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August 2019

Vol. 24, No.32 Week of August 11, 2019

Alberta regulator in trouble

Kenney orders ‘full review’ of AER; will cover time to approve applications, whether companies have assets to cover liabilities

Gary Park

for Petroleum News

Alberta’s history of “safe, efficient, orderly and environmentally responsible development of its hydrocarbon resources” stretches back 76 years and extends around the globe.

The province’s means of achieving its objectives has also been used as a blueprint in many jurisdictions beyond North America, but the remaking of that model in Alberta over the past six years under Alberta Energy Regulator has stumbled, forcing newly elected Premier Jason Kenney to order a “full review” of the organization.

He has asked Energy Minister Sonya Savage and Environment Minister Jason Nixon to evaluate the organization.

Underfunded liabilities

That examination faces a mountain of problems from underfunded liabilities for abandoned (more commonly known as orphan) wells to reports that the AER has paid for personal travel by some executives who live outside Alberta.

However, the greatest challenge was identified by Kenney who said that since the AER was created “timelines for project approvals (have become) unacceptably long and fees charged to Alberta energy producers are unacceptably high.”

An equally serious problem is the number of transfers of high-liability wells to financially weak operators.

One example of that failing involved Sequoia Resources, a failed natural gas producer that acquired thousands of aging wells, leaving the AER holding the bag for C$225 million when Sequoia slipped into bankruptcy.

The AER oversees 167,000 operating oil and natural gas wells and 426,000 kilometers of pipelines through a payroll of about 1,200, funded by a C$253 million annual administrative levy collected from the industry.

Room for improvement

“We are not saying that the AER is broken, but there is room for some improvements,” said Savage, who said the review will cover the agency’s mandate, including timelines to deal with regulatory applications and how the AER reviews projects.

She told the Calgary Herald that the AER takes “too long (in approving projects), there’s too much red tape, there’s too much process, they’re not getting to decisions fast enough.”

Ian Dundas, chief executive officer of Enerplus, was less critical, noting “there are things the AER does exceptionally well. I think when you start going to things that feel a little more non-routine, suddenly timelines extend.”

Ben Brunnen, vice president of the Canadian Association of Petroleum Producers, suggested a “thoughtful and comprehensive review of the AER needs to be undertaken” covering the roles of the governing board and the organization.

Tristan Goodman, president of the Explorers and Producers Association of Canada, said the AER “needs to improve its culture” to make sure each step it takes is consistent with the agency’s core legislated mandate.






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