Alberta's Site Rehabilitation Program Enters Period 4

Bennett Jones LLP

Bennett Jones LLP[co-author: Kassandra Devolin - Summer Student]

On August 7, 2020, the Government of Alberta launched Period 4 of the Site Rehabilitation Program (SRP) and released further details about the SRP, including information about the submission process for abandonment work and Phase 1 Environment Site Assessments (ESA), Indigenous company criteria, and further guidance for interim invoice reporting.

As noted in our prior blog post, following update, and discussions of Periods 2 and 3 of the Program, the SRP administers grant funding to eligible oil field service contractors completing reclamation and abandonment work in the province.

Summary of Period 4

Similar to Period 3, Period 4 will allocate $100 million in funding and will remain open until March 31, 2021, or until licensee funding has been completely allocated. Contractors may complete reclamation and abandonment work up until December 31, 2022.

Funding in Period 4 is allocated to licensees who gave confirmed or proposed plans to the Alberta Energy Regulator for the Area-Based Closure (ABC) program before the 2020 spending targets were suspended temporarily due to COVID-19. The ABC program is a voluntary program developed by the AER with various associations to encourage abandonment and reclamation activities by assisting licensees to develop and coordinate closure programs in a manner that utilizes economies of scale to achieve cost savings. Licensees have been allocated funding commensurate to their ABC spending targets for 2020. A list of Period 4 licensees can be found on the Program's website.

For Period 4, projects are eligible for 50% grant funding, and licensees are responsible for the remainder. However, where a licensee employs an Indigenous oil field service contractor, projects may receive 100% grant funding.

As in prior periods, oil field service contractors may negotiate with licensees for work and apply for Program grants. Licensees can allocate funding to multiple contractors, but must ensure grant amounts do not surpass licensee funding limits. Additionally, licensees determine the scope of site work and must approve contractor applications in the appropriate sequence, starting with abandonment activities and finishing with reclamation. Per the Program, abandonment work should be submitted alongside Phase 1 ESAs if Phase 1 ESAs are performed concurrently with abandonment activities or immediately subsequent.

Indigenous Company Criteria

For contractors to classify as Indigenous, thereby qualifying for 100% grant funding in Period 4, contractors must be either Indigenous companies or prime contractors hiring Indigenous sub-contractors.

Oil field service contractors must meet one of the four criteria to qualify as an Indigenous company:

  1. At least 50% or more of the company is Indigenous-owned (sole proprietor, community-owned, or shareholders), and 50% or more of the employees carrying out the work are Indigenous;
  2. At least 50% or more of the company’s board of directors or executive officers are Indigenous, and 50% or more of the employees carrying out the work are Indigenous;
  3. The company is registered in Indigenous Services Canada’s Indigenous Business Directory; or
  4. The company is a Certified Aboriginal Business with the Canadian Council for Aboriginal Business.

Prime contractors hiring sub-contractors can be recognized as Indigenous if 100% of the sub-contractors are Indigenous.

Interim Invoice Reporting and Grant Payment Process

As part of Period 4, the Program released further information regarding the process for interim invoice reporting and grant payments. To receive grant awards, contractors must fill out an Interim Invoice and Reporting Form and submit an invoice copy, along with their respective grant agreement, to the Program via email. The invoice copy must be signed by the licensee, and cannot include GST or other ineligible costs, including administration fees, non-related work expenses, costs of work to prepare for contract bids, grant applications or project contracts, or other similar costs not directly incurred in relation to closure activities.

For final invoices and grant payments, contractors will be able to use their ETS Site Rehabilitation Program accounts. Similar to interim invoice reporting, contractors will be required to provide a Final Invoice and Reporting Form, a contractor declaration, an invoice copy, and submission ID numbers from Alberta Energy Regulator's (AER) OneStop showing work activity completion reports. More information will be released about final grant payments within the next few weeks.

Future of Site Closure

Period 4 demonstrates the continued evolution of the SRP. For this most recent period, the Government of Alberta appears to have adopted British Columbia's approach of requiring licensees to contribute to closure costs. Each of the previous periods have provided for full funding.

Period 4 also promotes the ABC program by rewarding those licensees that proactively established closure spend targets. As part of the Government of Alberta's new oil and gas Liability Management Framework announced on July 30, 2020, and discussed in our prior blog post, the Government of Alberta has advised that it intends to impose mandatory spend requirements. This is not the first time we have seen an intersection between the SRP and the proposed Liability Management Framework, as the landowner nomination program has also been identified as a component of the proposed Liability Management Framework.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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