The Alberta Energy Regulator (AER) has evaluated its play-based regulation pilot program (the Pilot) in the Duvernay shale lands near Fox Creek, Alberta. The Pilot tested a unique regulatory approach of having oil and gas companies submit one regulatory application for all of their proposed activities within a region, instead of submitting numerous individual applications for each well, pipeline, facility, road and water diversion.
The Pilot was launched on September 1, 2014. Applications were accepted until July 15, 2015. Participation by the 50 or so companies that operate in the Duvernay area was voluntary and only six fully participated in the Pilot.
The AER issued six single "mega approvals" under the Pilot, each with 30 to 50 individual authorizations under multiple legislation, including the Oil and Gas Conservation Act, Pipeline Act, Public Lands Act, Environmental Protection and Enhancement Act and Water Act. Outside of the Pilot, a company would need to file, and the AER would need to consider and process, 30 to 50 separate regulatory applications per company for the same level of development.
A single application and decision-making process for energy development allows for a more holistic assessment of risks and allows regulatory experts across subject areas to work better together in making decisions. It also encourages companies to develop project-based and longer-term development plans, which in turn allows for a better assessment and reduction of cumulative effects. Companies can also benefit from having improved longer-term regulatory certainty.
The Pilot was grounded in two basic principles:
- Risk-based regulation, where regulatory action is proportional to the level of perceived risk, with a greater focus on the areas with the greatest risk; and
- Play-focused regulation, where the regulatory approval is focused on an entire resource play instead of individual components such as individual wells, pipelines and facilities.
The AER has released an Evaluation of the Alberta Energy Regulator's Play-Based Regulation Pilot where it evaluated the Pilot against four objectives.
1. Minimize cumulative effects in the Pilot area and have industry collaborate on surface development plans
In the Evaluation the AER concluded that cumulative effects were reduced but not minimized and more work is needed to address cumulative effects comprehensively. For instance, as participant companies applied for long-term water diversion licences instead of short-term temporary water diversion licences, the AER was better able to review broader, longer-term water diversion demands. The use of fewer, but larger, multi-well drilling pads decreased the amount of associated surface infrastructure, such as access roads and pipelines, needed for development.
The AER believes that with better collaboration among operators on surface infrastructure, cumulative effects can be further reduced.
2. Enhance engagement with stakeholders, including First Nations and Metis
The Evaluation found that general information about the Pilot from the AER and participating companies to stakeholders was insufficient. Stakeholders did see a benefit with the concept of having a broader view of energy development plans but felt they did not receive enough information to understand project plans.
3. Establish risk-based, play-based requirements
Although subsurface requirements for development, production and data gathering were established the Pilot pursuant to an AER subsurface order, surface-related requirements were not developed as further work was needed to develop regulatory tools that support and enable play-based regulation.
4. Develop and test a single application and decision-making process
Part of the Pilot included the release of Manual 009: Play-Based Regulation Pilot Application Guide. Participants found it did not provide sufficient detail and clarity, and therefore the quality and content of the application made under the Pilot varied considerably. However, participating companies saw a benefit to spending more time upfront preparing a single application with the certainty of a longer-term approval rather than submitting multiple individual applications.
The applications received under the Pilot contained development plans for the next three to five years, which was shorter that what the Pilot intended.