Overview
The Licensee Liability Rating Program manages the financial risk to the Saskatchewan Oil and Gas Orphan Fund (SOGOF), in terms of a licensee's future costs to abandon and reclaim their wells and facilities, through the collection of security deposits.
The collected security deposit may be refunded to a licensee when eligible or forfeited to the SOGOF to carry out the abandonment and/or reclamation work required on behalf of a licensee that has been deemed an orphan in Saskatchewan.
Security Deposit Payment Responsibility
The ministry reserves the right to collect security deposit requirements where it is in the best interest of the public, regardless of whether the company is an upstream oil and gas producer or not.
Therefore, each Saskatchewan licensee that has abandonment and/or reclamation liability associated with their well and facility licences, under the LLR Program, may be subject to a security deposit requirement.
Guidance
How Security Deposit Requirements are Determined
Under the LLR Program, security deposit assessments are conducted by the ministry:
- Within the first 15 days of each month – after Integrated Resources Information System (IRIS) update – as part of the monthly LLR evaluation for all licensees (OFP invoice); or
- Prior to any well and/or facility licence transfer (OFT invoice).
For more details on the security deposit assessment process refer to Directive PNG025: Financial Security Requirements.
NOTE: Licensees can refer to their Securities Worksheet and Licensee Liability Inventory Reports, available in IRIS, for further details specific to their organization to help anticipate when a security deposit may be required.
Refer to the Access Liability Management Reports lesson within the Liability Management module at the User Learning Centre for more details on how to view the report in IRIS.
How Security Deposit Invoices are Issued
Security Deposit invoices are issued through IRIS.
Refer to the Access Security Deposit Invoice lesson within the Liability Management module at the User Learning Centre for more details on how to view the invoice in IRIS and/or receive notification when issued.
Ministry Accepted Payment Methods for Security Deposits
Security deposit payments must be made payable to the Minister of Finance and reference the invoice number to expedite processing.
Where another party is providing payment on behalf of the invoiced licensee, please ensure this is communicated at the time of submission to ensure payment is applied to the applicable licensee's account.
The invoiced amount can be paid by Electronic Funds Transfer (EFT), direct deposit, cheque or Irrevocable Letter of Credit (LOC). Where an LOC is the method chosen, the LOC must adhere to the following criteria for acceptance by the ministry:
- Obtained from a recognized Canadian Bank, Credit Union or Trust Company guaranteeing payment for the beneficiary upon presentation to the issue
- Obtained by the licensee issued the security deposit invoice and identified as the Applicant on the LOC
- Only renewable LOCs that adhere to the ministry standardized LOC Form or Amended LOC Form will be accepted; therefore, the licensee must ensure the financial institution is provided the form and adheres to the requirements before submission to the ministry.
NOTE: A licensee may change their security deposit payment method at any time. However, the existing form of security deposit will be held until a replacement has been received and accepted/processed by the ministry.
Inquiries related to the payment methods should be directed to the ER Service Desk at 1-855-219-9373 or ER.ServiceDesk@gov.sk.ca.
Failure to Submit the Security Deposit Required for a Licence Transfer
A licence transfer application will be denied, by the ministry, where a licensee fails to provide the required security deposit for a pending licence transfer within 30 days.
Failure to Submit a Security Deposit Required for a Monthly Assessment
Where a licensee fails to provide security deposit payment related to a monthly assessment, within the required 30 days, the amount owing is a debt to the Minister and may be collected in any manner the Minister considers appropriate, including in the manner provided in section 53.2 of The Oil and Gas Conservation Act.
Prior to obtaining a court issued judgment against the licensee to collect the outstanding debt, the ministry may issue a variety of Minister's Orders requiring the licensee to suspend operation, abandon wells, decommission facilities and reclaim well and facility sites by a given date in lieu of the security deposit payment. Further details on the possible enforcement actions are provided in Directive PNG025: Financial Security Requirements.
Eligibility
Security Deposit Invoice Installment Payments or Extension Considerations
OFT security deposit invoices issued as a result of a licence transfer are not eligible for extensions or installments.
Licensees may apply to the ministry for consideration of deferring OFP Security invoice payments to allow the licensee time to improve their LLR situation or by allowing licensees to pay the invoice in installments over a set period of time. It is important these submissions occur early before the payment deadline to ensure enforcement action to collect the unpaid security is not taken.
Installment Payment Plan – The ministry recommends the plan should typically not exceed three months in duration with installments evenly distributed throughout the duration of the plan to achieve the full invoice payment.
Extension Request Based on Action Plan to Improve LLR – The ministry recommends the plan should typically not exceed three months and must demonstrate that a licensee is actively working to reduce their liability obligations and improve their LLR. Though production increases will be taken into consideration when evaluating extension requests, an extension will not be granted solely on an anticipated increase of production.
A licensee may be eligible to reduce the abandonment and/or reclamation liability associated with a well or facility licence assigned under the LLR Program through various methods:
- Well Abandonment
- Downhole Well Abandonments
- Facility Decommissioning
- Reclamation Declaration Application
- Grandfathered Reclamation Release Application
- Acknowledgement of Reclamation (AOR) Application
- Exemptions from Reclamation for Well or Facility Sites with Overlapping Activities
- Multi-Licensed Site Reclamation Liability Reduction Application
- Well or Facility Licence Transfer
- Site Specific Liability Assessment for sites designated as Unassessed Problem Sites
- Problem Site Correction for Assessed Problem Sites
A licensee may also improve their LLR by increasing their asset value through various methods:
- Reactive existing licences to increase production
- Acquire new licences with asset value through a licence transfer or by drilling new wells.
How to Apply
To apply for an OFP security deposit invoice installment payment plan or extension the licensee must:
- Ensure the eligibility criteria prescribed above are met.
- Complete the appropriate form related to the type of proposal being applied for:
- Submit the completed form to the ERLiabilityRegulation@gov.sk.ca with subject line "OFP Invoice Deadline Extension/Installment Proposal for {Enter your Licensee Name}."
Licensees will be contacted via email after the request has been reviewed. Please note that submitting an extension request or installment payment plan does not guarantee that a licensee will be granted an extension.
Where the ministry approves an installment plan or invoice extension, the licensee’s progress will be monitored on a monthly basis to ensure the proposed actions are being achieved. If at any time the licensee does not adhere to the agreed upon plan, the minister may revoke the approval and proceed with enforcement action as described in Directive PNG025: Financial Security Requirements.
Further Information
A licensee, when eligible, must apply for a security deposit refund.