Alberta to overhaul ‘flawed’ scheme that regulates old oil and gas infrastructure – by Geoffrey Morgan (Financial Post – January 31, 2020)

CALGARY – The Alberta energy regulator will soon unveil sweeping changes to how it regulates its old oil and gas infrastructure, including a complete overhaul of an environmental liability rating scheme it now considers a “flawed system.”

In December, the AER stopped its longstanding practice of publishing liability management ratios (LMRs) for every oil and gas company operating in the province, which were used to measure the value of a company’s assets against its total deemed liabilities. The AER then limited companies with a low LMR score from buying assets that would add to their liabilities.

A full review of how the government and regulators handle oil and gas clean-up rules is years, if not decades, overdue, Alberta Energy Minister Sonya Savage said in an interview with the Financial Post. She confirmed the province would be rolling out new policies by the end of the first quarter of 2020.

“We’re working on and putting the final touches on a whole suite of policies,” Savage said, adding that changes are necessary because using an LMR to gauge a company’s ability to remediate its oil and gas infrastructure, “hasn’t been working.”

“For the liability management issue, we’re looking at decades where no government has been willing to move on this file,” she said.Taken on its own, the LMR is not a good indicator of a company’s financial health, said AER spokesperson Shawn Roth in an email.

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