August 11, 2020
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At the end of July, the Government of Alberta announced a new Liability Management Framework (LMF) to enable industry to “better manage the clean up of oil and gas wells, pipelines and facilities at every step of development”. This framework replaces a decades-old process and is designed to meet the needs of an aging oil and gas sector that currently has an estimated 97,000 inactive wells across the province.
In the announcement, the Government of Alberta identified five components to the new LMF:
As currently announced, the Liability Management Framework is light on details and actionable information for producers. We know there will be closure spending targets, but only have rumours suggesting what those targets will be. We know the LMR program is ending, but don’t yet know when or how the new Licensee Capability Assessment System will be calculated.
What is clear from this announcement is the province’s renewed commitment to ensure that producers meet their environmental liability responsibilities. It is a priority for this government to reduce the number of inactive wells in the province and mitigate the risk of a growing inventory of orphan sites, with the hopes of improving Alberta’s ability to attract oil and gas investment. Which means that even during difficult downturns like the one currently facing our industry, producers cannot afford to neglect their Asset Retirement Obligations (ARO). It is essential that producers have plans in place to manage their liabilities, and if their current process was designed around the LLR program, they will have to change their plans when that program ends.
XI Technologies is here to help E&Ps strategically manage their liabilities with tools to estimate, analyze, and monitor ARO. XI’s cost model was developed independently of LLR through a combination of government resources, expert opinion, and industry data. To learn how ARO Manager can help your company navigate liabilities, visit our website or contact us today.