On February 1, 2021, the Government of Alberta launched Period 5 and Period 6 of the Site Rehabilitation Program (SRP), including additional information within the updated Site Rehabilitation Guidelines.
As noted in our earlier blog post, following update, and discussions of Period 2, Period 3 and Period 4, the SRP administers funding to eligible oil field service contractors completing reclamation and abandonment work in the province.
As of February 12, 2021, Alberta reports that $310.3 million of the of the $1 billion in federal funding has been approved and is being allocated to 633 Alberta-based companies.
Update on Period 3 and Period 4
Period 3 (which allocated maximum funding of $139,000 by licensee) and Period 4 (which provided funding for licensees with confirmed and proposed Area-Based Closure Plans) both remain open until March 31, 2021, or until licensee funding has been completely allocated. For more details, please see our earlier discussion of Periods 3 and 4.
Summary of Period 5
With $300 million available, Period 5 represents the largest funding allocation to date. Period 5 will remain open until March 31, 2022, or until allocations are fully subscribed. Funding in Period 5 is available to licensees with confirmed hydrocarbon production in 2019 where the licensees had completed closure work in 2019 and 2020. A list of eligible licensees has been posted online by the Government of Alberta.
Period 5 introduces the opportunity for licensees to use their allocation on sites where they are the Working Interest Participant (WIP). WIPs that are either i) responsible for closure of sites subject to orders issued by the Alberta Energy Regulator (AER); or ii) have a major working interest in a defunct licensee's site may contract with oil field services contractors to apply for SRP funding starting in Periods 5 and 6. If a contractor applies for and receives funding under the SRP, the WIP will not be eligible to file a Working Interest Claim (WIC) to the AER for that same work on the same site. Any AER abandonment or reclamation order issued to the WIP must be attached to the contractor's contract as part of the SRP grant application. Any active WIC files with the AER are not eligible for an SRP grant.
As in prior SRP periods, oil field service contractors are responsible for applying for funding allocations. However, contractors may now contract with both licensees and WIPs to apply for and obtain SRP funding to complete closure activities.
Similar to Period 4, projects are eligible for 50 percent of the contract value, with the licensee or WIP remaining responsible for the remaining amount. However, where a licensee contracts with an Indigenous oil field service contractor, up to 100 percent of the contract value may receive grant funding. See discussion of Period 4 for guidelines surrounding Indigenous oil field service companies.
Starting in Period 5 and continuing into Period 6, the scope of work in the contractor's oilfield services contract must match the assets and work activities in the SRP grant application project information. If the work and costs do not align, the application will be denied.
Summary of Period 6
Period 6 allocates $100 million in closure funding exclusively for clean-up activities within Indigenous communities in Alberta. The Period 6 application period is open until March 31, 2022, or until allocations are fully subscribed. Funding is divided between First Nations communities ($85 million) and Metis Settlements ($15 million). Lists of eligible licensees associated with First Nations and Metis Settlements are posted online.
First Nations communities and Metis Settlements will approve the sites that are eligible for closure work using their allocation, and will work with licensees and contractors to approve the spending. Once approved, contractors can then apply directly to the Government of Alberta for SRP grants to do the work. First Nations and Metis Settlements cannot apply for this funding—only the contractor doing the work can do so.
As with prior periods, Period 6 closure activity projects are eligible for 50 percent of grant funding, with the licensee or WIP responsible for the remaining amount of the contract. However, and as in Periods 4 and 5, projects may receive up to 100-percent grant funding where a licensee contracts with an Indigenous oil field service contractor to complete the closure work.
Additional Updates to the Guidelines
In its update to the Site Rehabilitation Program Guidelines, Alberta has clarified a number of points:
- The total SRP funding allocated to Licensees, WIPs, First Nations and Metis Settlement (described as their "allocation balance") will also be adjusted were an application is withdrawn by a contractor.
- Unlicensed pipelines directly associated with a licensed pipeline are eligible for funding with the submission of a survey or map clearly indicating the location of the unlicensed and licensed pipelines. The associated pipelines must have the same work activity.
- Where an oil field service contract exceeds the determined value for an activity, the applicant may be offered a grant for a lesser amount. After a grant is awarded, no additional funds will be provided to that specific project in the event of cost overruns. Applicants are encouraged to ensure that contracts with Licensees cover those costs for work done that exceeds the amount offered by an SRP grant. SRP funding is meant to encourage accelerations of site abandonment and reclamation work and are not meant to be the only source of funding for work completion.
- The updated guideline also provide various housekeeping updates, including a new email address and a new definition of "hours of work generated". In addition, a new performance measure for work funded by the Period 6 allocation requires reporting on the number of Indigenous employees and sub-contractors from the communities where the SRP-funded work is located.
Future of Site Closure
Periods 5 and 6 represent the ongoing expansion of the SRP to include larger, longer-term capital injections for a broader variety of closure projects on a greater diversity of land bases. As with prior periods, the effectiveness of the funding roll-out will remain in the details. Given the new timelines, the scope and target of future Periods is unknown at this time.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.