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.
Who pays Security Deposits?
The security deposit requirements is applicable to oil and gas producers. Therefore, each Saskatchewan upstream oil and gas 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.
Typically, any licensee that holds only non-oil and gas well/facility licences for purposes other than oil and gas production (such as potash mining, storage facilities, waste facilities etc.) would be exempt from the security deposit requirement under the LLR Program. If a licensee receives an invoice and believes they qualify for exemption, please contact ER.ServiceDesk@gov.sk.ca and provide supporting evidence for the Ministry of Energy and Resources to review.
Please be advised that 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 would typically be considered exempt under the LLR Program.
When and how are Security Deposit Requirements Determined?
Under the LLR Program, security deposit assessments are conducted by the ministry:
- After the 28th of each month 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.
Licensees can refer to their Securities Work sheet or Licensee Liability Inventory Reports, available in IRIS, for further details specific to their organization to help anticipate when a security deposit may be required.
How are Security Deposit Invoices Issued?
Security Deposit invoices are issued through IRIS. To view the invoice in IRIS, an individual will require the licensee’s IRIS Security Administrator (SA) to set them up with the necessary permission in IRIS. After which the individual can log into IRIS and navigate to Reports > Billing > Under Search category click Invoices > Set the Invoice Type = Security Deposit Billing > Click the Search > the results are displayed on the screen > click on the applicable pdf hyperlink to view the invoice.
Note: For individual’s wanting to receive notification when the licensee is issued an invoice in IRIS you will need to set your Notification Preference (after the SA has given you the permission to view the IRIS invoices). To do this, log into IRIS and navigate to Support > Notifications Preferences > Scroll down to the bottom of the page and click the “Edit Notifications Preferences” button > Scroll to the Billing section and find IRIS BILLING and change the IRIS Invoice Notification from None to one of the other options > Scroll down to the bottom of the page and click the Save button.
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 For OFP Security Deposit Invoice Installment Payments or Invoice Extensions
Licensees may apply to the ministry for consideration of deferring 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.
Note: OFT security deposit invoices issued as a result of a licence transfer are not eligible for extensions or installments.
Installment Payment Plan – The ministry recommends the plan should typically not exceed 3 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 3 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 ER.ServiceDesk@gov.sk.ca with subject line "Attn: Liability Regulations - OFP Invoice Deadline Extension/Installment Proposal."
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.
For more information on how to apply for a security deposit refund.
For more information on using of security toward Annual Reduction Target (ART).