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The purpose of the Liability Management Rating program is to ensure that permit holders are responsible for the financial risks related to their operations. It assists the Commission in determining security deposits required of permit holders to protect against those who may not be capable of meeting abandonment and restoration obligations.

LMR calculations are completed by the Commission and are used in monthly assessments of security requirements, as well as in review of permit transfer applications for permit holders. Detailed information on the LMR program can be found in the LMR Program Manual. An updated report outlining the LMR calculated for each BC permit holder can be found in the Monthly Summary Report.

The Commission has also developed a Liability Management Rating Summary report that lists the deemed assets and liabilities for each individual well and facility permit held by an operator.

Liability Management Rating Program Frequently Asked Questions

Where can I find the electronic/wire transfer information to submit the required security?

Please have your banking institution contact the Commission directly at Liability.Management@bcogc.ca to request this information.


Who should my letter of credit or cheque be made payable to and where do I send it?

The letter of credit beneficiary and cheques are payable to, BC Oil and Gas Commission.
Security deposits are to be couriered to:

BC OIL AND GAS COMMISSION
ATTN: FINANCE
2950 JUTLAND ROAD
VICTORIA BC V8T 5K2


What will happen if I can't or won't pay?

Permit holders who fail to submit required security deposits within the allocated timeframe may be in noncompliance with Section 30 of OGAA. If the security deposit was required to approve a permit transfer application, the application will not be approved. If the security deposit was required under an initial or monthly assessment, additional compliance action will be taken against the permit holder. This may result in the cancellation of permits or orders to cease operations.


In what format does the Commission accept security?

Security deposits will be accepted as a certified company cheque or electronic/wire transfer, from a recognized Canadian financial institution, or as an irrevocable letter of credit from a Canadian Schedule I or Schedule II bank, a Canadian Credit Union, the Caisse Desjardins, or the Alberta Treasury Branch. Please note, letters of guarantees, safekeeping agreements, performance bonds, and personal cheques, will not be accepted.


When will my security deposit be returned?

  1. The Commission may, upon request by a permit holder, return a security deposit where the permit holder has achieved a consistent and sustainable non security-adjusted LMR greater than 1.0. The permit holder must also have demonstrated compliance with regulatory obligations.
  2. The security deposit will be automatically returned when an operator no longer holds any permits in B.C.

Will interest be paid on an operator's security deposit when it is returned?

No, interest will not be paid. Only the amount that was held as security will be returned. This policy was rolled over from the Ministry of Finance administration.

Will the program eventually eliminate Orphan wells?

It is the intention that the LMR program will result in adequate security to cover well plugging and reclamation activities if a company becomes insolvent. The program is a protection measure to cover liabilities should a company fail to meet its closure obligations. However, there may be a potential for orphan wells should a company become insolvent that has failed to pay the required security.

How often will non-producers be required to submit a ‘Permit Holder Netback Calculation’ form?

The Commission may at any time request a current ‘Permit Holder Netback Calculation’ form from disposers and processors to calculate the industry average netback for each non-producer category. You will be provided with ample time to submit a ‘Permit Holder Netback Calculation’ form when required.


When are updates made to the calculation parameters used to calculate production assets?

In November 2015 the calculation parameters (netback, shrinkage factor, and oil equivalency factor) were updated with 2009 to 2013 industry data collected by CAPP. Future updates will be implemented at the discretion of the Commission.


Why do a number of my cancelled wells have a reclamation liability assigned to them? There was never a well drilled onsite.

A drilling event may not have occurred on the lease; however, the Commission has reason to believe that construction had started (e.g. clearing, road construction, cut/fill, etc.) Therefore these wells have been flagged ‘cancelled with surface disturbance’ and will require restoration work be completed in order to have a Certificate of Reclamation issued.


Do I have to submit a 'Permit Holder Netback Calculation' form?

Producers: No, you do not have to complete this form unless you choose to dispute a required security deposit by submitting a dispute request to the Commission. Under the current LMR program, a universal netback is calculated for all producers based on CAPP statistics.
Non-producers: Yes, you do have to submit this form upon request from the Commission if a Permit holder wishes to receive a deemed asset for a designated gas plant or disposal station. The netbacks used in the determination of a deemed asset for processors and disposers is based on an average of all submitted industry netbacks from the most recent year-end totalled and calculated individually for each non-producer category.
Permit holders that chose not to submit a netback will be given a deemed asset of zero.
Sufficient notice will be given when the Commission is required or deems it necessary to update the industry average netbacks.


Do you take into account working interest participants (WIPs) when assigning deemed liability and production assets of a well?

No. At this time WIPs are not taken into account. Under the program the permit holder of the site holds 100% of the deemed liability and production assets.
Why not?
Because WIPs are frequently changing we are unable to consistently keep our records current enough to tie into the LMR program. Ultimately, the permit holder is held responsible by the Commission.


My deemed well liability has increased since last month, but we haven't drilled or acquired any new wells. How did that happen?

A number of things may have happened.

  1. A surface casing vent flow/ gas migration issue was identified, therefore a premium is added to the wells individual deemed liability.
  2. A drilled/cased well completion has been entered into the Commission database.
  3. A cancelled wellsite was later identified as being cancelled with surface disturbance.
  4. A well previously never having produced/injected, does so.

Other than divesting, how can I reduce our deemed liability?

Complete abandonments: Deemed liability will decrease when a well is abandoned and the appropriate documentation is submitted to and approved by the Commission
Apply for a Certificate of Restoration (CoR): The deemed liability assigned to a site will be removed when the wellsite is reclaimed and a CoR is issued.
Terminate a facility: A Facility’s deemed liability will only be removed when a facility is decommissioned, removed from site and terminated in the Commission database.


More information on the dispute process and site-specific liability assessments can be found in the LMR Program Manual:

The Commission may require a site-specific liability assessment for one or more permits to be used in the calculation of an operator’s LMR or, in the case of a problem site, for the determination of a required security deposit. The only time an operator may make the choice to submit a site-specific assessment is as part of a security deposit dispute process. As part of the process an operator must submit for review, along with a operator specific netback calculation, site-specific liability assessments completed by a qualified third-party professional for each well and facility permitted to the operator. More information on the dispute process and site-specific liability assessments can be found on pages 16 and 17 of the LMR Program Manual.

We note that the program is similar to the AER program in Alberta. Is there an attempt to harmonize the 3 western province's liability programs?

The Commission recognizes that other jurisdictions have previously implemented liability rating programs and believes that a consistent process between western provinces is a valid approach. However, there are no existing plans or agreements to harmonize a liability rating program among western provinces.


Industry has considerable knowledge and experience on liability costs as a result of the Alberta system. Will there be an opportunity for further industry consultation?

At this time no further consultation periods will be held for the producer and non-producer programs. That being said, the Commission is always open to feedback from stakeholders regarding our programs.

What tool will be put in place so that an operator can monitor their liability rating?

LMR ratios for BC operators are posted to the Commission’s website here. Ratios are calculated and updated daily.

The Commission has developed a report that lists the deemed assets and liabilities for each individual well and facility permit held by an operator. To access these reports visit Data and Reports, then Data Centre and select Liability Management reports from the list on the left-hand side. Operators that would like to obtain information on their security deposits can send a request to Liability.Management@bcogc.ca.

Recent Updates

Liability Management Rating

Name Date Published
Facility Specific Netback Calculation Form
A completed Facility Specific Netback Form is required from all permit-holders whose assets are in the form of processing and/or disposal activities for all permitted gas processing plant(s) and water disposal station(s). Submitted forms are to be used to calculate an industry average netback for each operation in the calcualtion of deemed assets in the LMR program. A single form may be submitted for multiple facilities.
Apr. 4, 2013
Liability Management Rating Program Manual
The Liability Management Rating Program Manual guides industry through the processes and procedures of the Commission's Liability Management Rating program.
Feb. 2, 2012
Permit Holder Netback Calculation
The Permit Holder Netback Calculation Form allows industry to submit revised netback under a dispute process.
Nov. 23, 2011
Sample Letter of Credit
The Sample Letter of Credit is used as a template by financial institutions when issuing a letter of credit.
Nov. 16, 2010

LMR Questions & Comments

Feedback is welcomed by the Commission and can be directed as follows.

For general inquiries or for operators that would like to obtain information on their security deposits:
liability.management@bcogc.ca.

For Orphan Wells inquiries: orphanrestoration@bcogc.ca.

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