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Fariz A. Guliyev: The economics of financial securities for environmental obligations and
their impact in royalty revenues from Alberta oil sands in North America
2. Resultant Asset Safety Factor = MFSP Assets/Liability Net of Deposits =
$57,500,000/$20,000,000 = 2.88
3. Asset Safety Factor Deposit = MFSP Liability – OLD – BSD – (MFSP Assets/3) =
$20,000,000 - $57,500,000/3 = $19,166,667
Operating Life Deposit (OLD)
As noted in section 1.2 (Types of Financial Security Deposits) Operating Life Deposit is
required as Approval Holder’s reserves have less than 15 years of lifetime.
Calculation for OLD begins when the Reserve Life Index (RLI) becomes lower than 15
years:
0% of the MFSP Liability when RLI >= 15.00
10% of the MFSP Liability when RLI < 15.00
20% of the MFSP Liability when RLI < 14.00
30% of the MFSP Liability when RLI < 13.00
The calculation reaches a 100% of the MFSP Liability when reserve life becomes less than
six years (The calculation for Operating Life Deposit is based on Alberta Environment MFSP
Guide 2011).
1.4. Current Status of Reclamation Activities in Alberta Oil Sands
Generally, mine land areas can either be temporarily or permanently reclaimed. Alberta
Environment provides that official trend for disturbed land has increased between 2009 and 2011.
The figure below describes the cumulative area for oil sands mining and reclamation activities during
2009-2011. We could see that areas ready for reclamation have decreased from 2009 to 2011. This is
because these lands are being either actively used or reclaimed. The fact that temporary reclamation
activities have broadened may explain the decrease of areas ready for reclamation.
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