Working Interest Participant Obligations Under the AER's Reasonable Care and Measures Orders

Nearly a year ago, the Government of Alberta announced its new Liability Management Plan. Through this plan, the Alberta Government provided the Alberta Energy Regulator (AER) with additional tools to ensure that sites are properly managed through their full life cycle. One such tool is the ability of the AER to issue orders requiring that reasonable care and measures be undertaken to prevent impairment or damage to the environment, human health and safety, or property. The potential reach and scope of these orders is quite broad, in that they may be directed at licensees, non-operating working interest partners, or both. Arising through the Alberta Government's changes to the Pipelines Act and the Oil and Gas Conservation Act, the implications and the inherently broad scope of these new types of regulatory orders are still being evaluated by oil and gas industry participants.

What is a Reasonable Care and Measures Order (RCAM Order)?

RCAMs issued to date have included requirements such as the following:

• an active 24 hours-a-day emergency number to be posted at the site;
• all containment devices such as pipelines, sumps or pits must be depressurized and empty. The associated fluids must be disposed of in a manner acceptable to the AER;
• the named entities identify all the known hazards and site-specific risks and provide a letter on company letterhead indicating that they have implemented any necessary additional mitigation measures;
• wells be shut in, sealed, locked and chained;
• the named party conducts inspections at specified intervals;
• the named parties develop an Action Plan, which may be for the surface, subsurface, or both; and
• require development of an Action Plan that will:
  • confirm the reasonable care and measures that are being provided for the site;
  • outline the actions that will be undertaken to address past non-compliances if they exist;
  • outline the steps that will be taken to address off-lease odours and substance releases;
  • ensure that the operations authorized under the licenses are suspended; and
  • provide the name and contact information of the company that will be providing emergency response as well as the name and contact information of the company that will be providing spill response services.

RCAM Orders can be standalone, or issued as part of another order such as an abandonment order. To date, the AER has issued six of these orders which are now posted on the AER's website. The majority of these orders were issued in respect of companies that are currently subject to insolvency proceedings.

What Should a Party Do When Named in a RCAM Order?

If named in a RCAM Order, a party should consider the following:

1. confirm that they are correctly named;
2. confirm whether a monitor, receiver or trustee has been appointed with respect to the assets and if so ensure an understanding of the impacts of the appointment on the RCAM Order;
3. ensure adequate access to records to carry out work directed by the AER;
4. ensure coordination with other parties named in the order;
5. ensure insurance coverage for the site if not already covered by existing policies; and
6. ensure understanding of which costs may be reimbursable from the Orphan Well Association.

The amendments which introduced the authority for the AER to issue RCAM Orders and other recent amendments to Directive 067 which include an obligation for licensees to report material changes in working interest percentages signals an ongoing movement towards holding working interest participants responsible for addressing environmental liabilities where the current licensee is unable to. This shift requires additional coordination among working interest participants to mitigate the risks around addressing financial distress and insolvencies of, and also strongly incentivizes conducting proper initial and ongoing counterparty due diligence as part of A&D programs as well as managing current assets.