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Alberta government announces relief for energy industry

energy industry

Alberta oil and gas producers, who are dealing with both historically low commodity prices and the COVID-19 crisis, received some relief from the Alberta government over the last several weeks as the Government announced several measures designed to reduce and defer producers’ costs and ease the administrative burden on producers.

Orphan Well Association

The Alberta government announced in March that it would give a $100 million loan to the Orphan Well Association (OWA), with the intention of having the OWA start the reclamation and abandonment of up to 1000 more wells and start the environmental work associated with up to 1000 more abandonments.

At the same time, the Government announced that it would enact changes under Bill 12 to the Oil and Gas Conservation Act which would authorize the Orphan Well Association to ‎produce and sell oil and gas from orphan wells to operate associated pipelines. Prior to these amendments, the Orphan Well Association did not have the authority to produce oil and gas from orphan wells which were still viable, only to abandon such wells. Bill 12 received Royal Assent on April 2 and will become effective on proclamation.

Alberta Energy Regulator

In March, the Government announced that it would fund the entire industry contribution to the operation of the Alberta Energy Regulator for the first six months of 2020. 

Under the Responsible Energy Development Act, the Alberta Energy Regulator is authorized to charge a levy to fund its operations. The 2020 levy was announced by the regulator in November, 2019. The assumption by the government of the industry levy is forecast by the Government to save producers $113 million in the first half of 2020.

Extension of oil and gas leases

The Government also announced that it would provide for the extension of oil and gas leases expiring in 2020. 

Pursuant to Section 8.1(h) of the Mines and Minerals Act, the Minister of Energy is authorized to extend the term of any Crown lease under that Act where it is in the public interest to do so, whether or not the term has already expired. For leases expiring during 2020, the Government has announced that it will extend the term of all such leases by one year. Renewal is not automatic; application by the leaseholder must be made under Section 14 of the Petroleum and Natural Gas Tenure Regulation prior to expiration. 

Suspension of environmental reporting requirements

The Minister of Environment and Parks issued several Ministerial Orders in early April, suspending the requirement to report much environmental monitoring data in the province. Read the Ministerial Orders here.

The orders suspend reporting obligations under licenses, approvals and registrations issued under the Environmental Protection and Enhancement Act (EPEA), the Water Act and the Public Lands Act, until August 14, 2020. 

It is important to note that only the requirement to report environmental data has been suspended. The requirement to monitor and collect environmental data remains in place and once the Ministerial Orders expire or are terminated, all collected information will be reported including for the period during which reporting is suspended. 

Reporting obligations related to drinking water are not suspended, and reports which are mandated by the legislation itself (for example, the requirement to report releases of substances under Section 110 of EPEA) must still be made as required by the legislation.

Reporting obligations under the Technology Innovation and Emissions Reduction Regulation and the Renewable Fuels Standard Regulation, both under the Emissions Management and Climate Resilience Act are suspended until June 30, 2020.

By Michael Styczen and Trevor Wong-Chor, DLA Piper

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In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.

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