By law, coal and oil sands mine companies are responsible for reclaiming land that is disturbed by
mining and the operation of related plants. Standards for reclamation are set by the Government of Alberta.
The fundamental principle of the Mine Financial Security Program (MFSP) is that the Environmental Protection
and Enhancement Act Approval holder is responsible
for carrying out suspension, abandonment, remediation and surface reclamation work to the standards established
by the province and to maintain care-and-custody
of the land until a reclamation certificate has been issued. The approval holder must have the financial
resources to complete these obligations.
Effective March 29, 2014, the Alberta Energy Regulator (AER) has assumed responsibility for this program,
originally established by Alberta Environment and Sustainable Resource Development in 2010.
The Mine Financial Security Program has been developed to take a comprehensive approach to managing
liabilities associated with coal and oil sands mine operations.
- Quantification of liabilities for all facilities, as well as the assets dedicated to the management
of those liabilities;
- Regular and appropriate reporting and review of that information; and,
- A requirement to undertake and report ongoing reclamation.
The Mine Financial Security Program takes an asset-to-liability approach to managing financial risks.
It recognizes that the resource value associated with an
approved project is an asset in terms of the cash flow generated by its operations. The program requires a
base amount of security for each project which, among
other things, would provide the funds necessary to safely secure the site and place the project in a care and
custody state. When a project has MFSP assets at least
three times larger than its MFSP liability, is 15 years or more from the end of its reserves and is keeping
current with its reclamation plans, additional security
above the base amount is not required. When a project has MFSP assets less than three times its MFSP liability,
or is nearing the end of the mine productive life,
or is not meeting its targeted reclamation plans, additional financial security is required.
Supporting documentation for the Mine Financial Security Program can be accessed on the AER website at:
- Annual Mine Financial Security Program Submissions
- Mine Financial Security Program Guide
- Mine Financial Security Program Standard
- MFSP Schedules
Type of Financial Security Deposits Under the Mine Financial Security Program
The MSFP includes four types of financial security deposits, focusing on various potential risks in the
lifecycle of a mine:
Base Security Deposit (BSD): existing and new projects will be required to provide a base security.
Among other things, this security will be used for
care and custody to maintain security and safety at the site until a new company takes over or the site
is closed. For existing projects, the base security deposit
will be the amount of security each project had posted with the government effective December 31, 2010.
For new projects, the base security will be as follows:
Base Security Deposit (BSD)
Mine-mouth coal mine
Export coal mine
Oil sands mine with no EPEA approval as of January 1, 2011
Oil sands mine and upgrader with no EPEA approval as of January 1, 2011
Operating Life Deposit (OLD) addresses the risks at the end of mine life. A company is required
to start posting financial security when there are
less than 15 years of reserves left so that all outstanding abandonment, remediation and surface reclamation
costs are fully financially secured by the time
there are less than six years of reserves left.
Asset Safety Factor Deposit (ASFD) addresses the risks if a company’s cash flow falls below
a level deemed adequate to ensure that all MFSP liabilities
can be fully funded. The company posts financial security when the MFSP asset to MFSP liability ratio falls
below 3.00. Sufficient financial security must be posted
to bring the ratio to 3.00.
Outstanding Reclamation Deposit (ORD) addresses the risks posed by a company deferring reclamation.
The company posts security when they do not reduce
according to a reclamation schedule approved by Alberta Environment and Sustainable Resource Development.
Approval holders can elect to place full security at any time in the life of the project based on the
MFSP liability calculation. In this case, the approval holder
would no longer be subject to the four security deposits described above. The entire coal sector has elected
to provide full financial security.
Updated: Feb 5, 2015