Alberta Energy Regulator
Consolidated Financial Statements
For the Year Ended March 31, 2023

Statement of Management Responsibility
Independent Auditor's Report
Consolidated Statement of Operations
Consolidated Statement of Financial Position
Consolidated Statement of Change in Net Financial Assets (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 consolidated financial statements are prepared in accordance with Canadian public sector
accounting standards. The consolidated financial statements necessarily include some amounts thatare based on informed judgments and best estimates of management. The financial information
contained elsewhere in this annual report is consistent with that in the consolidated 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 18, 2023

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, 2023, and theconsolidated statements of operations, change in net financial assets (net debt), and cash flows forthe year then ended, and notes to the consolidated financial statements, including a summary ofsignificant 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, 2023, and the results of its
operations, its changes in net financial assets, and its cash flows for the year then ended inaccordance 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.
Classification: Public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.
Classification: Public•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 18, 2023
Edmonton, Alberta

Classification: Public

ALBERTA ENERGY REGULATORCONSOLIDATED STATEMENT OF OPERATIONSYEAR ENDED MARCH 31, 2023

2023

2022

Budget(Note 5, Schedule 3)

ActualActual(in thousands)
Revenues
Administration fees
Orphan fund levies and transfers (Note 6)
Government of Alberta grants
Information, services and fees
Investment income$

Expenses
Energy regulation (Schedule 1)
Orphan well abandonment (Note 6)

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

200,730
78,50012,811
1,299
675
294,015$

201,42980,294
16,7542,576
4,085
305,138$

207,92177,824
16,9882,247
573
305,553

219,015
78,500297,515

223,496
80,294
303,790

221,629
77,824299,453(3,500)73,58770,087

1,348
73,58774,935

6,100
67,48773,587$$

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

1

ALBERTA ENERGY REGULATORCONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT MARCH 31, 2023

2023

2022
(in thousands)

Financial assets
Cash and cash equivalents (Note 7)
Accounts receivable (Note 8)
Pension assets (Note 15)$

Liabilities
Accounts payable and other accrued liabilities (Note 9)
Payable to Orphan Well Association
Deferred revenue (Note 10)
Deferred lease incentives (Note 12)
Net financial assets
Non-financial assets
Tangible capital assets (Note 16)
Prepaid expenses and other assets

Net assets before spent deferred capital contributions
Spent deferred capital contributions (Note 10)
Net assets
Accumulated surplus (Note 17)$

43,171
2,927
9,903
56,001$

52,566
1,684
3,958
58,20826,017
2,419
7,657
9,849
45,942
10,05926,725
1,064
11,362
11,31550,466
7,742

56,6728,204
64,87657,443
8,642
66,08574,93573,827-240

74,935$73,587

Asset Retirement Obligation (Note 14)
Contractual rights (Note 18)
Contingent liabilities (Note 19)
Contractual obligations (Note 20)
The accompanying notes and schedules are part of these consolidated financial statements.

2

ALBERTA ENERGY REGULATORCONSOLIDATED STATEMENT OF CHANGE IN NET FINANCIAL ASSETS (NET DEBT)YEAR ENDED MARCH 31, 2023

2023

2022

Budget(Note 5, Schedule 3)

Annual operating surplus (deficit)$

Acquisition of tangible capital assets (Note 16)
Amortization of tangible capital assets (Note 16)
Net loss on disposal and write-down of tangible capital assets
Proceeds on disposal of tangible capital assets
Write-off of leasehold improvements (Note 12)
Decrease in prepaid expenses and other assets
Net (decrease)/increase in spent deferred capital contributions (Note 10)
Decrease in net debt
Net financial assets (net debt) at beginning of year
Net financial assets at end of year$

(3,500)

Actual(in thousands)
$

1,348

$

(12,808)
13,114
418
47
438
(240)
2,317
7,742
10,059(14,500)
18,000

7,742
7,742

Actual

$

6,100

$

(12,950)
13,921
663
1,056
743
240
9,773
(2,031)
7,742

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

3

ALBERTA ENERGY REGULATORCONSOLIDATED STATEMENT OF CASH FLOWSYEAR ENDED MARCH 31, 2023

2023

2022
(in thousands)

Operating transactions
Annual operating surplus
Non-cash items included in annual operating surplus:
Amortization of tangible capital assets (Note 16)
Write-off of leasehold improvements (Note 12)
Change in pension assets
Net loss on disposal and write-down of tangible capital assets (Note 16)
Bad debt expense (recovery)
Write-off of deferred lease incentives (Note 12)
Amortization of deferred lease incentives (Note 12)$

Increase in accounts receivable
Decrease in prepaid expenses and other assets(Decrease)/increase in accounts payable and other accrued liabilities
Increase/(decrease) in payable to Orphan Well Association(Decrease)/increase in deferred revenue
Cash provided by operating transactions
Capital transactions
Acquisition of tangible capital assets (Note 16)
Proceeds on disposal of tangible capital assets
Cash applied to capital transactions
Financing transactions(Decrease)/Increase in spent deferred capital contributions (Note 10)
Cash (applied to) provided by financing transactions(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

$

1,348

$

6,100

13,114(5,945)418
34(1,466)
7,503(1,277)
438
(708)
1,355
(3,705)
3,606

13,921
1,056
965
663
(16)
(1,450)(1,567)
19,672
(212)
743
8,688
(878)
11,03739,050(12,808)47(12,761)(12,950)(12,950)

(240)
(240)

240
240

(9,395)52,56643,171

26,34026,22652,566$

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

4

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 1 AUTHORITY
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 2 SUMMARY 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 an Orphan
Fund Levy and a Large Facility Program Orphan Levy, and transfers the funds to the Orphan Well Association through the Orphan
Fund. The AER also transfers funds for first time licensee application fees, including regulator directed transfer fees, and forfeited
security deposits through the Orphan Fund. The AER and the 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. The AER recognizes revenue from administration fees at their realizablevalue. Cash received for which services have not been provided by year end is recognized as deferred revenue.
Government of Alberta Grants
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 and the
AER meets the eligibility criteria (if any). Provincial grants with stipulations for the use of the transfer are recognized as deferred
revenue and subsequently recognized when the AER meets the stipulations.
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 are 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 on each
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 and retirement
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.

5

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND REPORTING PRACTICES (continued)
Basis of Financial Reporting (continued)
Employee future benefits (continued)
Actuarial gains and losses are amortized over the average remaining service period of the active employees, which is 11.2 years(2022 - 11.2 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, PublicService Pension Plan and Supplementary Retirement Plan for Public Service Managers. Defined contribution plan accounting isapplied to these plans as the AER has insufficient information to apply defined benefit plan accounting. Accordingly, pension expensecomprises employer contributions to the plans that are required for its employees during the year, which are calculated 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
Pension assets
Accounts payable and other accrued liabilities
Payable to the Orphan Well Association

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

Environmental Liabilities
Deferred lease incentives

Cost
Amortized cost

The AER has not designated any financial assets or liabilities in the fair value category, does not have any significant foreign currencytransactions and does not hold any derivative contracts. The AER has no significant remeasurement gains or losses andconsequently has not presented a consolidated 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 include cash and the AER's financial claims on external organizations and individuals at year end.
Cash and cash equivalents
Cash comprises cash on hand, externally restricted cash and demand deposits.
Accounts receivable
Accounts receivable are recognized at the lower of cost or net recoverable value. A valuation allowance is recognized when recovery
is uncertain.

6

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 2 SUMMARY 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.
Deferred lease incentives
Deferred lease incentives, consisting of leasehold improvement costs, reduced rent benefits and rent-free periods, are amortized on astraight-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 in productive
use and may also arise from an unexpected event resulting in contamination. The resulting liability is recognized when all of thefollowing criteria are met:i. an environmental standard exists;
ii. contamination exceeds the environmental standard;iii. the AER is directly responsible or accepts responsibility;
iv. it is expected that future economic benefits will be given up; andv. a reasonable estimate of the amount can be made.
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 sacrifice economic
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:(a) are normally employed to deliver AER services;(b) may be consumed in the normal course of operations; and(c) 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.

7

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 2 SUMMARY 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 to theacquisition, design, construction, development, improvement or betterment of the assets. Cost includes overhead directly attributable
to construction and development of the asset.
The cost, less residual value, 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 project iscomplete 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 bookvalue. 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 tothe 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 and extent ofcontamination, the responsibility for clean-up, and the timing and costs of remediation cannot be reasonably estimated in all
circumstances. The degree of measurement uncertainty cannot be reasonably determined.
Note 3 CHANGE IN ACCOUNTING STANDARDS
Effective April 1, 2022, the AER adopted the new accounting standards PS 3280 Asset Retirement Obligations. There was no material
impact on the AER’s consolidated financial statements, as discussed in Note 14.

8

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 4 FUTURE CHANGES IN ACCOUNTING STANDARDSThe Public Sector Accounting Board has approved the following accounting standards, which are effective for fiscal years starting on
or after April 1, 2023:
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.
PS 3160 Public Private Partnerships (effecitve April 1, 2023)
This standard provides guidance on how to account for public private partnerships between public and private sector entities, where
the public sector entity procures infrastructure using a private sector partner.
Management is currently assessing the impact of these standards on the consolidated financial statements. These standards are notexpected to have a significant impact on the AER's consolidated financial statements.
Note 5 BUDGETThe budget and budget adjustments reflected on Schedule 3 have been approved by the Government of Alberta.
Note 6 ORPHAN WELL ABANDONMENT(in thousands)
The Government of Alberta has delegated the authority to manage the abandonment and reclamation of wells, facilities, and pipelinesthat are licensed to defunct licensees to the Orphan Well Association. The AER collects an Orphan Fund Levy and a Large Facility
Program Orphan Levy, and transfers the funds to the Orphan Well Association through the Orphan Fund. The AER also transfers
funds for first time licensee application fees, including regulator directed transfer fees, and forfeited security deposits through theOrphan Fund. During the year ended March 31, 2023, the AER collected and transferred $78,090 (2022 - $73,788) in levies, $669
(2022 - $436) in application fees and $1,535 (2022 - $3,600) in forfeited security deposits.
Note 7 CASH AND CASH EQUIVALENTS(in thousands, unless otherwise noted)
Cash and cash equivalents are held in an account with a Canadian chartered bank and earn interest calculated based on the averagemonthly cash balance. The funds are available to be withdrawn upon request. During the year ended March 31, 2023, the AER
earned interest at an annual average rate of 3.5% (2022 - 0.8%).
Cash and cash equivalents includes restricted funds of $7,447 (2022 - $11,159), as reflected in deferred revenue (discussed in Note
10).
Note 8 ACCOUNTS RECEIVABLE(in thousands)
Accounts receivable are unsecured and non-interest bearing.
2023

Accounts receivable

2022

Gross amount

Allowancefor doubtful
accounts

$

$

3,187

Net
recoverable
value(260) $

2,927

Net
recoverable
value
$

1,684

9

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 9 ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES(in thousands)
2023
Trade and other accrued liabilities
Lease termination payable$

Accrued salaries and benefits
$

2022

9,743
5,820
10,45426,017$

12,481
7,376
6,868
26,725$Note 10 DEFERRED REVENUE(in thousands)
Deferred revenue consists of the following:
2023
Deferred contributions
Unearned revenue

(1)

$
$

2022

7,447
210
7,657

Spent deferred capital contributions$

11,159203
11,362

$

$

240

7,657

$

11,602(1) Deferred contributions
2023

Balance at beginning of year

Government ofAlberta$
10,837

2022

Other
$

Total

322

$

Total

11,159$143

Cash contributions received/receivable during year

12,811347

13,15828,369Less: amounts recognized as revenue(16,514)(356)(16,870)(17,113)

-

-

-

(240)

Transferred to spent deferred capital contributions
Balance at end of year

$

7,134

$

313

$

7,447

$

11,159Note 11 FINANCIAL INSTRUMENTS
The AER has the following financial instruments: cash and cash equivalents, accounts receivable, accounts payable and otheraccrued 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 arevolving line of credit which provides financial flexibility to allow the AER to meet its obligations if funding cannot be collected on atimely basis.

10

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 11 FINANCIAL INSTRUMENTS (continued)(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 include balances due from operators in the oil and gas industry, and are 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 of operators,
historical trends and economic circumstances.
Note 12 DEFERRED LEASE INCENTIVES(in thousands)
The AER has entered into various lease agreements which provide for lease incentives comprising reduced rent benefits, rent-free
periods and leasehold improvement costs. These amounts are amortized on a straight-line basis over the term of the lease.
2023

Balance at beginning of year
Write-off of lease incentives(1)Amortization
Balance at end of year

ReducedLeaseholdrent benefits
improvement and rent-free
costs
periods$
9,370 $
1,945 $
(1,136)(330)$
8,234 $
1,615 $

2022

Total
11,315 $(1,466)
9,849 $

Total
14,332(1,450)(1,567)
11,315(1) In 2022, the AER exited a portion of the lease for its Calgary Head Office. As a result, the AER wrote off the related leasehold improvements

and lease incentives pertaining to this office space.

Note 13 ENVIRONMENTAL LIABILITIES(in thousands, unless otherwise noted)
The AER has a mandate to protect public safety and the environment. As at March 31, 2023, the AER is not responsible, nor has it
accepted responsibility, for performing remediation and reclamation work at contaminated sites. The AER has $nil (2022 - $nil)
environmental liabilities recorded.
As at March 31, 2023, the AER is administering 29 (2022 – 29) legacy sites. Of these sites, during the year ended March 31, 2023,
the AER identified one (2022 – two) site as having immediate public safety and environmental risk, and the AER needed to takeappropriate action to mitigate these risks. During the year ended March 31, 2023, the AER incurred $3 (2022 - $9) in costs to mitigate
immediate public safety and environmental 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 included.

11

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 14 ASSET RETIREMENT OBLIGATION
Tangible capital assets are assessed for asset retirement obligations annually. Asset retirement obligations are initially measured asof the date the legal obligation was incurred, based on management's best estimate of the amount required to retire tangible capital
assets and subsequently re-measured taking into account any new information and the appropriateness of assumptions used. At
March 31, 2023, the estimate of the liability is insignificant and therefore no liability was recognized. During the year ended March 31,
2023, the AER incurred $nil (2022 - $nil) in costs to settle the obligation.
Note 15 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, PublicService Pension Plan and Supplementary Retirement Plan for Public Service Managers. For the year ended March 31, 2023, theexpense for these pension plans is equal to the contributions of $12,207 (2022 - $12,253) and is included in salaries, wages andemployee benefits on Schedule 1. The AER is not responsible for future funding of the plan deficit other than through contribution
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 oneach 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, 2021. The accrued benefit obligation as
at March 31, 2023 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, 2024.
Pension plan assets are valued at market values. During the year ended March 31, 2023, the weighted average actual return on plan
assets was -1.9% (5.2% in 2022).
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

2023
5.4%
4.0% until March 31, 2023,
6.0% until March 31, 2024,
3.0% thereafter
2.0%
2023
4.5%
4.5%
4.0% until March 31, 2023,
3.0% thereafter

2022
4.5%
4.0% until March 31, 2023,
3.0% thereafter
2.0%
2022
4.4%
4.4%
0% until March 31, 2022,
3.0% thereafter

12

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 15 EMPLOYEE FUTURE BENEFITS (continued)
The funded status and amounts recognized in the Consolidated Statement of Financial Position were as follows:

2023
Market value of plan assets
Accrued benefit obligations
Plan surplus
Unamortized actuarial gains
Pension assets

$

$

2022

81,577 $(67,126)
14,451(4,548)9,903 $

76,893(70,739)
6,154(2,196)
3,958(in thousands, unless otherwise noted)
The pension benefit costs for the year included the following components:

2023
Current period benefit cost
Interest cost
Expected return on plan assets
Amortization of actuarial (gains)/losses

$

$

2022

3,921 $
3,277
(3,462)(67)
3,669 $

4,045
3,197
(3,227)251
4,266

Additional information about the defined benefit pension plans is as follows:
Benefits paid
AER contributions
Employees' contributions

$

2023
4,189
9,615
751

$

2022
5,009
3,298
684

The asset allocation of the defined benefit pension plans' investments was as follows:
Equity securities
Debt securities
Alternatives
Other

2023
45.4%
24.3%
18.5%
11.8%
100.0%

2022
44.1%
23.4%
20.0%
12.5%
100.0%

13

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 16 TANGIBLE CAPITAL ASSETS(in thousands)

Estimated useful life

2023

2022

Land

Leaseholdimprovements

Furniture andequipment (1)Computerhardwareand software

Indefinite

Term of thelease

5-12 years

4-5 years

Total

Total

Historical cost (2)Beginning of year
Additions
Disposals, including write-downs
Accumulated amortization
Beginning of year
Amortization expense
Effect of disposals, including
write-downs

$

282
-

$

282
$

-

46,366
1,398

$

(141)
47,623$-24,3842,737

12,400
803

$

(301)
12,902$(132)
26,9899,529
770

138,338
10,607

197,386
12,808(8,689)140,256$(270)
10,029106,030
9,607

282

$

20,634

$

2,873

$

32,883

Net book value at March 31, 2022 $282$

21,982

$

2,871

$

32,308$(9,131)
201,063$

139,943
13,114(8,264)
107,373

Net book value at March 31, 2023 $(1)$(23,968)
197,386$(8,666)
144,391$

208,404
12,950148,271
13,921(22,249)
139,943

56,672$57,443

Furniture and equipment includes organization-owned vehicles, office equipment, furniture and other equipment.

(2) Historical costs includes work-in-progress at March 31, 2023 totalling $6,381 (2022 -$2,297) comprised of: computer hardware and software

includes work-in-progress totalling $6,369 (2022 - $2,297) and leasehold improvements $12 (2022 - $nil).

Note 17 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:
2023

2022

Net investment in tangible capital assets (1)Investments intangible capital
assets (1)$48,073365

Unrestricted
net assets$
25,514 $
1,348
(365)

Balance at end of year$$

Balance at beginning of year
Annual operating surplus

48,43826,497$

Total
73,587
1,348
74,935$$

Total
67,487
6,100
73,587(1) Excludes leasehold improvement costs received by the AER as a lease incentive and related amortization.

14

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 18 CONTRACTUAL RIGHTS(in thousands)
Contractual rights are rights of the AER to economic resources arising from contracts or agreements that will result in both assets andrevenues in the future when the terms of those contracts or agreements are met.
During the year ended March 31, the AER collected the following amounts for its contractual rights under operating subleases:
2022

2023
Contractual rights from operating subleases

$

543

$

316

As at March 31, 2023, estimated amounts that will be received or receivable for each of the next five years are as follows:
2023-242024-252025-262026-272027-28

550
433
439
182
-

$

1,604

Note 19 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, 2023, accruals totalling $1,312 (2022 - $1,359) have been recognized as a liability.
The AER has identified various sites where contamination may exist and the level of contamination is unknown at this time. As at
March 31, 2023, no liability has been recognized for these sites as further testing and evaluation is required to determine the extent ofimmediate actions necessary. No liability for remediation on other sites has been recognized as the AER becoming responsible forthese sites is not determinable; the AER does not expect to give up any future economic benefits; no reasonable estimate of theamount can be made; or a combination of these factors. The AER’s ongoing efforts to assess contaminated sites may result inenvironmental remediation 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.

15

ALBERTA ENERGY REGULATORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 20 CONTRACTUAL OBLIGATIONS(in thousands)
As at March 31, 2023, the AER had contractual obligations totalling $125,189 (2022 - $146,445).
Contractual obligations are obligations of the AER to others that will become liabilities in the future when the terms of those contracts
or agreements are met.
As at March 31, 2023, estimated payment requirements for obligations under operating leases and contracts for each of the next five
years and thereafter are as follows:
2023-242024-252025-262026-272027-28
Thereafter$

50,733
16,824
10,891
10,116
9,675
26,950$125,189

Note 21 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. Security may be forfeited and transferred to the Orphan Well Association for thecost of suspension, abandonment, site decontamination and surface land reclamation.
As at March 31, 2023, assets under administration included the following types of security deposits:
2023
Letters ofcreditCash
Liability Management Rating
programs and landfills
Mine Financial Security program
Other programs$$

102,539
67,07911,061
180,679$$

281,789
1,245,343
10,923
1,538,055

2022
Surety Bond$$

247,312247,312

Total$

384,328
1,559,734
21,984$ 1,966,046

Total
$

368,1031,520,516
21,134$ 1,909,753

Note 22 COMPARATIVE FIGURES
Certain 2022 figures have been reclassified, where necessary, to conform to the 2023 presentation.
Note 23 APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS
These consolidated financial statements were approved by the AER Board of Directors on May 18, 2023.

16

ALBERTA ENERGY REGULATORENERGY REGULATION EXPENSES - DETAILED BY OBJECTYEAR ENDED MARCH 31, 2023

Schedule 1

2023

2022
(in thousands)

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

147,068
22,60818,84817,801
13,114
1,703
1,640
418
296
223,496$$

132,71226,53927,305
17,71013,921
1,274
1,292
663
205
8
221,629

17

ALBERTA ENERGY REGULATORSALARY AND BENEFITS DISCLOSURE
YEAR ENDED MARCH 31, 2023

Schedule 2

2022
Restated (4)

2023
Base
salaryOther
non-cash(2)
benefits

Other cash
(1)
benefits

Total

Total

(in thousands)
Position
Board Members (3)President and Chief Executive Officer(4)
Chief Hearing Commissioner
Chief Operations Officer(5)
Executive Vice-President, Law and General Counsel
Vice-President of Finance and Chief Financial Officer(6)Vice-President of People, Culture and Learning

$

460
342
224
271
230
239
225

Former Executive Vice-President, Law and General Counsel (7)

41

$

40
11
15
11
9
14
19

$

38
83
59
84
84
87
74
12

$

498
465
294
370
325
335
313

$

468
464
276
347
327
-

72

346

(1) Other cash benefits include payments in lieu of vacation, pension and health benefits, as well as vehicle allowances and other cash reimbursements.
(2) Other non-cash benefits include contributions to all benefits as applicable, including employer's share of all employee benefits and contributions or
payments made on behalf of employees, including pension, supplementary retirement plans, health care and payments made for professional
memberships, tuition fees, parking and other taxable benefits.
(3) The incumbent Board of Directors consists of eight members. Seven Board Members are remunerated with monthly honoraria as per rates prescribedin the Orders in Council, one Board Member is unpaid. Two new Board Members were appopointed on August 22, 2022 and March 14, 2023, andone member was rescinded on October 24, 2022.
(4) The 2022 figures have been restated to include the two individuals who occupied this position during 2022. In October 2021, an incumbent wasappointed as acting Chief Hearing Commissioner and held the position until April 14, 2022.
(5) The incumbent held the position effective May 23, 2022.
(6) Effective April 6, 2022 the position became a voting member of the Executive Leadership Team.
(7) The incumbent retired on May 24, 2022.

18

ALBERTA ENERGY REGULATORSALARY AND BENEFITS DISCLOSURE
YEAR ENDED MARCH 31, 2023

Schedule 2 (continued)

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 years ended March 31, 2022
and 2023, and participated in the SEPP and SRP maintained by the AER. The SEPP and SRP provide retirement benefits to compensate
senior staff who do not participate in the Government of Alberta's management pension plans.
2023

Position(5)
Executive Vice-President, Law and General Counsel
Vice-President of Finance and Chief Financial Officer
Vice-President of People, Culture and Learning(6)Current
service cost
$
24
33
28

Prior service
and other costs
$
(1)
(1)
-

2022

Total
$

Total
23
32
28

$

39
-

The SEPP and SRP accrued obligation for each executive employed by the AER during the years ended March 31, 2022 and 2023 isoutlined in the following table:

Position
Executive Vice-President, Law and General Counsel(5)Vice-President of Finance and Chief Financial Officer
Vice-President of People, Culture and Learning(6)Accruedobligation
April 1, 2022
$
185
57
46

Changes in
accruedobligation
$
13
36
24

Accruedobligation
March 31, 2023
$
198
93
70

Accruedobligation
March 31, 2022
$
185
57
46

19

ALBERTA ENERGY REGULATORCONSOLIDATED ACTUAL RESULTS COMPARED WITH BUDGETYEAR ENDED MARCH 31, 2023

Schedule 3

Budget(Note 5)
Revenues
Administration fees
Orphan fund levies and transfers
Government of Alberta grants
Information, services and fees
Investment income$

Expenses
Energy regulation
Orphan well abandonment

CapitalCapital investment
Less: Amortization of tangible capital assets
Net loss on disposal and write-down of tangible capital
assetsProceeds on disposal of tangible capital assets
Net capital investment
Surplus$(1)

Adjustments
Adjusted budget(in thousands)

200,730
78,50012,811
1,299
675
294,015$640
10,800203
3,177
14,820$201,370
78,50023,611
1,502
3,852
308,835

Actual

$201,42980,294
16,7542,576
4,085
305,138

219,015
78,500297,515(3,500)15,32015,320(500)

234,335
78,500312,835(4,000)223,496
80,294
303,790
1,348

14,500(18,000)(5,500)
5,000

9,000
(13,000)(3,500)(500)(4,000)12,808(13,114)
(418)
(47)
(771)

-

$

-

$

-

$

2,119

(1) Adjustments reflect changes to the original budget approved by the Treasury Board. These adjustments reflect an extension of grant funding to accommodate work
completed in 2023 for the Public Geoscience grant received in 2022, higher investment income, a reduction to amortization expense and capital spending, and higher
energy regulation expenses to address inflationary increases for certain expenditures.

20

ALBERTA ENERGY REGULATORRELATED PARTY TRANSACTIONSYEAR ENDED MARCH 31, 2023

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 2023, there
were no amounts 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
2023
2022

Other entities
2023(in thousands)
Revenues
Government of Alberta grants$

Information, services and fees$

16,754333
17,087(in thousands)$

16,988334
17,322

$

$

671
671

$

Entities in the
Ministry of Energy
2023

$

2022

$

$

341
341

Receivable from$

Prepaid expenses and other assets

$

485
485

$

Other entities
2023(in thousands)
ExpensesComputer services
Buildings
Administrative
Consulting services

2022

2022
(in thousands)

$

$

386
386

$

$

3,441
433
515
174
4,563

$

3,573
400
370
187
4,530

130

$

137

$

13

$

6

$

-

$

-

$

36

$

36

Payable to

$

-

$

-

$

1,987

$

1,307

Deferred revenue

$

7,134

$

10,837

$

200

$

259

Contractual obligations (a)

$

-

$

-

$

3,869

$

4,850

(a) Contractual obligations are obligations of the AER to related parties that will become liabilities in the future when the terms of

those contracts or agreements are met.

21