Frequently Asked Questions - Liability Management Rating Program
The letter of credit beneficiary and cheques are payable to, BC Oil and Gas Commission.
Security deposits are to be couriered to:
BC Oil and Gas Commission
#300, 398 Harbour Rd
Victoria, BC V9A 0B7
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.
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.
Security will be returned for one of two reasons.
- The Commission may, upon request by a permit holder, return a security deposit where the permit holder has achieved a consistent and sustainable non security-adjusted LMR greater than 1.0. The permit holder must also have demonstrated compliance with regulatory obligations.
- The security deposit will be automatically returned when an operator no longer holds any permits in B.C.
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.
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.
The Commission may at any time request a current ‘Permit Holder Netback Calculation’ form from disposers and processors to calculate the industry average netback for each non-producer category. You will be provided with ample time to submit a ‘Permit Holder Netback Calculation’ form when required.
In November 2015 the calculation parameters (netback, shrinkage factor, and oil equivalency factor) were updated with 2009 to 2013 industry data collected by CAPP. Future updates will be implemented at the discretion of the Commission.
A drilling event may not have occurred on the lease; however, the Commission 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 Reclamation issued.
Producers: No, you do not have to complete this form unless you choose to dispute a required security deposit by submitting a dispute request to the Commission. Under the current LMR program, a universal netback is calculated for all producers based on CAPP statistics.
Non-producers: Yes, you do have to submit this form upon request from the Commission if a Permit holder wishes to receive a deemed asset for a designated gas plant or disposal station. The netbacks used in the determination of a deemed asset for processors and disposers is based on an average of all submitted industry netbacks from the most recent year-end totalled and calculated individually for each non-producer category.
Permit holders that chose not to submit a netback will be given a deemed asset of zero.
Sufficient notice will be given when the Commission is required or deems it necessary to update the industry average netbacks.
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.
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 Commission.
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 Commission database.
- A cancelled wellsite was later identified as being cancelled with surface disturbance.
- A well previously never having produced/injected, does so.
Complete abandonments: Deemed liability will decrease when a well is abandoned and the appropriate documentation is submitted to and approved by the Commission
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 Commission database.
The Commission 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 .
LMR ratios for BC operators are posted to the Commission’s website here. Ratios are calculated and updated daily. An operator may also request an Operator Detail Report (a report that lists the deemed assets and liabilities for each individual permit held by an operator) by emailing Liability.Management@bcogc.ca .
The Commission recognizes that other jurisdictions have previously implemented liability rating programs and believes that a consistent process between western provinces is a valid approach. However, there are no existing plans or agreements to harmonize a liability rating program among western provinces.
At this time no further consultation periods will be held for the producer and non-producer programs. That being said, the Commission is always open to feedback from stakeholders regarding our programs.