Saskatchewan updates Oil & Gas Conservation Regulations to accommodate Closure Companies in new Oil & Gas Liability Management Regulations

“Qualifying expenditures approved by the minister as a result of a license transfer to a closure company may be applied against the transferor’s Annual Reduction Target (ART)”

Background

On July 5, 2021, the Ministry of Energy and Resources released Bulletin BT2021-010 outlining the new Financial Security and Site Closure Regulations along with amendments to the Oil & Gas Conservation Regulations. These regulatory updates further strengthen and support the ongoing efforts of both 360 Energy Liability Management, and our sister company Skye Asset Retirement.  As we constantly look for ways to support and improve the closure industry inside of the energy sector, these updates encourage and drive us to continue.

Saskatchewan has been transparent with changes it was considering, and the updates and amendments are generally in line with industry expectations. Featured prominently are the new Proportional Risk Transfer Assessment and the 5% Liability Reduction Percentage (LRP).

Special consideration has also been made for Closure Companies inside of this new liability framework. This was done in two major ways:

1. 1. Added the definition of a Closure Company, meaning a company:
      1. 1. 1. 1. That has as its primary business the abandonment and reclamation of inactive infrastructure and sites; and
               2. That has or will acquire the licenses for the inactive infrastructure and sites mentioned in subclause (i).
   2. Included a Closure Company in the eligibility requirements to be issued a license.
   3. Allow the cost associated with transferring sites to a Closure Company to be applied against a Transferor’s ART.

Implications

These amendments signal regulatory support behind Closure Companies and their viability as a tool for Licensees to reach their spending quotas. Saskatchewan has signaled that these changes will not come into effect until they modify internal systems, so we do not anticipate any mandatory quotas for 2022.

We expect 2022 closure spending to be dominated by ASCP funding but encourage Licensees to view these programs as opportunities to delineate properties for future closure dispositions.

-Lindy