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AER apologizes for $200 billion overestimate on liabilities


November 5, 2018  


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The Alberta Energy Regulator (AER) wants to clear up one thing: the liabilities faced by the industry are much lower than reported.

“Several media outlets have reported liability estimates provided by the AER in presentations to industry,” states the AER in a press release. “We want to apologize for the concern and confusion that this information has caused.”

The numbers are staggering – $260 billion in total liability, “which is $200 billion more than we have consistently reported.”

This particular estimate was created for a presentation to try and hammer home the message to industry that the current liability system needs improvement, states the AER.

“While the message to address liability is important, the numbers were not validated and were based on a hypothetical worst-case scenario. Using these estimates was an error in judgement and one we deeply regret.”

The AER-verified calculations estimate the current total liability at $58.65 billion.

“We know that we have a lot of work ahead of us in the liability space; this was made obvious during the recent economic downturn and highlighted in particular with the Redwater ruling.”

While the AER is still waiting for a decision from the Supreme Court of Canada on the Redwater case, they haven’t been idle.

Through Directive 067, the AER now requires more information at the time of application and has more discretion to reject applications where an applicant poses a risk to public safety or the environment. The directive also allows the AER to review existing licensees to manage risk.

“Energy operators must disclose financial information to the AER, such as audited financial statements and the existence of insolvency proceedings,” states the regulator.

The AER has the authority to revoke or vary existing license eligibility or deny eligibility based on a company’s financial disclosure.

“We have also helped introduce the area-based closure program, which encourages operators to work together in an area to close oil and gas infrastructure. The program benefits industry and Albertans by reducing costs and the number of inactive sites in the province.”

Ellis steps down

In other AER news, Jim Ellis – president and CEO – will resign from the organization, effective Jan. 31.

Ellis joined the AER in 2013 as the first CEO for the newly-formed regulator.

Ellis worked with the Government of Alberta and the AER board of directors to build the new regulator, merging the regulatory functions of the former Energy Resources Conservation Board with those of former Environment and Sustainable Resources Development (now Alberta Environment and Parks) related to oil and gas development to create a single, full-lifecycle regulator for Alberta.

“Jim’s leadership and strategic vision has been vital to the launch and growth of the Alberta Energy Regulator,” said AER chair Sheila O’Brien. “He built a new organization from the ground up, ensuring that the needs of all stakeholders were embedded in the decision making framework of the AER.”

Throughout his term as CEO, Ellis led a team that focused on initiatives that have delivered more than $2 billion in industry savings while protecting public safety and the environment. The AER recently announced new regulatory efficiency initiatives to further transform the regulator to better respond to new developments in technology and changing stakeholder expectations.

“The AER is a trusted, effective, and more efficient regulator today because of the leadership of Jim Ellis,” added O’Brien. “The AER Board wishes Jim all the very best in the future and offers our gratitude for his service and the legacy he leaves at the AER.”

This decision has been in the planning stages for the past several months. The AER board will begin a broad-based search for the new CEO immediately to ensure continuity of leadership in the organization.


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