Alberta ERCB Increases Security for Abandonment and Reclamation Obligations


The ERCB announced on March 12 that it was revising Directive 6 and Directive 11 (the Licensee Liability Rating program) to increase the amount of security required to be posted by operators of oil and gas wells, facilities and pipelines.

The purpose of the revisions is to reduce the risk to the orphan well fund and to the province generally, and arises out of concerns that the existing LLR program underestimated the amount of abandonment and reclamation liability associated with existing wells.

The revisions primarily involve changes to the formulae used to estimate future  abandonment and reclamation liabilities, including adjusting factors for salvage value, and increasing the estimated well and facility reclamation costs.

The ERCB estimates that it currently holds $13 million in security deposits from 88 licensees.  After the changes are fully implemented, it estimates that it will hold $297 million in security from 248 licensees.

The changes come into force on May 1.

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