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.
LICENSEE LIABILITY RATING PROGRAM MANAGEMENT PLAN
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
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Emotional culture is influenced in great part by the mindset and actions of leadership, although employees also play more of a role than they may realize in creating the culture that exists in the group.
The session will be led by Dr. Robert Brooks, an award-winning author and psychologist. In his presentation, Dr. Brooks will describe the mindset and realistic practices of leaders and staff that help to nurture and sustain a culture characterized by positive emotions, satisfying, respectful relationships, a sense of meaning and ownership for one’s work, and enhanced job performance. Examples will be offered to illustrate strategies for developing a positive emotional culture in an organization.
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.
Ready? The company wants its in-house lawyers to be on the front lines, but there is little to no training around how to “look for risk,” let alone how to evaluate it or report it. Our special guest, Sterling Miller, will present simple ideas and processes you can use to spot and identify risk, and demonstrate how to evaluate and manage that risk alongside the business.
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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).