Alberta Energy Regulator
Consolidated Financial Statements
For the Year Ended March 31, 2021

Statement of Management Responsibility
Independent Auditor's Report
Consolidated Statement of Operations
Consolidated Statement of Financial Position
Consolidated Statement of Change in Net Debt
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Schedules to the Consolidated Financial Statements

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of the Alberta Energy Regulator and all otherinformation relating to the AER contained in this annual report have been prepared and presented bymanagement, who is responsible for the integrity and fair presentation of the information.
These financial statements are prepared in accordance with Canadian public sector accounting
standards. The financial statements necessarily include some amounts that are based on informed
judgments and best estimates of management. The financial information contained elsewhere in thisannual report is consistent with that in the financial statements.
Management is responsible for maintaining an effective system of internal controls designed toprovide reasonable assurance that financial information is reliable, transactions are properly
authorized, assets are safeguarded and liabilities are recognized.
The Auditor General of Alberta, the AER’s external auditor appointed under the Auditor General Act,
performed an independent external audit of these consolidated financial statements in accordancewith Canadian generally accepted auditing standards, and has expressed his opinion in theaccompanying Independent Auditor’s Report.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities forfinancial reporting and internal controls. The Board of Directors exercises this responsibility throughthe Audit and Finance Committee, composed of Directors who are not employees of the regulator.
The Audit and Finance Committee meets with the internal auditors and the external auditors-both in
the presence and in the absence of management to discuss their audit, including any findings as tothe integrity of financial reporting processes and the adequacy of our systems of internal controls.
The internal and external auditors have full and unrestricted access to the Audit and FinanceCommittee.

[Original signed by Laurie Pushor]
President and Chief Executive Officer[Original signed by Mike Dalton]
Vice-President Finance and Chief Financial Officer

Date: May 13, 2021

Independent Auditor’s Report
To the Board of Directors of the Alberta Energy Regulator
Report on the Consolidated Financial Statements

OpinionI have audited the consolidated financial statements of the Alberta Energy Regulator (the Group),
which comprise the consolidated statement of financial position as at March 31, 2021, and theconsolidated statements of operations, change in net debt, and cash flows for the year then ended,and notes to the consolidated financial statements, including a summary of significant accounting
policies.

In my opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2021, and the results of its
operations, its changes in net debt, and its cash flows for the year then ended in accordance with
Canadian public sector accounting standards.

Basis for opinion
I conducted my audit in accordance with Canadian generally accepted auditing standards. My
responsibilities under those standards are further described in the Auditor's Responsibilities for the
Audit of the Consolidated Financial Statements section of my report. I am independent of the Group inaccordance with the ethical requirements that are relevant to my audit of the consolidated financial
statements in Canada, and I have fulfilled my other ethical responsibilities in accordance with theserequirements. I believe that the audit evidence I have obtained is sufficient and appropriate toprovide a basis for my opinion.
Other information
Management is responsible for the other information. The other information comprises theinformation included in the Annual Report, but does not include the consolidated financial
statements and my auditor’s report thereon. The Annual Report is expected to be made available tome after the date of this auditor’s report.
My opinion on the consolidated financial statements does not cover the other information and I do
not express any form of assurance conclusion thereon.

In connection with my audit of the consolidated financial statements, my responsibility is to readthe other information identified above and, in doing so, consider whether the other information ismaterially inconsistent with the consolidated financial statements or my knowledge obtained in theaudit, or otherwise appears to be materially misstated.
If, based on the work I will perform on this other information, I conclude that there is a material
misstatement of this other information, I am required to communicate the matter to those charged
with governance.

Responsibilities of management and those charged with governance for the consolidated
financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with Canadian public sector accounting standards, and for such internalcontrol as management determines is necessary to enable the preparation of the consolidated
financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless an intention exists to liquidate or tocease operations, or there is no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting
process.

Auditor's responsibilities for the audit of the consolidated financial statements
My objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor's report that includes my opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, I exercise
professional judgment and maintain professional skepticism throughout the audit. I also:• Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If I conclude that a material uncertainty exists, I am required to draw attention in myauditor’s report to the related disclosures in the consolidated financial statements or, if suchdisclosures are inadequate, to modify my opinion. My conclusions are based on the audit
evidence obtained up to the date of my auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. I am responsible for the direction, supervision and performance of the group audit.
I remain solely responsible for my audit opinion.

I communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that I identify during my audit.

[Original signed by W. Doug Wylie FCPA, FCMA, ICD.D]
Auditor General
May 13, 2021
Edmonton, Alberta

ALBERTA ENERGY REGULATORCONSOLIDATED STATEMENT OF OPERATIONSYEAR ENDED MARCH 31, 2021

2021

2020

Budget(Note 4, Schedule 3)

ActualActual(in thousands)
Revenues
Administration fees
Government of Alberta grant
Orphan fund levy and fees (Note 5)
Information, services and fees
Investment income$

Expenses
Energy regulation (Schedule 1)
Orphan well abandonment (Note 5)

Annual operating surplus (deficit)
Accumulated surplus at beginning of year
Accumulated surplus at end of year$

226,450$

69,0003,542
867
299,859

114,240
113,000
65,6982,731
359
296,028

215,859
69,000284,859

203,753
65,698269,451

264,248
61,039325,287

15,00026,577(25,607)

40,91055,910

The accompanying notes and schedules are part of these consolidated financial statements.

$$

40,91067,487$233,393
61,0394,693
555
299,680

66,51740,910ALBERTA ENERGY REGULATORCONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT MARCH 31, 2021

2021

2020
(in thousands)

Financial assets
Cash and cash equivalents (Note 6)
Accounts receivable (Note 7)
Pension assets (Note 12)$

Liabilities
Bank indebtedness (Note 6)
Accounts payable and other accrued liabilities (Note 8)
Payable to Orphan Well Association
Deferred lease incentives (Note 10)
Net debt
Non-financial assets
Tangible capital assets (Note 13)
Prepaid expenses and other assets
Net assets
Accumulated surplus (Note 14)$

Contingent liabilities (Note 15)
Contractual obligations (Note 16)
The accompanying notes and schedules are part of these consolidated financial statements.

26,226
1,456
4,923
32,605

$

1,920
1,505
3,425

18,362
1,942
14,332
34,636(2,031)

812
17,955609
15,94935,325(31,900)

60,133
9,385
69,518

63,105
9,705
72,81067,487$40,910ALBERTA ENERGY REGULATORCONSOLIDATED STATEMENT OF CHANGE IN NET DEBTYEAR ENDED MARCH 31, 2021

2021

2020

Budget(Note 4, Schedule 3)

Annual operating surplus (deficit)$

Acquisition of tangible capital assets (Note 13)
Amortization of tangible capital assets (Note 13)
Loss on disposal and write-down of tangible capital assets
Decrease in prepaid expenses and other assets
Decrease/(increase) in net debt
Net debt at beginning of year
Net debt at end of year

15,000

Actual(in thousands)$

26,577$(13,697)
15,686983
320
29,869(31,900)(2,031)(14,500)
16,000$16,500(31,900)(15,400)

The accompanying notes and schedules are part of these consolidated financial statements.

Actual$(25,607)$(12,704)
15,94767
1,033(21,264)(10,636)(31,900)

ALBERTA ENERGY REGULATORCONSOLIDATED STATEMENT OF CASH FLOWSYEAR ENDED MARCH 31, 2021

2021

2020
(in thousands)

Operating transactions
Annual operating surplus (deficit)
Non-cash items included in annual operating surplus (deficit):
Amortization of tangible capital assets (Note 13)
Loss on disposal and write-down of tangible capital assets(Increase)/decrease in pension assets
Amortization of deferred lease incentives (Note 10)$

26,577$(25,607)

15,686983(3,418)(1,617)
38,211
464
320
407
1,333
40,735

15,94767
636(1,619)(10,576)
5,564
1,033
(2,550)(1,319)(7,848)

Capital transactions
Acquisition of tangible capital assets (Note 13)
Cash applied to capital transactions(13,697)(13,697)(12,704)(12,704)

Financing transactions
Proceeds from line of credit
Debt repayment
Cash (applied to) provided by financing transactions

9,855(10,667)(812)

64,587(63,775)
812

Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

26,226
26,226(19,740)
19,740-Decrease in accounts receivable
Decrease in prepaid expenses and other assets
Increase/(decrease) in accounts payable and other accrued liabilities
Increase/(decrease) in payable to Orphan Well Association
Cash provided by (applied to) operating transactions$

The accompanying notes and schedules are part of these consolidated financial statements.

$

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 1AUTHORITY
The Alberta Energy Regulator (AER) is an independent and quasi-judicial organization of the Government of Alberta. The AER
operates under the Responsible Energy Development Act. The AER's mandate provides for the safe, efficient, orderly andenvironmentally responsible development of hydrocarbon resources over their entire life cycle. This includes allocating andconserving water resources, managing public lands, and protecting the environment while providing economic benefits for all
Albertans. The AER is exempt from income taxes under the Income Tax Act.

Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND REPORTING PRACTICES
These consolidated financial statements are prepared in accordance with Canadian Public Sector Accounting Standards (PSAS).
Reporting Entity and Method of Consolidation
The consolidated financial statements reflect the assets, liabilities, revenues and expenses of the AER, which is composed of allcomponents controlled by the AER. The Orphan Fund is a fund retained and administered by the AER. The AER collects theorphan fund levy and first time licensee application fees, and transfers the funds to the Orphan Well Association. The AER andthe Orphan Fund are consolidated using the line-by-line method.
Basis of Financial Reporting
Revenues
All revenues are reported on the accrual basis of accounting. Cash received for which services have not been provided by year
end is recognized as unearned revenue and recorded in accounts payable and other accrued liabilities.
Government of Alberta Grant
Transfers from the Government of Alberta are referred to as provincial grants.
Provincial grants, without stipulations for the use of the transfer, are recognized as revenue when the transfer is authorized andthe AER meets the eligibility criteria (if any).
Investment Income
Investment income includes interest income.
Expenses
Expenses are reported on an accrual basis. The cost of all goods consumed and services received during the year is expensed.
Employee future benefits
The AER maintains its own defined benefit Senior Employees Pension Plan (SEPP) and two supplementary pension plans tocompensate senior staff who do not participate in the government management pension plans. Retirement benefits are based oneach employee's years of service and remuneration.
Pension assets represent the sum of the accumulated cash contributions less the sum of the current and prior years' pension
expense.
Accrued benefit obligations are actuarially determined using the projected benefit method prorated on length of service andmanagement's best estimate of expected plan investment performance, projected employees' compensation levels andretirement age of employees.
Accrued benefit obligations and pension benefit costs for the year are calculated using the expected rate of return on plan assets
as the discount rate, which is determined using market values of plan assets.

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND REPORTING PRACTICES (continued)
Basis of Financial Reporting (continued)
Actuarial gains and losses are amortized over the average remaining service period of the active employees, which is
11.2 years (2020 - 10.9 years).
Past service cost arising from plan amendments is accounted for in the period of the plan amendments.
Gains and losses determined upon a plan curtailment are accounted for in the period of curtailment.
The AER participates in the Government of Alberta's multi-employer pension plans: Management Employees Pension Plan,
Public Service Pension Plan and Supplementary Retirement Plan for Public Service Managers. Defined contribution planaccounting is applied to these plans as the AER has insufficient information to apply defined benefit plan accounting. Accordingly,
pension expense comprises employer contributions to the plans that are required for its employees during the year, which arecalculated based on actuarially pre-determined amounts that are expected to provide the plans' future benefits.
Valuation of financial assets and liabilities
The AER's financial assets and liabilities are generally measured as follows:
Financial Statement Component
Cash and cash equivalents
Accounts receivable
Bank indebtedness
Accounts payable and other accrued liabilities
Payable to the Orphan Well Association
Deferred lease incentives

Measurement
Cost
Lower of cost or net recoverable value
Cost
Cost
Cost
Amortized cost

The AER has not designated any financial assets or liabilities in the fair value category, does not have any significant foreign
currency transactions and does not hold any derivative contracts. The AER has no significant remeasurement gains or losses
and consequently has not presented a statement of remeasurement gains and losses.
Financial assets
Financial assets are assets that could be used to discharge existing liabilities or finance future operations and are not for
consumption in the normal course of operations.
Financial assets are the AER's financial claims on external organizations and individuals at the year end.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits.
Accounts receivable
Accounts receivable are recognized at the lower of cost or net recoverable value. A valuation allowance is recognized whenrecovery is uncertain.

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND REPORTING PRACTICES (continued)
Basis of Financial Reporting (continued)
Liabilities
Liabilities are present obligations of the AER to external organizations and individuals arising from past transactions or eventsoccurring before the year end, the settlement of which is expected to result in the future sacrifice of economic benefits. They arerecognized when there is an appropriate basis of measurement and management can reasonably estimate the amounts.
Liabilities include all financial claims payable by the AER at fiscal year end.
Bank indebtedness
Bank indebtedness comprises the amount outstanding for a revolving line of credit.
Deferred lease incentives
Deferred lease incentives, consisting of leasehold improvement costs, reduced rent benefits and rent-free periods, are amortizedon a straight-line basis over the term of the leases.
Environmental Liabilities
Liability for Contaminated Sites:
Contaminated sites are a result of contamination of a chemical, organic or radioactive material or live organism that exceeds anenvironmental standard, being introduced into soil, water or sediment.
A liability for remediation of a contaminated site may arise from an operation that is either in productive use or no longer inproductive use and may also arise from an unexpected event resulting in contamination. The resulting liability is recognized net ofany expected recoveries, when all of the following criteria are met:
i.
ii.
iii.
iv.
v.

an environmental standard exists;
contamination exceeds the environmental standard;
the AER is directly responsible or accepts responsibility;
it is expected that future economic benefits will be given up; anda reasonable estimate of the amount can be made.

Contingent Liabilities
Contingent Liabilities:
A contingent liability is recognized when:i. there is an existing condition or situation;
ii. there is an expected future event that will resolve the uncertainty as to whether a present obligation to sacrificeeconomic benefits exists;
iii. it is likely that a future event will confirm that a liability has been incurred at the date of the financial statements; andiv. a reasonable estimate of the amount can be made.
Non-financial assets
Non-financial assets are acquired, constructed or developed assets that do not normally provide resources to discharge existing
liabilities, but instead:- are normally employed to deliver AER services;- may be consumed in the normal course of operations; and- are not for sale in the normal course of operations.
Non-financial assets of the AER include tangible capital assets, prepaid expenses and other assets.

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND REPORTING PRACTICES (continued)
Basis of Financial Reporting (continued)
Tangible capital assets
Tangible capital assets are recognized at cost less accumulated amortization, which includes amounts that are directly related tothe acquisition, design, construction, development, improvement or betterment of the assets. Cost includes overhead directly
attributable to construction and development of the asset.
The cost of the tangible capital assets, excluding land, is amortized over their estimated useful lives as follows:
Leasehold improvements
Straight line
Term of the lease
Furniture and equipment
Straight line
5 - 12 years
Computer hardware
Straight line
4 years
Computer software - purchased
Straight line
4 years
Computer software - developed
Declining balance
5 years
Amortization is only expensed when the tangible capital asset is put into service.
Work-in-progress, which may include developed computer software and leasehold improvements, is not amortized until a projectis complete and the asset is put into service.
Tangible capital assets are written down when conditions indicate that they no longer contribute to the AER's ability to provide
goods and services, or when the value of future economic benefits associated with the tangible capital assets is less than their
net book value. The net write-downs are accounted for as an expense in the Consolidated Statement of Operations.
Prepaid expenses
Prepaid expenses are recognized at cost and amortized based on the terms of the agreements.
Measurement uncertainty
Measurement uncertainty exists when there is a variance between the recognized or disclosed amount and another reasonably
possible amount, whenever estimates are used. The amounts recognized for amortization of tangible capital assets are based on
estimates of the useful life of the related assets. Accrued defined benefit obligations are subject to measurement uncertainty due
to the use of actuarial assumptions. The resulting estimates are within reasonable limits of materiality and are in accordance with
the AER's significant accounting policies.
Estimates of contingent liabilities for contaminated sites are subject to measurement uncertainty because the existence andextent of contamination, the responsibility for clean-up, and the timing and costs of remediation cannot be reasonably estimatedin all circumstances. The degree of measurement uncertainty cannot be reasonably determined.

Note 3

FUTURE CHANGES IN ACCOUNTING STANDARDSThe Public Sector Accounting Board has approved the following accounting standards:
PS 3280 Asset Retirement Obligations (effective April 1, 2022)
This standard provides guidance on how to account for and report liabilities for retirement of tangible capital assets.
PS 3400 Revenue (effective April 1, 2023)
This standard provides guidance on how to account for and report on revenue, and specifically, it differentiates between revenue
arising from exchange and non-exchange transactions.
The AER has not yet adopted these standards. Management is currently assessing the impact of these standards on the financial
statements.

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 4BUDGET
The budget and budget adjustments reflected on Schedule 3 have been approved by the Government of Alberta.

Note 5

ORPHAN WELL ABANDONMENT(in thousands)
The Government of Alberta has delegated the authority to manage the abandonment and reclamation of wells, facilities andpipelines that are licensed to defunct licensees to the Orphan Well Association. The AER collects the orphan levy and first time
licensee application fees through the Orphan Fund and transfers the funds to the Orphan Well Association. During the year
ended March 31, 2021, the AER collected $65,225 (2020 - $60,345) in levies and $473 (2020 - $694) in application fees.

Note 6

CASH AND CASH EQUIVALENTS AND BANK INDEBTEDNESS(in thousands, unless otherwise noted)
2020

2021
Cash and cash equivalents$

26,226
-

$

(812)

$

26,226$(812)

Bank indebtedness

Cash and cash equivalents are held in an account with a Canadian chartered bank and earn interest calculated based on the
average monthly cash balance. The funds are available to be withdrawn upon request. During the year ended March 31, 2021,
the AER earned interest at an annual average rate of 0.7% (2020 - 2.1%).
The AER has an unsecured $75 million revolving line of credit. Amounts borrowed can only be applied to general corporate
purposes and exclude the funding of capital expenditures.
Bank advances on the line of credit are payable on demand and bear interest at a rate of prime less 0.75%. For the year ended
March 31, 2021, interest expense on the revolving line of credit was $4 (2020 - $143).
Note 7

ACCOUNTS RECEIVABLE(in thousands)
Accounts receivable are unsecured and non-interest bearing.

2020

2021

Accounts receivable
Note 8Gross amount

Allowancefor doubtful
accounts

$

$

3,127

Net
recoverable
value(1,671) $

1,456

Net
recoverable
value
$

1,920

ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES(in thousands)
Accrued liabilities
Accounts payable
Unearned revenue

$

$

2021
15,7222,315
325
18,3622020$$

14,177
3,052
726
17,955ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 9FINANCIAL INSTRUMENTS(in thousands)
The AER has the following financial instruments: cash and cash equivalents, accounts receivable, bank indebtedness, accounts
payable and other accrued liabilities, and payable to the Orphan Well Association.
Financial Risk Management
The AER has exposure to the following risks from its use of financial instruments:(a) Liquidity risk
Liquidity risk is the risk that the AER will encounter difficulty in meeting obligations associated with its financial liabilities. Liquidity
requirements of the AER are met primarily through the collection of funding at the beginning of the year to fund operating
expenses and capital expenditures throughout the year. The AER manages liquidity risk by having established budget processes
and regularly monitoring cash flows to ensure the necessary funds are on hand to fulfill upcoming obligations. In addition, the
AER maintains a revolving line of credit which provides financial flexibility to allow the AER to meet its obligations if funding
cannot be collected on a timely basis. As at March 31, 2021, the AER had bank indebtedness of $nil (2020 - $812).
(b) Credit risk
The AER is exposed to credit risk from potential non-payment of accounts receivable. A substantial portion of the AER's accounts
receivable includes balances due from operators in the oil and gas industry, and is subject to normal industry credit risk. The AER
regularly monitors the financial status of operators and assesses the collectability of accounts receivable. The AER's maximum
exposure to credit risk is limited to the carrying amount of accounts receivable presented in the Consolidated Statement of
Financial Position at the reporting date. The AER established a valuation allowance that corresponds to the specific credit risk ofoperators, historical trends and economic circumstances.

Note 10 DEFERRED LEASE INCENTIVES(in thousands)
The AER has entered into various lease agreements which provide for lease incentives comprising reduced rent benefits, rentfree periods and leasehold improvement costs. These amounts are amortized on a straight-line basis over the term of the lease.
2020

2021

Balance at beginning of year
Amortization
Balance at end of year

Reducedrent benefits
Leaseholdimprovement and rent-free
periods
costs$
12,891 $3,058 $
(1,252)(365)$
11,639 $2,693 $

Total
15,949 $(1,617)
14,332 $Total
17,568(1,619)15,949

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 11 ENVIRONMENTAL LIABILITIES(in thousands, unless otherwise noted)
The AER has a mandate to protect public safety and the environment. As at March 31, 2021, the AER is not responsible, nor has
it accepted responsibility, for performing remediation and reclamation work at contaminated sites. The AER has $nil (2020 - $nil)
environmental liabilities recorded.
As at March 31, 2021, the AER is administering 28 (2020 – 28) legacy sites. Of these sites, the AER identified 5 (2020 – 3) sites
as having immediate public safety and environmental risk, and the AER needed to take appropriate action to mitigate these risks.
During the year ended March 31, 2021, the AER incurred $906 (2020 - $460) in costs to mitigate immediate public safety andenvironmental risks. Costs to mitigate immediate public safety or environmental risks are costs where the AER has completed
protective or remediation work at legacy sites. Costs for ongoing assessment and monitoring are not reported.
Note 12 EMPLOYEE FUTURE BENEFITS(in thousands, unless otherwise noted)
The AER participates in the Government of Alberta's multi-employer pension plans: Management Employees Pension Plan,
Public Service Pension Plan and Supplementary Retirement Plan for Public Service Managers. For the year ended March 31,
2021, the expense for these pension plans is equal to the contributions of $12,539 (2020 - $15,533) and is included in salaries,
wages and employee benefits on Schedule 1. The AER is not responsible for future funding of the plan deficit other than throughcontribution increases.
In addition, the AER maintains its own defined benefit Senior Employees Pension Plan (SEPP) and two supplementary pension
plans to compensate senior staff who do not participate in the government management pension plans. Retirement benefits are
based on each employee's years of service and remuneration.
All the information presented in the note below is related to the AER's defined benefit pension plans.
The effective date of the most recent actuarial funding valuation for SEPP was December 31, 2018. The accrued benefit
obligation as at March 31, 2021, is based on the extrapolation of the results of this valuation. The effective date of the next
required funding valuation for SEPP is December 31, 2021.
Pension plan assets are valued at market values. During the year ended March 31, 2021, the weighted average actual return onplan assets was 14.7% (-3.7% in 2020).
Significant weighted average actuarial and economic assumptions used to value accrued benefit obligations and pension benefit
costs were as follows:
Accrued benefit obligations
Discount rate
Rate of compensation increaseLong-term inflation ratePension benefit costs for the year
Discount rate
Expected rate of return on plan assets
Rate of compensation increase

2021
4.4%
0% until March 31, 2022,
3.0% thereafter
2.0%
2021
4.8%
4.8%
0% until March 31, 2021,
3.5% thereafter

2020
4.8%
0% until March 31, 2021,
3.5% thereafter
2.0%
2020

5.1%
5.1%

0% until Sep 30, 2019,3.5% thereafter

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 12 EMPLOYEE FUTURE BENEFITS (continued)(in thousands, unless otherwise noted)
The funded status and amounts recognized in the Consolidated Statement of Financial Position were as follows:
Market value of plan assets
Accrued benefit obligations
Plan surplus (deficit)
Unamortized actuarial losses
Pension assets

$

$

2021
74,119 $(70,954)
3,165
1,758
4,923 $

2020
65,442(72,461)(7,019)
8,524
1,505

2021
3,976 $
3,442
(3,039)804
5,183 $

2020
4,326
3,382
(3,574)
(53)
1,342
(172)
5,251

The pension benefit costs for the year included the following components:
Current period benefit cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses (gains)$

Loss on curtailments (a)Unamortized gains recognized in curtailments$(a)

For the year ended March 31, 2020, the AER underwent a re-organization and decreased the number of employees. This
resulted in a curtailment due to a reduced number of active employees in the AER's defined benefit pension plans. The
curtailment impact was a $1,342 increase in the accrued benefit obligations recognized through pension expense for the year
ended March 31, 2020.

Additional information about the defined benefit pension plans is as follows:
Benefits paid
AER contributions
Employees' contributions
The asset allocation of the defined benefit pension plans' investments was as follows:
Equity securities
Debt securities
Alternatives
Other

$

2021
10,171
8,600
683
2021
48.2%
22.2%
17.3%
12.3%
100.0%

$

2020
5,325
4,616
839
2020
42.3%
24.7%
19.6%
13.4%
100.0%

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 13 TANGIBLE CAPITAL ASSETS(in thousands)

Estimated useful life

2021

2020

Land

Leaseholdimprovements

Furniture andequipment

Computerhardware andsoftwareIndefinite

Term of thelease

5-12 years

4-5 years

Total

Total

Historical cost (1)Beginning of year

$

282

$

45,735$

13,112$

143,420$

202,549$

196,874

Additions

-

765

396

12,536

13,697

12,704

Disposals, including write-downs

-

-

(448)

(7,394)(7,842)(7,029)282

46,50013,060148,562

208,404

202,549

Accumulated amortization
Beginning of year

$

-

$

20,179

$

9,427

$

109,838$

139,444$

130,459

Amortization expense

-

2,734

905

12,047

15,686

15,947

Effect of disposals, including writedowns

-

-

(426)

(6,433)(6,859)(6,962)-

22,913

9,906

115,452

148,271

139,444

Net book value at March 31, 2021

$

282

$

23,587

$

3,154

$

33,110Net book value at March 31, 2020

$

282

$

25,556

$

3,685

$

33,582$60,133$

63,105(1) As at March 31, 2021, historical cost of computer hardware and software includes work-in-progress totalling $6,630 (2020 - $76).

Note 14 ACCUMULATED SURPLUS(in thousands)
The accumulated surplus of the AER is calculated as the sum of the AER's net debt and its non-financial assets. The
accumulated surplus represents the net assets of the AER and comprises the following:
2021

2020

Net investment in capital assets (a)Investments in Unrestrictedtangible capital net assets(debt)
assets (a)$50,214 $(9,304) $26,577(1,720)1,720

Balance at end of year$

Balance at beginning of year
Annual operating surplus (deficit)

48,494$18,993$

Total
40,91026,577
67,487(a) Excludes leasehold improvement costs received by the AER as a lease incentive and related amortization.

$

$

Total
66,517(25,607)
40,910ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 15 CONTINGENT LIABILITIES(in thousands)
The AER is involved in legal matters where damages are being sought. These matters may give rise to contingent liabilities.
Accruals have been made in specific instances where it is likely that losses will be incurred based on a reasonable estimate. As
at March 31, 2021, accruals totalling $125 (2020 - $630) have been recognized as a liability.
The AER has identified various sites where contamination exists and the level of contamination is either known or unknown at
this time. As at March 31, 2021, no liability has been recognized for these sites as further testing and evaluation is required todetermine the extent of immediate actions necessary. No liability for remediation on other sites has been recognized as the AER
becoming responsible for these sites is not determinable; the AER does not expect to give up any future economic benefits; noreasonable estimate of the amount can be made; or a combination of these factors. The AER’s ongoing efforts to assesscontaminated sites may result in environmental liabilities related to newly identified sites, or change in the assessment or
intended use of existing sites. Any change to the environmental liabilities will be accrued in the year in which they are assessed
as likely and measurable.
Note 16 CONTRACTUAL OBLIGATIONS(in thousands)
As at March 31, 2021, the AER had contractual obligations totalling $162,248 (2020 - $171,894).
Contractual obligations are obligations of the AER to others that will become liabilities in the future when the terms of thosecontracts or agreements are met.
As at March 31, 2021, estimated payment requirements for obligations under operating leases and contracts for each of the next
five years and thereafter are as follows:
2021-222022-232023-242024-252025-26
Thereafter$$

43,05929,634
17,497
11,662
10,46449,932
162,248

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
Note 17 ASSETS UNDER ADMINISTRATION(in thousands)
The AER administers security deposits in accordance with specified acts and regulations. Security deposits are held on behalf ofdepositors with no power of appropriation and therefore are not reported in these consolidated financial statements. The AER
does not have any financial risk associated with security collected. Security, along with any interest earned, will be returned to thedepositors upon meeting specified refund criteria.
As at March 31, 2021, assets under administration included the following types of security deposits:
2021

Liability Management Rating programs and landfills
Mine Financial Security program
Other programs

$

$

Cash
90,431
39,342
10,446140,219

2020

2021

2020

Cash
$
98,812
39,146
6,834$ 144,792

Letters ofcredit$225,418
1,447,447
7,714$ 1,680,579

Letters ofcredit$220,667
1,434,643
7,778$ 1,663,088

Note 18 COVID-19 IMPACTOn March 11, 2020, the World Health Organization declared the COVID-19 disease to be a global pandemic and on March 17,
2020, the Government of Alberta declared a state of public health emergency. These declarations have impacted the AER in thefollowing ways:
Revenues
On March 20, 2020, the Government of Alberta committed to provide relief for the energy sector by funding the AER's
administration fees for the first six months of fiscal 2020-21. The AER received the grant in six monthly installments between April
and September 2020 for a total of $113 million.
Operations
The AER maintained core regulatory functions as most staff transitioned to working remotely during the COVID-19 pandemic.
The AER's operations were not significantly impacted by COVID-19.
Note 19 COMPARATIVE FIGURES
Certain 2020 figures have been reclassified, where necessary, to conform to the 2021 presentation.
Note 20 APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS
These consolidated financial statements were approved by the AER Board of Directors on May 13, 2021.

ALBERTA ENERGY REGULATORENERGY REGULATION EXPENSES - DETAILED BY OBJECTYEAR ENDED MARCH 31, 2021

Schedule 1

2021

2020
(in thousands)

Salaries, wages and employee benefits
Buildings
Computer services
Amortization of tangible capital assets
Consulting services
Travel and transportation
Loss on disposal and write-down of tangible capital assets
Administrative
Abandonment and enforcement
Equipment rent and maintenance$$

131,598
20,354
17,112
15,686
14,634
1,382
983
915
766
323
203,753$$

192,271
20,577
17,23815,947
12,429
1,815
67
3,492
412
264,248

ALBERTA ENERGY REGULATORSALARY AND BENEFITS DISCLOSURE
YEAR ENDED MARCH 31, 2021

Schedule 2

2021
Base
salary (a)

2020
Other
non-cashbenefits (c)Other cash
benefits (b)

Total

Total

(in thousands)
Position
Board of Directors
Chair (d)Members (e)

$

131
334

$

-

$

7
20

138
354

$

78
332

Executives
President and Chief Executive Officer (f)Chief Hearing Commissioner
Chief Operations Officer (g)Executive Vice-President, Law and General Counsel
Executive Vice-President, Corporate Services (h,n)
Vice-President of Finance and Chief Financial Officer (i,n)

319
218
259
274
231
130

30
24
17
9
196
7

73
47
64
60
77
54

422
289
340
343
504
191

296
148
363
157
-

Former President and Chief Executive Officer (j)Former Executive Vice-President, Operations (k,n)
Executive Vice-President, Strategy & Regulatory (l,n)
Executive Vice-President, Stakeholder & Government Engagement (m,n)

17
-

6
-

-

23
-

511
394
686
407

(a)
(b)

Includes retainers and per diems for Board Directors and regular salary and acting pay for Executives.
Includes payments in lieu of vacation, pension and health benefits, as well as severance, vehicle allowances and other cash reimbursements. There were nobonuses paid in 2021.

(c)Includes contributions to all benefits as applicable, including employer's share of Employment Insurance, Canada Pension Plan, Government of Alberta and
AER pension plans, health benefits, and payments made for professional memberships, tuition fees, fair market value of parking and other taxable benefits.

(d)Two individuals occupied the position of Chair during 2021. The current Chair was appointed on April 15, 2020, and is remunerated with a monthly honorarium
as per rates prescribed in the Orders in Council. Prior to the current Chair's appointment, the previous Chair's remuneration was set at $nil while this individual
occupied the position from September 6, 2019 until April 15, 2020. Prior to the previous Chair, a former Chair occupied the position until September 6, 2019,at which time the individual’s appointment was rescinded; the amount in 2020 reflects remuneration paid to the individual until September 6, 2019.

(e)

The incumbent Board of Directors consists of six members. Five Board members are remunerated with monthly honoraria as per rates prescribed in theOrders in Council. Remuneration for one Board member is set at $nil. As at March 31, 2020, the Board of Directors consisted of four members. On April 15,
2020, one member resigned and four new members were appointed. On June 5, 2020, one member was rescinded. The 2020 amount reflects four members
until April 28, 2019 and three members from April 28, 2019 until September 6, 2019. For the remainder of the 2020 fiscal year, the Board of Directors
consisted of four members.
The incumbent held the position effective April 15, 2020.
The incumbent held the position of Executive Vice- President, Operations until February 24, 2021, at which time the incumbent was appointed to the positionof Chief Operations Officer.

(f)
(g)
(h)

The incumbent held the position until February 24, 2021, at which time the position was eliminated and the incumbent was terminated. Other cash benefits
include $170 of severance pay.

(i)

The incumbent held the position effective September 8, 2020, at this time the position became a voting member of the Executive Leadership Team. Prior tothis appointment, the position was a non-voting member of the Executive Leadership Team.

(j)
(k)
(l)

The incumbent held the position until April 15, 2020, at which time the incumbent's contract ended.
The incumbent held the position until October 23, 2019, at which time the incumbent was terminated. Severance pay of $171 was expensed in 2020.
The incumbent held the position until October 23, 2019, at which time the incumbent was terminated. The position was eliminated effective October 28, 2019.
Severance pay of $449 was expensed in 2020.

(m) The incumbent held the position until October 23, 2019, at which time the incumbent was terminated. The position was eliminated effective October 28, 2019.
Severance pay of $168 was expensed in 2020.

ALBERTA ENERGY REGULATORSALARY AND BENEFITS DISCLOSURE
YEAR ENDED MARCH 31, 2021

Schedule 2 (continued)(n) Under the terms of the AER's defined benefit SEPP and two supplementary retirement plans (SRP), employees may receive supplemental retirement
payments. Retirement arrangement costs as detailed below are not cash payments in the period but are the period expense for rights to futurecompensation. Costs shown reflect the total estimated cost to provide annual pension income over an actuarially determined post-employment period.
The SEPP and SRP provide future pension benefits to participants based on years of service and remuneration. The cost of these benefits is
actuarially determined using the projected benefit method pro-rated on service, a market interest rate and management's best estimate of expected
costs and period of benefit coverage. Net actuarial gains and losses of the benefit obligations are amortized over the average remaining service life of
the employee group. Current service cost is the actuarial present value of the benefits earned in the fiscal year. Prior service and other costs include
amortization of past service costs, amortization of actuarial gains and losses, and interest accruing on the actuarial liability.
SEPP AND SRP RETIREMENT BENEFITS(in thousands)
The costs detailed below are only for those employees, included in Schedule 2, who were employed during the year ended March 31, 2021 andparticipated in the SEPP and SRP maintained by the AER. The SEPP and SRP provide retirement benefits to compensate senior staff who do notparticipate in the government management pension plans.
2020

2021

Position
Executive Vice-President, Corporate Services
Vice-President of Finance and Chief Financial Officer
Former Executive Vice-President, Operations (o)Executive Vice-President, Strategy & Regulatory
Executive Vice-President, Stakeholder & Government Engagement

Current
service cost
$
32
23
-

Prior service
and other costs
$
2
-

$

Total

34
23
-

$

Total

33
7
15
28

The SEPP and SRP accrued obligation for each executive employed by the AER during the year ended March 31, 2021 is outlined in the following table:

Position
Executive Vice-President, Corporate Services
Vice-President of Finance and Chief Financial Officer
Executive Vice-President, Strategy & Regulatory
Executive Vice-President, Stakeholder & Government Engagement

Accruedobligation
April 1, 2020
$
128
718
16

Changes in
accruedobligation
$
59
25
1
1

Accruedobligation
March 31, 2021$
187

Accruedobligation March
31, 2020
$
128

25
719
17

718
16

(o) The pension obligation for the former Executive Vice-President, Operations was paid out during the year ended March 31, 2020.

ALBERTA ENERGY REGULATORCONSOLIDATED ACTUAL RESULTS COMPARED WITH BUDGETYEAR ENDED MARCH 31, 2021

Schedule 3

Budget(Note 4)
Revenues
Administration fees
Government of Alberta grant
Orphan fund levy and fees
Information, services and fees
Investment income$

Expenses
Energy regulation
Orphan well abandonment

CapitalCapital investment
Less: Amortization of tangible capital assets
Loss on disposal and write-down of tangible capital assets
Net capital investment
Surplus226,450(a)

Adjustments
Adjusted budget(in thousands)$

69,0003,542
867
299,859(113,000)
113,000(3,500)(1,703)(5,203)215,859
69,000284,859
15,000(1,703)(3,500)(5,203)-214,156
65,500279,656
15,000203,753
65,698269,451
26,577

14,500(16,000)-

14,500(16,000)

13,697(15,686)(983)(2,972)(1,500)$16,500$-$113,450
113,000
65,5001,839
867
294,656

Actual

$(1,500)$16,500$114,240
113,000
65,6982,731
359
296,028

29,549(a) Adjustments reflect a provincial grant announced by the Government of Alberta (GoA), a decrease in revenues collected from information sales, a GoA-mandated inyear savings request, and a GoA request to delay issuing the large facility levy. Adjustments are related to the economic impacts of COVID-19 and low commodity
prices.

ALBERTA ENERGY REGULATORRELATED PARTY TRANSACTIONSYEAR ENDED MARCH 31, 2021

Schedule 4

The AER, in the normal course of business, entered into various transactions with entities consolidated or accounted for on the modified equity
basis in the Government of Alberta's Consolidated Financial Statements. These entities are considered to be related parties of the AER.
Related parties also include key management personnel and close family members of those individuals in the AER. In 2021, there were noamounts or transactions, other than compensation, between the AER and its key management personnel. Key management personnel
compensation is disclosed in Schedule 2.
Related Party Transactions with Government of Alberta Entities
The AER recognized the following transactions with Government of Alberta entities in the Consolidated Statement of Operations and theConsolidated Statement of Financial Position at the amount of consideration agreed upon between the related parties:
Entities in the
Ministry of Energy
2021
2020
(in thousands)
Revenues
Government of Alberta grant
Information, services and fees$$

113,000366
113,366$$

Other entities
2021(in thousands)
96
96

$

$

$

$

418
418

Receivable from$

Prepaid expenses and other assets

361
361

$

Entities in the
Ministry of Energy
2021
2020
(in thousands)
ExpensesComputer services
Buildings
Administrative
Consulting services

2020

2021

$

$

454
454

108

$

$

-

Payable to$Unearned revenue
Contractual obligations (a)

$

618
618

$

Other entities
2020 (a)(in thousands)
$

$

2,975
528
396
310
4,209

$

4,270
509
430
573
5,782

119

$

33

$

4

$

-

$

36

$

40

209

$

94

$

641

$

724

$

1

$

-

$

-

$

-

$

-

$

-

$

7,069

$

10,390(a) Certain 2020 amounts have been restated to ensure completeness of 2020 related party transactions.
(b) Contractual obligations are obligations of the AER to related parties that will become liabilities in the future when the terms of thosecontracts or agreements are met.