Page 56 - Azerbaijan State University of Economics

Fariz A. Guliyev: The economics of financial securities for environmental obligations and
their impact in royalty revenues from Alberta oil sands in North America

Operating Life Deposit (OLD)

OLD mitigates risks as mine reserves matures. The OLD is normally a difference in

reclamation liabilities above BSD.

The Approval Holder must start paying financial security for reclamation purposes when

there is less than or equal to fifteen years of reserves left. The deadline for fully funded security

is when a mine facility has six years of reserve life left. The financial security posting

requirements due to reserve years left is depicted in Figure 1.

Figure 1. Time Related Posting Requirements for Financial Securities

Source: MFSP Assets/Liabilities, Alberta Environment

The OLD amount is normally calculated as the difference between the actual reclamation

liabilities incurred to date minus the BSD paid at inception (Reclamation Liability incurred up to date

– BSD = OLD. This function is derived based on the MFSP Guide of Alberta Environment 2011.).

Asset Safety Factor Deposit (ASFD)

According to the MFSP guide an MFSP Asset to MFSP Liability ratio of 3.00 (three) must

be maintained during the life of the mining production. The Approval Holder is required to bring

the MFSP Asset/MFSP Liability ratio to 3.00 whenever the rate falls below 3.00. For this

purpose, the Approval Holder posts additional financial security.

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