements to hold a Licence. (Page 5)

A corporation is eligible if it is:

  • registered with an active status under the Alberta Business Corporations Act;
  • incorporated by or under an act of the Legislature, other than the Business Corporations Act, and approved by the AER as a corporation that may acquire or hold a licence;
  • incorporated under the Bank Act (Canada)
  • a railway company incorporated under an act of the Canadian Parliament
  • registered under the Locan and Trust Corporations Act; or
  • an insurance company licensed under the Insurance Act.

*A partnership may not become an AER licensee because it does not meet the eligibility requirements set out at section 20 of the Oil and Gas Conservation Act. Also, AER Directive 067, specifically precludes it.

AER licensees must be resident in Alberta.  Licensees not resident in Alberta must appoint an agent, in accordance with s. 91 of the OGCA, and s. 19 of the Pipeline Act (where applicable). A "resident" means, in the case of a corporation, having an office in the Province of Alberta, and having staff within Alberta to make technical and operational decisions. (page 5)

Agent Appointment for Non-Residents:

A licensee who is resident outside of Alberta, if not going to become a resident of Alberta, must designate and obtain AER approval of an agent that is a resident of Alberta.  Agent appointment must be in accordance with section 91 of the Oil and Gas Conservation Act and Section 19 of the Pipeline Act(where applicable) (Page 2).

Only licensees that are not resident in Alberta may appoint an agent.  The Agent must have a BA code, have the authority to carry out all of the duties and responsibilities of the licensee, and meet the requirements to become a licensee.  Agents must also meet the insurance requirements of a licensee, but will not be required to pay the first-time licensee fee unless the agent wishes to become a licenses in its own right. (Page 5) 

The appointment of an agent must be approved by the AER before it is effective.  An agent may not be changed or discharged without the consent in writing of the AER, which consent may, at the AER's discretion, be refused. (Page 5). The Agent will be held accountable and liable, in accordance with the OGCA, should the licensee be unable or unwilling to fulfil its responsibilities associated with holding a licence. (Page 6).

Licence Transfer Process and LMR Assessments – AER Directive 006: Licensee Liability Rating Program and Licence Transfer Process:

Agreements for the purchase and sale of AER-licensed facilities and pipelines do not effect a transfer of the associated licences unless and until the AER approves the related licence transfer application. (Directive 006, Appendix 2, page 8)

A licence transfer application must be submitted electronically through the Licence Transfer System, accessed through the Digital Data Submission system, the AER's electronic database and filing website. A licensee can access the DD system through the AER's website, using its identification code and password established for the licensee.  The AER Information Collection and Dissemination Group is responsible for assigning DDS access codes and passwords. 

Regardless of their liability management program classification (which will require different amounts of security for different assets), well, facility, and pipeline licences may all be included within a single application.

The AER will process licence transfer applications as they are received.  It will not hold an application pending receipt of a subsequent application in order to facilitate a LMR (Liability Management Rating) assessment of the combined applications.  The AER's LMR assessment is a comparison of a licensee's deemed assets in its various programs to its deemed liabilities in these programs.  Any security deposit provided to the AER as a result of these programs is considered in determining a licensee's "security-adjusted" LMR.  The LMR assessment is designed to assess a licensee's ability to address its suspension, abandonment, remediation, and reclamation liabilities.  This assessment is conducted monthly, and upon receipt of a licence transfer application.  For LMR calculation purposes, 100 % of the deemed assets and 100% of the deemed liabilities of a well or facility for which it is the licensee are attributed to the licensee. (page 3).

Licence Transfer Application Requirements:

The transferor, the transferee, or an authorized agent or consultant acting on their behalf may submit a licence transfer application in accordance with Directive 006.  Agents can be appointed pursuant to Directive 067: Applying for Approval to Hold AER Licences.

Before a licence transfer application will be accepted, both parties (i.e. the transferor and the transferee) must confirm that the information in the application is correct and accept a declaration stating that they have complied with a list of specified AER requirements. 

A licence transfer application that is submitted by one party but not accepted by the other party within 90 days will be closed and the submitting licensee advised of its closure.  This is designed to ensure a timely process for determining the party responsible for licences contained within an application. (Page 8)

The transferee and the transferor must both have an AER identification code that permits the holding of all licence types within the transfer application (page 9).

The AER will review the compliance record of both the transferee and the transferor as part of its licence transfer application process.  If either has a "Refer" status or there is evidence of other significant noncompliance on the part of either party, the application will be considered "non-routine", and may potentially require additional information and consideration time. 

The AER will assess the circumstances surrounding the proposed transfer, including the nature and complexity of the issues that caused any compliance issues identified by the AER, to determine whether regulatory requirements have been satisfied and whether a security deposit will be required.  A non-routine licence transfer application requires additional time to process.  The AER has the ability to make a finding that it is not in the public interest to approve the licence transfer application based on the compliance history of one or both parties or their directors, officers, or security holders.  (Page 9).

The Oil and Gas Conservation Act (sections 16 and 17) require a licensee to hold a working interest participation in each well or facility for which it is the licensee.  Applicants must therefore provide current information about each working interest participant (including the % of working interest) for every well and facility included in a licence transfer application.  (Page 9)

Licence Transfer LMR Assessments - Security Deposit Requirements:

On receipt of a licence transfer application, the AER will conduct a LMR assessment of both the transferor and the transferee.  The licence transfer LMR assessments is conducted as if the transfer were approved (post-transfer LMR).  If both the transferor and transferee have a Post-Transfer LMR equal to or exceeding 1.0, a security deposit will not be required from either party.  (page 10)

If either the transferor or transferee has a Post-Transfer LMR below 1.0, the AER will require a security deposit in an amount representing the difference between its deemed liabilities and deemed assets plus any existing liability management security deposits.  This security deposit must be received before the licence transfer application is approved. 

A transferor or transferee required to submit a security deposit as a result of a licence transfer application will have 30 days from the licence transfer LMR assessment date to provide the required security deposit to the AER.  The AER will advise a transferor or transferee in writing of the amount of any security deposit required and of the date by which the security deposits must be received.  If not received by the due date, the application will be closed and the transferor will be required to establish that it retains the rights to hold any licence included within the cancelled licence transfer application.  (Page 10 cont.)

The AER Decision on the Transfer Application:

The AER may approve, approve with conditions, or deny a licence transfer application.  It may determine that it is not in the public interest to approve the licence transfer application based on the compliance history of one or both parties or their directors, officers, or security holders.  (Page 11)  In cases where numerous recent non-compliance events have occurred, or a "named individual" (OGCA, s. 106) is involved in the license transfer, or the licence transfer poses a risk to the Orphan Fund, the AER may deny the application or impose conditions on the approval (e.g. require a security deposit).

The licensee of record (transferor) remains responsible to comply with all applicable regulatory requirements for any well, facility, or pipeline in a licence transfer application until the AER approves the transfer.  On approval, the new licensee of record becomes responsible for any well, facility or pipeline license in the application as of the effective date of the transfer.  (Page 11).

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.

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