The purpose of the BC Energy Regulator's Liability Management program is to ensure that permit holders are responsible for the financial risks related to their operations. They assist the BCER in determining security deposits required of permit holders to protect against those who may not be capable of meeting abandonment and restoration obligations.
Introduced in May 2019, our Comprehensive Liability Management Plan ensures the responsibility for reclaiming oil and gas sites in B.C. remains with industry. The CLMP ensures no direct cost to B.C. residents, protects public safety and safeguards the environment. It achieves this through three primary components:
Liability management
The BCER is enhancing stringent checks of each company’s financial health through the introduction of a Permittee Capability Assessment (PCA) program, with the continued goal to mitigate liability risk and minimize pressure on the Orphan Site Reclamation Fund (OSRF). The PCA is a holistic evaluation of permittees throughout the energy development life cycle and will replace the Liability Management Rating (LMR) program. The evaluation will include looking at more information than strictly liabilities versus assets. The new assessment will look at a company's financial capability, along with various aspects of their operations. The BCER is gradually moving from the LMR program to the PCA, with full implementation by April 2022.
Detailed information on the deemed liabilities for each individual well and facility permit held by an operator can be accessed here.
Improving the rate of inactive site restoration
The Dormancy & Shutdown Regulation speeds up the rate at which inactive sites are returned to their pre-activity state. The regulation gives each dormant well site a prescribed cleanup timeline and imposes requirements for decommissioning, site assessment, remediation, reclamation/restoration, notification and reporting.
For more information on Dormant Sites, please visit our Dormant Sites page.
Addressing orphan sites
A new liability levy to fund orphan site restoration has been phased in. The levy replaces a previous fixed tax on marketable gas and petroleum.
For more information on Orphan Sites, please visit our Orphan Sites page.
Liability Management Program Frequently Asked Questions
Where can I find the electronic/wire transfer information to submit the required security?
Please have your banking institution contact the Regulator directly at Liability.Management@bcogc.ca to request this information.
Who should my letter of credit or cheque be made payable to and where do I send it?
The letter of credit beneficiary and cheques are payable to, BC Energy Regulator.
Security deposits are to be couriered to:
BC OIL AND GAS COMMISSION
ATTN: FINANCE
2950 JUTLAND ROAD
VICTORIA BC V8T 5K2
What will happen if I can't or won't pay?
Permit holders who fail to submit required security deposits within the allocated timeframe may be in noncompliance with Section 30 of OGAA. If the security deposit was required to approve a permit transfer application, the application will not be approved. If the security deposit was required under an initial or monthly assessment, additional compliance action will be taken against the permit holder. This may result in the cancellation of permits or orders to cease operations.
In what format does the Regulator accept security?
Security deposits will be accepted as a certified company cheque or electronic/wire transfer, from a recognized Canadian financial institution, or as an irrevocable letter of credit from a Canadian Schedule I or Schedule II bank, a Canadian Credit Union, the Caisse Desjardins, or the Alberta Treasury Branch. Please note, letters of guarantees, safekeeping agreements, performance bonds, and personal cheques, will not be accepted.
When will my security deposit be returned?
- The Regulator may, upon request by a permit holder, return all or part of a security deposit when the permit holder has completed liability reduction activities (decommissioning or obtaining a Certificate of Restoration Part 1 or Part 2) and the security is not required to secure the permit holder's obligations.
- The security deposit will be returned in full when all the restoration obligations associated with a permit holder’s sites are brought to closure.
Will interest be paid on an operator's security deposit when it is returned?
No, interest will not be paid. Only the amount that was held as security will be returned. This policy was rolled over from the Ministry of Finance administration.
Will I have to pay a security deposit to transfer permits?
Upon receipt of an application for a permit transfer of one or more wells and/or facilities, both the transferor and the transferee will be subject to a security requirement review. As part of the security requirement review, the applicant and permit holder will be requested to submit their most recent Financial and Reserves information.
The applicant or permit holder involved in the transaction may be required to submit a security deposit as calculated by the Regulator. In addition to the requirement to maintain an immediate post-transfer LMR above 1.0, decisions on security deposit requirements may be based on the submitted financial and reserves information and associated compliance issues. Security deposits are to be submitted within 30 days from the date of request.
Will the program eventually eliminate Orphan wells?
It is the intention that the LMR program will result in adequate security to cover well plugging and reclamation activities if a company becomes insolvent. The program is a protection measure to cover liabilities should a company fail to meet its closure obligations. However, there may be a potential for orphan wells should a company become insolvent that has failed to pay the required security.
Why do a number of my cancelled wells have a reclamation liability assigned to them? There was never a well drilled onsite.
A drilling event may not have occurred on the lease; however, the Regulator has reason to believe that construction had started (e.g. clearing, road construction, cut/fill, etc.) Therefore these wells have been flagged ‘cancelled with surface disturbance’ and will require restoration work be completed in order to have a Certificate of Restoration issued.
Do you take into account working interest participants (WIPs) when assigning deemed liability and production assets of a well?
No. At this time WIPs are not taken into account. Under the program the permit holder of the site holds 100% of the deemed liability and production assets.
Why not?
Because WIPs are frequently changing we are unable to consistently keep our records current enough to tie into the LMR program. Ultimately, the permit holder is held responsible by the Regulator.
My deemed well liability has increased since last month, but we haven't drilled or acquired any new wells. How did that happen?
A number of things may have happened.
- A surface casing vent flow/ gas migration issue was identified, therefore a premium is added to the wells individual deemed liability.
- A drilled/cased well completion has been entered into the Regulator database.
- A cancelled wellsite was later identified as being cancelled with surface disturbance.
- A well previously never having produced/injected, does so.
Other than divesting, how can I reduce our deemed liability?
Complete abandonments: Deemed liability will decrease when a well is abandoned and the appropriate documentation is submitted to and approved by the Regulator
Apply for a Certificate of Restoration (CoR): The deemed liability assigned to a site will be removed when the wellsite is reclaimed and a CoR is issued.
Terminate a facility: A Facility’s deemed liability will only be removed when a facility is decommissioned, removed from site and terminated in the Regulator database.
More information on the dispute process and site-specific liability assessments can be found in the LMR Program Manual:
The Regulator may require a site-specific liability assessment for one or more permits to be used in the calculation of an operator’s LMR or, in the case of a problem site, for the determination of a required security deposit. The only time an operator may make the choice to submit a site-specific assessment is as part of a security deposit dispute process. As part of the process an operator must submit for review, along with a operator specific netback calculation, site-specific liability assessments completed by a qualified third-party professional for each well and facility permitted to the operator. More information on the dispute process and site-specific liability assessments can be found on pages 16 and 17 of the LMR Program Manual.
We note that the program is similar to the AER program in Alberta. Is there an attempt to harmonize the 3 western province's liability programs?
The Regulator works closely with other regulators in Alberta and Saskatchewan to align liability management programs where appropriate. The Permittee Capability Assessment (PCA) is being developed in collaboration with the Alberta Energy Regulator’s development of their Licensee Capability Assessment (LCA).
Industry has considerable knowledge and experience on liability costs as a result of the Alberta system. Will there be an opportunity for further industry consultation?
The Regulator has continuously engaged with stakeholders in the update of the liability model and the development of the Permittee Capability Assessment. The Regulator is always open to feedback from stakeholders regarding our programs.
What tool will be put in place so that an operator can monitor their liability rating?
LMR ratios for BC operators are posted to the Regulator’s website here. Ratios are calculated and updated daily.
The Regulator has developed a report that lists the deemed assets and liabilities for each individual well and facility permit held by an operator. To access these reports visit Data and Reports, then Data Centre and select Liability Management reports from the list on the left-hand side. Operators that would like to obtain information on their security deposits can send a request to Liability.Management@bcogc.ca.
Recent Updates
- INDB 2022-05 Implementing Permittee Capability Assessment
- 2018/19 Liability Management Rating Summary
- INDB 2020-04 Industry Review Period for Updated LMR Liability Model
- INDB 2019-23 LMR Program Integrates With AMS Payment
- NR 2019-02 First Timelines in Western Canada for Oil and Gas Well Cleanup Announced in New Plan
- INDB 2019-01 Change to Orphan Liability Levy
- INDB 2017-09 Discussion of Permit Transfer Plans Prior to Application Submission
Liability Management Documentation
| Name | Date Published |
|---|---|
|
Sample Letter of Credit
The Sample Letter of Credit is used as a template by financial institutions when issuing a letter of credit. Effective Date: Dec 11, 2024 |
Dec 11, 2024 |
|
PCA Program Guidance (v1.3)
This manual guides users through the processes and procedures of the Regulator’s Permittee Capability Assessment (PCA) program. Effective Date: Jun 1, 2024 - Please refer to the Table of Revisions within the document. |
Apr 30, 2024 |
|
Corporate Financial and Reserves eSubmission Portal Guidance (v1.2)
Effective Date: Dec 21, 2023 |
Dec 21, 2023 |
|
Comprehensive Liability Management Plan
|
May 31, 2019 |
LM Questions & Comments
Feedback is welcomed by the BC Energy Regulator and can be directed as follows.
For general inquiries or for operators that would like to obtain information on their security deposits:
liability.management@bc-er.ca
For Orphan Wells inquiries: orphanrestoration@bc-er.ca.