16 annual 17 report our mission our visionour our mandate our The Alberta Energy Regulator To regulate Alberta’s energy The Alberta Energy Regulator ensures the safe, efficient, resources by protecting what is recognized for regulatory orderly, and environmentally matters most to Albertans— excellence, ensuring the safe, responsible development of public safety, the environment, environmentally responsible hydrocarbon resources and economic value. development of energy over their entire life cycle. resources for the benefit This includes allocating and of all Albertans. conserving water resources, managing public lands, and protecting the environment while providing economic benefits for all Albertans. contents ABOUT THE ALBERTA ENERGY REGULATOR 1 MESSAGES 5 HIGHLIGHTS 10 PROTECTING WHAT MATTERS 13 YEAR-IN-REVIEW 30 MOVING FORWARD 33 OPERATIONAL OVERVIEWS 41 CORPORATE GOVERNANCE 45 MANAGEMENT’S DISCUSSION & ANALYSIS 53 FINANCIALS 71 GLOSSARY 85 ABOUT THE AER ABOUT ABOUT THE AER 1 The Alberta Energy Regulator (AER) is the single provincial regulator for oil, natural gas, oil sands, and coal development in Alberta. The AER ensures the safe, efficient, orderly, and environmentally responsible development of energy resources. This includes allocating and conserving water, managing public lands, and protecting the environment while securing economic benefits for all Albertans. This is our role, but how does this work in the real This includes allocating and conserving water, man- • 28.2 trillion cubic feet of natural gas world? aging public lands, and protecting the environment • 36.6 billion tons of coal … The AER decides when, where, and how the energy The Alberta Energy Regulator (AER) is the single industry may use water, and we make sure that Al- That’s a lot of energy, and it requires a lot of infra- provincial regulator for oil, natural gas, oil sands, berta’s water resources are protected. We regulate structure to produce, mine, process, and move to and coal development in Alberta. This means that any energy development that occurs in the province, markets. We’re also responsible for regulating this companies deal with the AER when carrying out and we work to ensure this development doesn’t infrastructure, which belongs to what’s called “up- activities in each stage of energy development, damage our province’s environment. stream” development: from initial exploration, to operation, right through • more than 422 000 kilometres of oil and gas to closure, including reclamation and remediation. … while securing economic benefits for all Albertans. pipelines, in addition to inspection and incident We are part of a broader government system that response support for 12 000 kilometres of pipe- The AER ensures the safe, efficient, orderly, and en- ensures that Alberta and its citizens receive full value lines regulated by the Alberta Utilities Commission vironmentally responsible development of energy for our energy riches. • over 167 000 operating wells resources. It’s our job to make certain that Alberta’s • 30 000 oil facilities oil, gas, bitumen, and coal are developed and trans- OUR RESPONSIBILITIES • 21 000 gas facilities ported in ways that Few organizations on the planet steward such a large • 50 thermal in situ (oil sands recovery) projects • ensure public safety; and varied mix of energy resources and infrastruc- • 9 oil sands mines • protect our air, water, land, and biodiversity; and ture as the AER. We oversee some very large estab- • 5 bitumen upgraders • make the best use of our valuable energy resources. lished reserves: • 4 coal processing plants • 1.6 billion barrels of conventional oil • 6 producing coal mines • 165 billion barrels of bitumen * Items highlighted in green can be found in the glossary. Annual Report 2016/17 2 ABOUT THE AER WHAT WE REGULATE * KILOMETRES OF PIPELINES OPERATING NATURAL GAS & OIL WELLS OIL FACILITIES GAS FACILITIES THERMAL/ENHANCED OIL SANDS BITUMEN COAL PRODUCING IN SITU PROJECTS MINES UPGRADERS PROCESSING PLANTS COAL MINES *Alberta In addition Energy Regulatorto inspection and incident response support for 12 000 kilometres of pipelines regulated by the Alberta Utilities Commission. ABOUT THE AER 3 The Government of Alberta gives the AER authority The AGS offers a scientific view into the world WHAT WE DON’T REGULATE to ensure that companies develop the province’s beneath Alberta. AGS geoscientists provide many The AER’s authority is limited to activities that relate massive energy resources in a safe and environmen- services, including determining the effect of oil and to oil, bitumen, natural gas, and coal development. tally responsible fashion, and without wasting these gas development on seismic events, monitoring We have no authority over any of the following: resources: the Crowsnest Pass’s unstable Turtle Mountain, and • any aspect of electricity generation or distribution, • We review applications and make decisions on mapping Alberta’s valuable groundwater resources. including renewable energies, gas utility pipelines, proposed energy developments (almost 134 000 and the price of natural gas (these are regulated applications processed since June 2013). ALBERTA’S SINGLE ENERGY REGULATOR by the Alberta Utilities Commission); • We oversee all aspects of energy resource activi- The Government of Alberta created the AER in 2013 • gasoline or other refined petroleum products; and ties in accordance with government policies. when it proclaimed the Responsible Energy Devel- • oil and gas pipelines that cross provincial or in- • We regularly inspect energy activities to ensure opment Act. We took on regulatory functions that ternational borders (these are regulated by the that all applicable requirements are met. are related to energy development and that were National Energy Board). • We penalize companies that fail to comply with held by Alberta Environment and Parks (previous- AER requirements. ly Alberta Environment and Sustainable Resource • We hold hearings on proposed energy develop- Development) and combined them with the regula- WHAT WE DON’T ments. tory functions of the Energy Resources Conservation REGULATE Board. To make it happen, the AER employs 1200 inspectors, technical staff, engineers, geologists, scientists, in- The AER’s role is to develop and enforce rules and vestigators, stakeholder engagement specialists, me- regulations around energy development, taking di- GASOLINE diators, lawyers, regulatory experts, and other em- rection from government policy. ployees in 15 offices and field centres around Alberta. ELECTRICITY The AER is a key partner in the government’s Inte- The AER also offers two unique and world-class grated Resource Management System, a collabora- services: the Core Research Centre (CRC) and the tive and coordinated approach to managing Alberta’s RENEWABLES Alberta Geological Survey (AGS). environment and natural resources. Other partners are the government departments of Environment NATURAL GAS PRICE The CRC collects, preserves, and displays core and Parks, Indigenous Relations, Energy, Agriculture samples (1.5 million boxes of these cylindrical rock and Forestry, and Health. PIPELINES THAT samples), drill cuttings (20 million vials of them), and CROSS BORDERS drilling and completion records from over 400 000 wells;companies use these to research what’s below the ground and to plan how to develop oil and gas. Annual Report 2016/17 4 MESSAGES Alberta Energy Regulator MESSAGES 5 MESSAGE from the chair Albertans are resilient. We’ve demonstrated it over Throughout this report, you’ll read stories of how Norminton, and Jack Royal—who will bring expertise and over again throughout our history. the people of the AER are maintaining our commit- and experience that will help the organization con- ment to safety and environmental protection. This tinue its journey toward excellence. These last few years have been difficult, with our is something we demand not only of ourselves but economy suffering through low commodity prices of the industry we regulate by being innovative and The year ahead will be a pivotal one that will include and overwhelming uncertainty. Despite these chal- resolute about protecting the public and the environ- releasing a refreshed strategy for 2018 that will con- lenges, Albertans remain steadfast in their commit- ment. An example of this is the launch of the industry tinue to strengthen our position as a trusted regula- ment to focus on maximizing opportunities. performance program that sets the foundation for tor and partner to our stakeholders and all Albertans. measuring, evaluating, and reporting on energy de- Alberta made international headlines for other velopment activities that we regulate. reasons in 2016, namely for its rapid and compas- sionate response during the Fort McMurray wildfires. Last year, the board bid farewell to some of the AER’s Not only did AER employees jump into action by sup- original directors—Dr. David Chalack, Peter Flynn, porting Alberta’s response to the blaze, many did so Andy Neigel, and Sheila O’Brien. These individuals knowing that their own homes were threatened. The had been with the AER since its creation in 2013 and board and I are proud of their commitment and thank contributed extensively to the board’s committees; all staff involved for their extraordinary efforts. these contributions are all detailed in previous annual GERRY PROTTI CHAIR reports. Their departure is a loss in expertise and I also want to acknowledge and congratulate Presi- continuity for the board and they will