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What is Alberta’s Liability Management Framework

Government of Alberta is concerned with the growing number of inactive and abandoned oil and gas sites. Inactive wells are wells that have not produced for 6 to 12 months, depending on the well classification. To address this issue Government of Alberta implemented a new upstream oil and gas liability management system.

In July 2020 Government of Alberta announced a new Liability Management Framework policy. The purpose of the Liability Management Framework is to improve and expedite reclamation efforts. 

What is the Goal of Liability Management Framework?

The goal/intent of the LMF is:

  • Polluter-pay, Government of Alberta wants to ensure the industry pays for the clean-up cost throughout the life cycle of energy development,
  • Provide guidance to industry to ensure licensee meet their environmental responsibilities,
  • Create a system that provides a holistic review to assess the capabilities of oil and gas licensees to meet their regulatory liabilities obligations and enable the Alberta Energy Regulator to reach out proactively to provide support,
  • Establish a five-year rolling mandatory closure spend target that every oil and gas licensee must meet,
  • Establish a closure nomination program where landowners can nominate sites for clean-up. 
  • Implement a process to address legacy and post-closure sites to bring them up to date with current environmental requirements, and
  • Expand the role of the Orphan Well Association to better manage and accelerate clean-up of sites that do not have a responsible owner.

Why is the Liability Management Framework Important?

Closure work has not kept pace with the growth of inactive sites in Alberta. The old process was created decades ago and is simply out of date. As the oil and gas industry matures a new approach is needed to ensure the inventory of inactive sites is reduced. 

Based on data on the Alberta Energy Regulator’s site, there was approximately 96,000 inactive wells in Alberta in 2021 compared to 84,000 inactive wells in 2018. It is clear the old approach on how liability was managed was not reducing the growth of inactive sites and needed to be improved. The question remains if this will be enough.

Alberta Energy Regulator’s role

The Alberta Energy Regulator was directed to develop new programs and processes to implement the policy. Stay tuned as I will explain the each of the five pillars the Alberta Energy Regulator was tasked to develop and implement over the next five posts.

About Allum Energy Advisory Service

Allum Energy Advisory Service is an energy regulatory advisory service. It has extensive experience with Alberta energy regulations. Alanda Allum, senior advisor, worked at the Alberta Energy Regulatory for 20 years in a variety of roles and 2 years as an independent regulatory advisor. If you have questions about the Liability Management Framework please contact Allum Energy Advisory Service.

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