Canada: Update: Alberta Licensee Liability Rating Program Imposes Financial Challenges For Junior Oil & Gas Companies

This is an update to our September 2013 Blakes Bulletin: Increases to Alberta Licensee Liability Rating Program.

Effective February 28, 2014, the Alberta Energy Regulator (AER) has implemented the Licensee Liability Rating (LLR) Program Management Plan (PMP). The PMP complements the changes made to the LLR program in the first part of 2013, which require oil and gas operators in Alberta to pay higher security deposits to maintain their required LLR. The higher deposits under the new LLR requirements pose significant financial challenges for junior oil and gas companies. They also significantly impact oil and gas companies that are the subject of voluntary or involuntary insolvency proceedings due to the financial liabilities of the LLR program or otherwise, and wish to transfer their licences.


The PMP allows licensees who meet its eligibility requirements to defer the financial burden imposed by the new LLR standards. Instead of making a lump sum payment, which is subject to escalating enforcement procedures by the AER on default, licensees can make quarterly payments beginning within six months of their PMP approval date and continuing until December 30, 2017 (Plan End Date). The amount of each quarterly payment is determined by dividing the total LLR security deposit owing to the AER by the number of quarterly payments remaining until the Plan End Date. Licensees retain the right to make lump sum payments, which supplement but do not replace quarterly payments.

The AER has placed a number of restrictions on eligibility for the PMP. Licensees with closure and abandonment orders issued prior to January 1, 2014 will not be eligible. Licensees that become noncompliant with the LLR after January 1, 2014, but prior to a closure order being issued, may be eligible for the program. An application to the PMP must include an operating forecast, including a cash flow forecast (which will not reflect the LLR security payments required by the program), internally evaluated reserves information, and a management and director signoff. The AER also retains its right to modify the requirements of PMP at its sole discretion. 

In order to be eligible for the PMP, most licensees will be required by the AER to conduct at least one abandonment and one site reclamation over the life of the program. In limited cases where all wells are active, this requirement may be waived. Conversely, where a licensee has a high ratio of inactive properties, multiple well abandonments may be required. The abandonment and reclamation plan must be completed by the end of 2017 and is subject to revision at the request of the AER.

Applying to the PMP imposes significant restrictions and obligations on a qualifying licensee. The licensee must be willing to submit itself to greater AER scrutiny of its ability to meet LLR security requirements and must demonstrate an improvement in its LLR ratio over time. The licensee must provide monthly reports to the AER delineating progression towards goals and actions taken, and will have its company name posted on the AER website along with its asset-to-liability ratio.

Once the PMP is entered into, a licensee must pay all required quarterly security deposits, conduct all applicable reclamation and remediation activities, and attain an LLR ratio of 1.2 in order to exit the program. This ratio cannot be obtained by providing a security deposit that exceeds the PMP requirements. It requires an increase in deemed assets or reduction in deemed liabilities beyond what would otherwise be required had the PMP not been entered into. For example, a licensee could raise its LLR ratio to 1.2 by increasing production or undertaking additional abandonment or reclamation of its inactive properties.

The PMP program does not alter the AER approval process for licence transfer requests. Accordingly, the full security required by the LLR program must be paid as part of the transfer approval process. Both the transferor and transferee must have an LLR rating of at least 1.0 before a transfer can be approved. If a licensee seeks to transfer out more deemed assets than liabilities, it must pay the required security deposit at the time of transfer and is not eligible for quarterly payments under the PMP. In effect, this means that a licensee seeking to transfer out all of its licences would first have to pay the full outstanding security deposit required under the LLR program and would no longer be eligible for quarterly payments under the PMP. This poses a significant challenge for junior oil and gas producers that are subject to insolvency proceedings and seeking to transfer their licences, as outlined in our previous bulletin.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

3 Nov 2016, Other, Vancouver, Canada

“Risk” is the new black. It’s on the lips of every CEO, CFO, GC and board member — as it should be. Can you spot it? How do you analyze it? Are you equipped to manage it?

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.