Amendments to Saskatchewan's Licensee Liability Rating (LLR) Program and Management
On August 19, 2016, the Saskatchewan Ministry of Economy ("ECON") released a notice to all operators advising them of certain changes to its LLR program. This action was taken in response to Alberta's Redwater Energy Corporation (Re)1 ("Redwater") decision, and in turn, the changes the Alberta Energy Regulator ("AER") made to its own liability management rating program. ECON has implemented the following measures to deal with the risk of a similar court decision in Saskatchewan:
- The Ministry of Justice has been requested to challenge any attempt by a receiver in Saskatchewan to renounce uneconomic oil and gas assets which are subject to the LLR program.
- ECON is in consultation with the Orphan Well Fund Advisory Committee ("FAC") on measures to manage the potential additional risk to the orphan fund in the wake of Redwater. Where necessary, ECON will consult with the FAC on specific transactions involving a high level of risk related with the transfer.
- Until further notice, all licence transfer applications are now considered non-routine as ECON will not be strictly relying on the standard LLR calculations in evaluating deposit requirements. ECON will consider all relevant factors in calculating transfer deposit requirements and implement additional deposit requirements and incorporate additional conditions with licence transfer approvals which may impact the decision to proceed with certain transactions.
As a result of these changes, all licence transfers involving a high percentage of uneconomic or potentially uneconomic infrastructure will be closely reviewed and deposit requirements set accordingly. Parties involved in acquisitions and sales must confirm that they can meet the new deposit requirements to ensure that they will be provided with a licence to operate.
Federal Carbon Tax
On October 4, 2016, the federal government announced its plan to implement a carbon price across Canada beginning in 2018. This would be implemented through either a cap and trade system or a carbon tax regime at the election of each province or territory. The federal government will impose a price on carbon of $10 per tonne on any province or territory which fails to implement its own system by 2018. This amount will increase by $10 each year until it reaches $50 per tonne in 2022 at which time the program will be reviewed. The federal government is expected to formalize this plan in November 2016.
Rocky 7 Pipeline Application
On September 12, 2016 the Alberta Energy Regulator convened a two day oral hearing on the non-routine application of Shell Canada Energy ("Shell") for pipeline licenses under Part 4 of the Pipeline Act2 and Section 3 of the Pipeline Rules.3 The application pertained to the Rocky 7 Pipeline which would total 6.99km in length. Prior to making this application, Shell indicated that it engaged in protracted negotiations with the O'Chiese First Nation ("OCFN") regarding measures to address the potential impacts of the pipeline project on the OCFN's traditional use of the land.
When a resolution between the parties could not be reached, Shell filed the application in an attempt to keep the project on schedule and requested an expedited hearing on its application and the AER ultimately convened an oral hearing to consider the issues raised by the OCFN. Upon the conclusion of the evidentiary portion of the hearing, the AER adjourned the hearing pending receipt of a report from the Aboriginal Consultation Office ("ACO"). After the ACO delivers its report, the AER has indicated that it will reconvene the hearing to hear final arguments.
We will continue to monitor this hearing as it is one of the few AER oral hearings convened in response to a statement of concern by an Aboriginal group alleging impacts to traditional land use in an area already subject to resource development activities.
Footnotes
1. 2016 ABQB 278 [Redwater].
2. RSA 2000, c P-15.
3. Alta Reg 91/2005.
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.