Page 54 - Azerbaijan State University of Economics
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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
negative revenue impacts. This report gives an analysis of such differences and suggests possible
ways to avoid royalty revenue reductions from Oil Sands mine fields.
Key words: the economics of financial security, qualifying environmental trust, letters of
credit, royalty revenue, west texas intermediate.
JEL Classification codes: Q51, Q52, B41
1. General summary
1.1.The Financial Regulation of Mining Operations in Alberta
In Alberta, unlike in many other jurisdictions around the globe, the calculation of security
deposits to enable future reclamation of mining area is made by the operators themselves. Since
it is more logical that an operator would make its best estimate to commit for a successful
reclamation of its used site the legislation in Alberta supports the reclamation calculations to be
made by operators. This approach also helps to ease the sustainable development of the Oil
Sands mineable areas by creating a clear yet favourable regulatory environment for national and
international operators without compromising the environmental challenges left to the
government by the industry. Until the September of 1993 security deposits under previous
legislation were calculated on an acre basis. With the new regulation of reclamation estimation at
full cost the previous per acre rate ($250 per acre) of calculation was grandfathered.
The Mine Financial Security Program, as stated in the MFSP Guide 2011 of Alberta
Environment, is a comprehensive program which manages all qualitative and quantitative aspects
of coal, sand and gravel and oil sands mine operations which includes:
Quantification of liabilities incurred for mine operations and potential assets matching
offsetting these liabilities
Regular and appropriate documentation and reporting of information for total liabilities arising and
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