Update bulletin on COVID-19 and the Alberta energy sector

16 April 2020

The energy sector in Alberta is currently experiencing tremendous upheaval. The massive changes caused by the COVID-19 crisis, in addition to the low price of oil, have led to an unprecedented level of uncertainty in the industry and in daily life across the province. Learn more in this article about the latest developments affecting Alberta's energy sector.



Alberta Energy Regulator

  • On April 2, the Legislative Assembly of Alberta passed multiple emergency bills aimed at providing industry relief. These include changes to the Oil and Gas Conservation Act and the Pipeline Act through Bill 12 that grants the Alberta Energy Regulator (the "AER") new powers and funding to manage the expected rise in suspended or abandoned oil and gas projects. The AER may now make rules respecting suspension, abandonment, remediation, and reclamation costs of wells, facilities and pipelines.
  • The Government of Alberta also announced it would fund the operation of the AER for the first half of 2020 by making the entire contribution typically levied from industry, saving energy producers some $113 million.

Federal aid

  • On April 17, the Federal Government announced $1.7 billion to clean up orphan wells in Alberta, Saskatchewan and British Columbia. In addition, the government will establish a $750 million emissions reduction fund, with a focus on methane, to create jobs through efforts to cut pollution. The fund includes $75 million to help the offshore industry cut emissions in Newfoundland and Labrador.
  • While it is unclear at this time if additional financial aid is forthcoming, suggestions from industry include:
    • Purchasing accounts receivable at a discount, which would provide instant cash flow and enable the federal government to collect these debts at a profit as oil prices recover;
    • Working with government agencies and financial institutions to ensure companies are provided with continued access to existing or new credit support;
    • The Federal Government buying crude volumes from producers now for delivery at a later date, keeping industry afloat and providing profit to the Federal Government if the price of oil recovers; and
    • Imposing a tariff wall around North America that would tax incoming barrels to effectively include the levy already paid by Canadian producers (such as the carbon tax), thereby increasing the price for North American oil compared to global prices.

Mineral rights and leases

Orphan Wells

  • The Government of Alberta announced it would provide a $100 million loan to the Orphan Well Association (the "OWA") to kick-start the reclamation and abandonment of up to 1000 wells and commence over 1000 environmental assessments.
  • The changes to the Oil and Gas Conservation Act through Bill 12 now enable the OWA to continue production and sell oil and gas from orphan wells through associated pipelines, a power the OWA previously did not possess.
  • OWA funds can now be used for broader purposes, such as paying for facility monitoring operations, hiring and retaining staff for monitoring and risk management purposes, and covering the cost of receivers, receiver-managers, trustees and liquidators.

Pipelines

  • The Government of Alberta is investing $1.5 billion in the Keystone XL pipeline to accelerate construction, ensuring it is operational by 2023. The province will also provide a further $6 billion in loan guarantees for the project.
  • Keystone XL will carry 830,000 barrels per day of crude oil and will be a significant step towards increasing Alberta's takeaway capacity. Construction begins April 1, 2020.

Reporting obligations

  • Alberta Energy suspended certain reporting requirements under the Coal Conservation Act, the Oil and Gas Conservation Act, and the Oil Sands Conservation Act until August 14, 2020.
  • Reporting obligations related to royalty calculations and collection, as well as any requirements with health and environmental impacts, are NOT suspended.

    Information Letter 2020-13 - Postponing Regulatory Reporting for Industry
  • The Minister of Environment and Parks suspended reporting requirements for most environmental monitoring data in the province until August 14, 2020. The suspension applies to reporting obligations required by licenses, approvals and registrations under the Environmental Protection and Enhancement Act, the Water Act and the Public Lands Act. The requirement to monitor and collect environmental data remains in place.
  • Reporting obligations related to drinking water and reporting required by legislation such as the release of substances under Section 110 of the Environmental Protection and Enhancement Act are NOT suspended.

    Ministerial Order 17/2020 - Suspension of Reporting Obligations
  • Reporting obligations under the Technology Innovation and Emissions Reduction Regulation and the Renewable Fuels Standard Regulation are suspended until June 30, 2020.

    Ministerial Order 16/2020- Technology Innovation and Emissions Reduction Regulation

    Ministerial Order 15/2020 - Renewable Fuels Standard Regulation

For more resources and insights on how COVID-19 might impact your business, visit our Covid-19 resource centre.

If you have questions regarding any of the above, please contact any member of Gowling WLG's Calgary Energy Group.


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

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