On April 8, 2016, the Alberta Energy Regulator ("AER")
sent a sombre reminder to licensees and their directors and
officers, of their corporate responsibilities when ceasing
operations because of insolvency or for any other reason. Bulletin 2016-10 reinforced the need for
compliance with all AER requirements when ceasing operations. Among
several other obligations, such as ensuring continued care of AER
licensed properties and maintenance of records, the bulletin
stressed that either approval for transfer of licences, approvals
and permits to an eligible party (i.e. with an LMR of at least 1.0
post-transfer) under Directive 006 be obtained; or abandonment and
reclamation of all sites be in compliance with AER requirements; or
that security be posted in accordance with Directive 006. If
a licensee fails to meet these obligations, the AER may pursue
various enforcement measures not only against the licensee but may
also name individual directors and officers of the licensee under
Section 106 of the Oil and Gas Conservation Act
Section 106 of the OGCA provides, among other things,
that where a licensee, approval holder or working interest
participant contravenes or fails to comply with an order of the
AER, or has an outstanding debt to the AER, or to the AER to the
account of the orphan fund, in respect of suspension, abandonment
or reclamation costs, and where the AER considers it in the public
interest to do so, the AER may make a declaration setting out the
nature of the contravention, failure to comply or debt and
naming one or more directors, officers, agents or other
persons who, in the AER's opinion, were directly or indirectly
in control of the licensee, approval holder or working interest
participant at the time of the contravention, failure to comply or
failure to pay.
In past AER decisions, including Decision 2015 ABAER 005, citing Decision 2011
ABERCB 037, the AER has confirmed that the purpose of a Section 106
declaration is to prevent a licensee or a person in control of a
licensee from continuing to breach AER requirements and orders and
from incurring abandonment costs or incurring new breaches or
additional debts, thereby safeguarding the public interest.
The test for a section 106 declaration, as set out by the AER in
Decision 2015 ABAER 005 (at para 16), is as follows:
Were there contraventions of or failures to comply with AER
If there was a contravention or failure, was the director,
officer, or other person in direct or indirect control of the
relevant company at the relevant time?
If there was a contravention or failure, and such person was in
control, is the requested declaration and order in the public
Further, the AER has indicated in Decision 2015 ABAER 005 (at
para 41) that the public interest purposes of a section 106
To protect the public and the environment,
To ensure confidence in the regulatory scheme,
To deter like-minded individuals from engaging in similar
To serve as a warning to others who may engage in business with
the named individuals.
Bulletin 2016-10 does not break new ground in terms of adding
new obligations. But it does remind officers or agents of companies
that should a company fail in its AER obligations
it could be subject to enforcement proceedings by the AER. In
addition to other sanctions, notably Section 106(3) of the OGCA
provides that named officers, directors or agents may be
responsible for payment of abandonment and reclamation deposits in
an amount determined by the Regulator.
What are the implications of this? This is merely a reminder of
already existing sanctions available to the AER. However, at a time
in the industry where we are likely to be seeing more insolvencies,
officers, directors or other persons in control of companies should
heed this warning and be aware of whether such companies are AER
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.
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).