By: Nigel Bankes
PDF Version: The AER and the Values of Efficiency, Flexibility, Transparency and Participation: Best in Class?
Matter Commented On: AER Bulletin, 2015-05 and an amendment to the Oil and Gas Conservation Rules creating the concept of a “Subsurface Order”
On February 10, 2015 the Alberta Energy Regulator (AER) issued Bulletin 2015-05 announcing a change to the Oil and Gas Conservation Rules. This change authorizes the AER to issue something called a Subsurface Order:
11.104 Notwithstanding sections 3.050, 3.051, 3.060, 4.021, 4.030, 4.040, 7.025, 10.060, 11.010, 11.102 and 11.145, if the Regulator is satisfied that it is appropriate to do so, the Regulator may, on its own motion, issue a subsurface order that
(a) designates a zone in a specific geographic area, and
(b) prescribes requirements pertaining to spacing, target areas, multi-zone wells, allowables, production rates and other subsurface matters within that zone,
in which case if there is a conflict or inconsistency between the subsurface order and any of the sections referred to above, the subsurface order prevails to the extent of the conflict or inconsistency.
The Bulletin provides additional guidance as to how the AER will use this significant new power – which evidently allows it to suspend and vary the default rules relating to important issues such as spacing, target areas, allowables and production rates over broad geographic areas. The amendment likely has something to do with the AER’s experimentation with the play-based approach (see post welcoming that development here). The Bulletin does not specifically mention that initiative although it does indicate that the change is particularly directed at tight oil and gas resources.