Alberta Energy Regulator
Financial Statements
For the Year Ended March 31, 2017

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

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying financial statements of the Alberta Energy Regulator and all other information
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 financial statements in accordance with Canadian
generally accepted auditing standards, and has expressed his opinion in the accompanying
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.

[Originally signed by Jim Ellis]
President and Chief Executive Officer[Originally signed by Rick Brown]
Executive Vice President, Corporate Services[Originally signed by Tom Heywood]
Vice President and Chief Financial OfficerIndependent Auditor’s Report
To the Board of Directors of the Alberta Energy Regulator
Report on the Financial Statements
I have audited the accompanying financial statements of the Alberta Energy Regulator, which comprise thestatement of financial position as at March 31, 2017, and the statements of operations, change in net debt andcash flows for the year then ended, and a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordancewith Canadian public sector accounting standards, and for such internal control as management determines isnecessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
My responsibility is to express an opinion on these financial statements based on my audit. I conducted myaudit in accordance with Canadian generally accepted auditing standards. Those standards require that I
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit
opinion.
OpinionIn my opinion, the financial statements present fairly, in all material respects, the financial position of theAlberta Energy Regulator as at March 31, 2017, and the results of its operations, its remeasurement gains andlosses, its changes in net debt, and its cash flows for the year then ended in accordance with Canadian public
sector accounting standards.
[Original signed by Merwan N. Saher FCPA, FCA]
Auditor General
May 11, 2017
Edmonton, Alberta

ALBERTA ENERGY REGULATORSTATEMENT OF OPERATIONSYear Ended March 31(in thousands)

2016

2017
Budget(Note 3, Schedule 3)
Revenues
Industry levies and assessments
Information, services and fees
Government transfer - provincial grant
Investment$

Expenses (Schedule 1)
Energy regulation
Orphan well abandonment (Note 4)
Climate leadership plan

268,403
4,146
867
273,416

Actual$245,416
30,500275,916

Actual269,222
5,132
3,338
1,062
278,754$245,959
31,0282,925
279,912270,335
6,867
1,278
278,480

249,113
31,111
280,224

Annual operating (deficit)(2,500)(1,158)(1,744)

Accumulated surplus at beginning of year
Accumulated surplus at end of year

62,111
59,611

62,111
60,95363,855
62,111$$$

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

2

ALBERTA ENERGY REGULATORSTATEMENT OF FINANCIAL POSITION
As at March 31(in thousands)

2017

Financial assets
Cash and cash equivalents (Note 5)
Accounts receivable (Note 6)
Pension assets (Note 12)$

Liabilities
Accounts payable and accrued liabilities
Grant payable to Orphan Well Association
Unearned revenue (Note 9)
Deferred lease incentives (Note 10)
Pension obligations (Note 12)
Net debt
Non-financial assets
Tangible capital assets (Note 13)
Prepaid expenses and other assets

Accumulated surplus (Note 14)$

2016
Restated - Note 2 (h)32,975
7,982
510
41,467$

24,851
18,14943,00017,302
14,115
1,997
20,64854,062(12,595)

16,64315,093
1,604
22,264692
56,296(13,296)

62,426
11,12273,54864,43010,97775,40760,953$

62,111

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

3

ALBERTA ENERGY REGULATORSTATEMENT OF CHANGE IN NET DEBT
Year Ended March 31(in thousands)

2016

2017
Budget(Note 3)
Annual operating (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
Increase in prepaid expenses and other assets
Decrease (increase) in net debt
Net debt at beginning of year
Net debt at end of year$

(2,500)

Actual$(1,158)$(12,109)
14,03776(145)
701(13,296)(12,595)(9,000)11,500$(13,296)(13,296)

Actual
$(1,744)$(14,196)
12,645332(624)(3,587)(9,709)(13,296)

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

4

ALBERTA ENERGY REGULATORSTATEMENT OF CASH FLOWS
Year Ended March 31(in thousands)

2017
Operating transactions
Annual operating (deficit)
Non-cash items included in net operating results
Amortization of tangible capital assets (Note 13)
Loss on disposal and write-down of tangible capital assets

$

2016

(1,158)$(1,744)

14,03776(1,202)(1,616)
10,137
10,167
(145)
659
(978)
393
20,233

12,645332(1,657)(1,522)
8,054(5,904)(624)(16,868)
38
(452)
763
(14,993)

Capital transactions
Acquisition of tangible capital assets (Note 13)
Cash applied to capital transactions(12,109)(12,109)(14,196)(14,196)

Financing transactions
Proceeds from line of credit
Debt repayment
Cash applied to financing transactions

16,138(16,138)--

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

8,124
24,851
32,975(29,189)
54,04024,851

Change in pension obligations
Amortization of deferred lease incentives (Note 10)
Decrease (increase) in accounts receivable(Increase) in prepaid expenses and other assets
Increase (decrease) in accounts payable and accrued liabilities(Decrease) increase in grant payable to Orphan Well Association
Increase (decrease) in unearned revenue
Additions to deferred lease incentives (Note 10)
Cash provided by (applied to) operating transactions$$

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

5

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 1

Authority and purpose
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.

Note 2

Summary of significant accounting policies and reporting practices
These financial statements are prepared in accordance with Canadian Public Sector Accounting Standards (PSAS).
(a)

Revenues
All revenues are reported on the accrual basis of accounting. Cash received for which services have not been provided byyear end is recognized as unearned revenue.
Government transfers
Transfers from the Government of Alberta, without stipulations for the use of the transfer, are recognized as revenue when
the transfer is authorized and the AER is eligible to receive the funds.

(b)

Expenses
Expenses are reported on an accrual basis. The cost of all goods consumed and services received during the year isexpensed.

(c)

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
Accounts payable and accrued liabilities
Grant payable to the Orphan Well Association

Measurement
Cost
Lower of cost or net recoverable value
Cost
Cost

The AER has not designated any financial assets or liabilities in the fair value category, has no significant foreign currencytransactions and does not hold any derivative contracts. The AER has no significant remeasurement gains or losses andconsequently has not presented a statement of remeasurement gains and losses.
(d)Financial assets
Financial assets are AER's financial claims on external organizations and individuals at the year end.
Cash and cash equivalents
Cash is comprised of 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.
PensionAccrued 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.

6ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 2

Summary of significant accounting policies and reporting practices (continued)(d) Financial assets (continued)
Pension (continued)
Accrued benefit obligations and pension benefit cost for the year are calculated using the expected rate of return on plan
assets as its discount rate. The expected return on plan assets is determined using market values of plan assets.
Actuarial gains and losses are amortized over the average remaining service period of the active employees, which is 10.5
years.
Past service cost arising from plan amendments is accounted for in the period of the plan amendments.
Defined contribution plan accounting is applied to the Government of Alberta multi-employer defined benefit pension plans as
the AER has insufficient information to apply defined benefit plan accounting. Accordingly, pension expense is comprised of
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.
(e)Liabilities
Liabilities represent present obligations of the AER to external organizations and individuals arising from transactions or
events occurring before the year end. They are recognized when there is an appropriate basis of measurement andmanagement can reasonably estimate the amount.
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, areamortized on a straight-line basis over the term of the lease.
Liability for contaminated sites
Contaminated sites are a result of contamination of a chemical, organic or radioactive material or live organism that exceeds
an environmental standard, being introduced into soil, water or sediment. The liability is recognized net of any expected
recoveries. A liability for remediation of contaminated sites normally results from an operation that is no longer in productive
use and is recognized when all of the following criteria are met:
- 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; and- a reasonable estimate of the amount can be made.

(f)

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 are limited to tangible capital assets and prepaid expenses and other assets.
Tangible capital assets
Tangible capital assets are recognized at cost, which includes amounts that are directly related to the acquisition, design,
construction, development, improvement or betterment of the assets and are amortized over their estimated useful lives using
the following methods:

7

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 2

Summary of significant accounting policies and reporting practices (continued)(f) Non-financial assets (continued)
Tangible capital assets (continued)
Leasehold improvements
Straight line
Furniture and equipment
Straight line
Computer hardware
Straight line
Computer software - purchased
Straight line
Computer software - developed
Declining balanceTerm of the lease5 - 12 years
4 years
4 years
5 years

Amortization is only charged if the tangible capital asset is put into service.
Work-in-progress, which includes 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 thantheir net book value. The net write-downs are accounted for as expense in the Statement of Operations.
Prepaid expense
Prepaid expense is recognized at cost and amortized based on the terms of the agreements.
(g)

Measurement uncertainty
Measurement uncertainty exists when there is a variance between the recognized or disclosed amount and anotherreasonably possible amount. 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 theuse of actuarial assumptions. The resulting estimates are within reasonable limits of materiality and are in accordance with
the AER's significant accounting policies.

(h)Change in accounting policy
Security deposits
During the year, the AER changed its accounting policy with respect to the disclosure of security deposits in the AER
Financial Statements. The AER now discloses security held in the form of cash in the notes to the financial statements only.
In prior years, the AER included these security deposits on the Statement of Financial Position as financial assets andliabilities, explaining in the notes that these deposits are held on behalf of licensees. This change aligns the accounting
treatment of security deposits with other entities within the Government of Alberta.
This change in accounting policy has been applied retroactively with restatement of the prior period's Statement of Financial
Position. The effect of adopting this change decreases AER's financial assets and liabilities on the March 31, 2016 Statementof Financial Position in the amount of security deposits of $138,125.

(i)

Future accounting changes
The Public Sector Accounting Board has issued the following accounting standards:
PS 2200 Related Party Disclosure and PS 3420 Inter-entity Transactions (effective April 1, 2017)
PS 2200 defines a related party and establishes disclosures required for related party transactions; PS 3420 establishes
standards on how to account for and report transactions between public sector entities that comprise a government's
reporting entity from both a provider and recipient perspective.

8

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 2

Summary of significant accounting policies and reporting practices (continued)(i)
Future accounting changes (continued)
PS 3210 Assets, PS 3320 Contingent Assets and PS 3380 Contractual Rights (effective April 1, 2017)
PS 3210 provides guidance for applying the definition of assets set out in Financial Statement Concepts, PS 1000, andestablishes disclosure standards for assets; PS 3320 defines and establishes disclosure standards on contingent assets;
PS 3380 defines and establishes disclosure standards on contractual rights.
PS 3430 Restructuring Transactions (effective April 1, 2018)
This standard provides guidance on how to account for and report restructuring transactions by both transferors andrecipients of assets and/or liabilities, together with related programs or operating responsibilities.
Management is currently assessing the impact of these standards on the financial statements.

Note 3

Budget
The Budget is based on the AER Business Plan for the year ended March 31, 2017. The Budget and budget adjustments havebeen approved by the Government of Alberta.

Note 4Orphan well abandonment
The AER has delegated the authority to manage the abandonment and reclamation of wells, facilities and pipelines that are licensed
to defunct licensees to the Alberta Oil and Gas Orphan Abandonment and Reclamation Association (Orphan Well Association). The
AER grants all of its orphan well abandonment revenues (levy and application fees) to the Orphan Well Association. During theyear ended March 31, 2017, the AER collected $30,448 (2016 - $30,167) in levies and $580 (2016 - $944) in application fees.

Note 5

Cash and cash equivalents
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, 2017, theAER earned interest at the rate of 1.0% (2016 - 1.1%).

Note 6

Accounts Receivable
2017

Accounts receivable
Note 7Gross amount$
10,028

Allowancefor doubtful Net realizableaccounts
value$(2,046) $
7,982

2016
Net realizablevalue$
18,149Financial instruments
The AER has the following financial instruments: accounts receivable, accounts payable and accrued liabilities and grant payable to
the Orphan Well Association.
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 financial liabilities. The AER does
not consider this to be a significant risk as the AER collects funding at the beginning of the year to meet all obligations that arise
during the year. In addition, the available credit facility provides financial flexibility to allow the AER to meet its obligations if funding
cannot be collected on a timely basis.

9

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 7

Financial instruments (continued)(b) Credit risk
The AER is exposed to credit risk from potential non-payment of accounts receivable. Accounts receivable include balances duefrom 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 tothe carrying amount of accounts receivable at the reporting date and presented in the Statement of Financial Position. The AER
established a valuation allowance that corresponds to the specific credit risk of operators, historical trends and economic
circumstances.

Note 8

Revolving line of credit
During 2017, the AER had an unsecured $50,000 revolving line of credit. Amounts borrowed can only be applied to general
corporate purposes and exclude the funding of operating deficits and/or capital expenditures. Bank advances on the line of credit
are payable on demand and bear interest at prime less 0.5%. As at March 31, 2017, the outstanding balance for the revolving line ofcredit was $nil (2016 -$nil).
For the year ended March 31, 2017, interest expense on the revolving line of credit was $13 (2016 - $nil) and is included in theStatement of Operations.

Note 9Unearned revenue
2017
Balance at beginning of year
Received during year
Less amounts recognized as revenue
Balance at end of year$$

1,604 $
1,143
(750)
1,997 $

2016
2,056
395
(847)
1,604

Note 10 Deferred lease incentives
The AER has entered into various lease agreements which provide for lease incentives comprised of reduced rent benefits, rentfree periods and leasehold improvement costs. These amounts are included in deferred lease incentives and are amortized on astraight line basis over the term of the lease.
2016

2017

Balance at beginning of year
Additions during the year
Amortization
Balance at end of year

ReducedLeaseholdrent benefits
improvement and rent-free
costs
periods$
17,899 $4,365 $
(1,252)(364)$
16,647 $
4,001 $

Total
22,264 $(1,616)
20,648 $Total
23,023763(1,522)
22,264Note 11 Liability for contaminated sites
As at March 31, 2017, the AER is not responsible, nor has it accepted responsibility, for performing remediation work at
contaminated sites. As at March 31, 2017, the AER's liability for contaminated sites was $nil (2016 - $nil).

10

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 12 Pension
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, 2017, theexpense for these pension plans is equal to the contribution of $17,766 (2016 - $18,026). 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 on each employee's years of service and remuneration.
The effective date of the most recent actuarial funding valuation for SEPP was December 31, 2014. The accrued benefit obligation
as at March 31, 2017 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, 2017.
Pension plan assets are valued at market values. During the year ended March 31, 2017 the weighted average actual return onplan assets was 8.5% (-3.4% in 2016).
Significant weighted average actuarial and economic assumptions used to value accrued benefit obligations and pension benefit
costs are as follows:
Accrued benefit obligations

March 31, 2017 March 31, 2016

Discount rate
Rate of compensation increaseLong-term inflation rate

4.6%

0% for 3 years, 0% for 2 years,
3.5%
3.5%
thereafter
thereafter
2.0%
2.0%
2017

Pension benefit costs for the year
Discount rate
Expected rate of return on plan assets
Rate of compensation increase

4.7%

2016
4.7%
4.7%

4.9%
4.9%

0% for 2 years,
3.5%
thereafter

0% for 1 year,
3.5%
thereafter

The funded status and amounts recognized in the Statement of Financial Position are as follows:
March 31, 2017 March 31, 2016
Market value of plan assets
Accrued benefit obligations
Plan (deficit)
Unamortized actuarial loss
Pension assets (obligations)$$

56,633 $58,200(1,567)
2,077
510 $

47,85354,639(6,786)
6,094
(692)

2017
4,302 $
2,690
(2,358)861
5,495 $

2016
4,375
2,573
(2,330)436
5,054

The pension benefit costs for the year include the following components:
Current period benefit cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses

$

$

11

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 12 Pension (continued)
Additional information about the defined benefit pension plans is as follows:
AER contribution
Employees' contribution
Benefits paid

$

2017
6,697
840
3,001

$

2016
6,711
861
3,216

The asset allocation of the defined benefit pension plans' investments is as follows:
March 31, 2017 March 31, 2016
Equity securities
Debt securities
Other

48.8%
36.0%
15.2%
100.0%

47.9%
37.7%
14.4%
100.0%

Note 13 Tangible capital assets
2016

2017

Estimated useful life

Land

Leaseholdimprovements

Furniture andequipment

Computerhardware andsoftwareIndefinite

Term of thelease

5-12 years

4-5 years

Total

Total

Historical cost
Beginning of year$

Additions
Disposals, including write-downs

282$

38,707$

15,249$126,868$

181,106$

176,490

-

937

802

10,37012,10914,196-(2)(1,241)(13,092)(14,335)(9,580)282

39,642

14,810124,146

178,880

181,106

Accumulated amortization
Beginning of year$

Amortization expense
Effect of disposals, including writedowns

-

$

-

9,920

$

8,804

$

97,952$

116,676

$

2,495

972

10,570-(2)(1,240)(13,017)(14,259)(9,248)-12,413

8,536

95,505

116,454

116,676

Net book value at March 31, 2017

$

282

$

27,229

$

6,274

$

28,641

Net book value at March 31, 2016

$

282

$

28,787

$

6,445

$

28,916

14,037113,279$

12,64562,426$64,430

Historical cost includes work-in-progress at March 31, 2017 totaling $4,659 (March 31, 2016 - $3,767) comprised of: computer
hardware and software $4,617 (March 31, 2016 - $3,767) and leasehold improvements $42 (March 31, 2016 - $nil).

12

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 14 Accumulated surplus
The accumulated surplus of the AER is calculated as the sum of the net debt of the AER and its non-financial assets. The
accumulated surplus represents the net assets of the AER. Accumulated surplus is comprised of the following:
2017

2016

Investments intangible capital Unrestrictedassets (a)net assets
Balance at beginning of year
Annual operating (deficit)
Net investment in capital assets
Balance at end of year
(a)

$

$

46,531 $(752)
45,779 $Accumulated Accumulated
surplussurplus15,580 $62,111 $63,855(1,158)(1,158)(1,744)752
15,174 $60,953 $62,111

Excludes leasehold improvement costs received by the AER as a lease incentive.

Note 15 Contingent liabilities
The AER, in the conduct of its normal activities, is a defendant in a number of legal proceedings. While the ultimate outcome andliability of these proceedings cannot be reasonably determined at this time, the AER believes that any settlement will not have amaterial adverse effect on the financial position or the results of operations of the AER. Based on legal advice, management has
concluded that none of the claims meet the criteria for recognizing an accrued liability under PSAS.
Note 16 Contractual obligations
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.
Estimated payment requirements for obligations under operating leases and contracts for each of the next five years and thereafter
are as follows:
2018
2019
2020
2021
2022
Thereafter$$

30,764
20,691
15,23012,68012,91897,179189,462

Note 17 Assets under administration
The AER administers security deposit programs in accordance with specified acts and regulations. Security deposits are held on
behalf of depositors with no power of appropriation and therefore are not reported in these financial statements. The AER does nothave any financial risk associated with security collected. Security, along with any interest earned, will be returned to the depositors
upon meeting specified refund criteria.

13

ALBERTA ENERGY REGULATORNOTES TO THE FINANCIAL STATEMENTS
March 31, 2017
(in thousands)
Note 17 Assets under administration (continued)
At March 31, 2017 assets under administration include security deposits held under the following programs:
2017

Licensee Liability Rating program
Mine Financial Security program
Other programs$

Cash114,146
40,993
7,162
162,301

2016

2017

2016

Cash
$ 107,695
24,2306,200$ 138,125Letters of
Credit$232,255
1,345,974
5,408$ 1,583,637

Letters of
Credit$183,162
1,340,513
4,664$ 1,528,339$
Note 18 Related party transactions
Related parties are those entities consolidated or accounted for on the modified equity basis in the Government of Alberta's financial
statements. Related parties also include key management personnel, comprising of the Board of Directors and the executive
management. In 2017, there were no business relationships, outstanding amounts or transactions other than compensation,
between the AER and its key management personnel. Key management personnel compensation is disclosed in Schedule 2.
The AER had the following transactions with related parties recognized in the Statement of Operations and the Statement of
Financial Position at the amount of consideration agreed upon between the related parties:
Entities in the Ministry
2017
2016
Revenues
Government transfer - provincial grant
Information, services and fees

$
$

3,338
66
3,404

$

Other entities
2017
2016

153
153

$

$
$

Entities in the Ministry
2017
2016
ExpensesComputer services
Buildings
Administrative
Consulting services

$

$

$

2,199
2,199

Receivable from$

Payable toUnearned revenue

417
417

$

176
176

$

Other entities
2017
2016
$

$

2,124
2,124

$

$

1,651
617
1,290
1,371
4,929

$

1,714
846
1,143
290
3,993

3,505

$

91

$

12

$

6

$

509

$

-

$

692

$

588

$

-

$

-

$

583

$

-

Note 19 Comparative figures
Certain 2016 figures have been reclassified to conform to the 2017 presentation.
Note 20 Approval of financial statements
These financial statements were approved by the AER Board of Directors on May 11, 2017.

14

ALBERTA ENERGY REGULATORSCHEDULE TO THE FINANCIAL STATEMENTS
Expenses - Detailed by Object
Year Ended March 31, 2017

Schedule 1(in thousands)

2017
Salaries, wages and employee benefits
Orphan well abandonment grant
Buildings
Computer services
Amortization of tangible capital assets
Consulting services
Administrative
Travel and transportation
Equipment rent and maintenance
Loss on disposal and write-down of tangible capital assets
Abandonment and enforcement

$

$

2016
177,01431,02816,936
16,742
14,037
13,731
5,320
4,115
884
76
29
279,912$$

180,705
31,111
15,19815,71912,645
13,692
4,657
4,603
881
332
681
280,224

15

ALBERTA ENERGY REGULATORSCHEDULE TO THE FINANCIAL STATEMENTS
Salaries and Benefits Disclosure
Year Ended March 31, 2017
(in thousands)

Schedule 2

2016

2017
Base
salary (a)Position
Board of Directors
Chairman
Board Director(e)Board Director(f)Board Director(g)Board Director(g)Board Director(g)Board Director(h)Board Director(h)Board Director(h)Board Director(i)Board Director(j)Executives
President and Chief Executive Officer (k)Chief Hearing Commissioner
Executive Vice-President, Corporate Services
Executive Vice-President and General Counsel (l)Executive Vice-President, Operations(l)Executive Vice-President, Stakeholder & Government Engagement
Executive Vice-President, Strategy & Regulatory(l)

(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)

$

222
106
52
47
45
45
24
25
22
-

527
209
274
274
316
274
274

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

$

-

29
18
82
83
89
95
87

$

11
4
2
3
3
3
2
2
-

139
59
75
103
116
74
37

Total (d)

$

Total

233
110
54
50
48
48
26
25
24
-

$

276
77
117
119
118
106
67
28

695
286
431
460
521
443
398

725
287
440
453
524
451
386

Includes retainers and per diems for Board Directors. Members of the Board of Directors do not participate in the AER's pension plans. Includes pensionable basepay for Executives.
Payments in lieu of vacation and health benefits, vehicle allowances, and short term incentive payments for Executive Vice-Presidents.
Contributions to all benefits as applicable including employer's share of Employment Insurance, Canada Pension Plan, Alberta and AER pension plans, healthbenefits or payments made for professional memberships and tuition fees.
Salaries and benefits for the Board of Directors are presented in descending order.
The incumbent held the position effective August 1, 2015.
The incumbent left the position effective September 30, 2016.
The incumbent held the position effective October 1, 2016.
The incumbent left the position effective June 16, 2016.
The incumbent left the position effective September 30, 2015.
The incumbent left the position effective June 16, 2015.
Automobile provided, no dollar amount included in other non-cash benefits.

16

ALBERTA ENERGY REGULATORSCHEDULE TO THE FINANCIAL STATEMENTS
Salaries and Benefits Disclosure
Year Ended March 31, 2017
(in thousands)(l)

Schedule 2 (continued)

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 actuariallydetermined using the projected benefit method pro-rated on service, a market interest rate, and management's best estimate of expected costs and theperiod of benefit coverage. Net actuarial gains and losses of the benefit obligations are amortized over the average remaining service life of theemployee 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. The costs detailed below are
only for those employees included in Schedule 2 who participate in the SEPP and SRP maintained by the AER to compensate senior staff who do notparticipate in the government management pension plans.

2017

Position
Executive Vice-President and General Counsel
Executive Vice-President, Operations
Executive Vice-President, Strategy & Regulatory

Position
Executive Vice-President and General Counsel
Executive Vice-President, Operations
Executive Vice-President, Strategy & Regulatory

2016

Current service
Prior service and other
cost
costs
$
43
$
10
57
4
24

$

Accrued obligation
April 1, 2016
$
475
204
1,175

Accrued obligation
March 31, 2017
$
525
270
1,180

Changes in accrued
obligation
$
50
66
5

Total

Total
53
61
24

$

47
56
27

2016
$

475
204
1,175

17

ALBERTA ENERGY REGULATOR

Schedule 3

SCHEDULE TO THE FINANCIAL STATEMENTS
Actual Results Compared with Budget
Year Ended March 31, 2017
(in thousands)

Budget(Note 3)
Revenues
Industry levies and assessments
Information, services and fees
Government transfer - provincial grant
Investment$

Expenses
Energy regulation
Orphan well abandonment
Climate leadership plan

AdjustedbudgetAdjustments (a)268,403
4,146
867
273,416$

245,416
30,500

3,624
3,624

$

Actual268,403
4,146
3,624
867
277,040$

269,222
5,132
3,338
1,062
278,754

275,916(2,500)

3,624
3,624
-

245,416
30,5003,624
279,540(2,500)245,959
31,0282,925
279,912(1,158)

CapitalCapital investment
Less: Amortization
Loss on disposal and write-down of tangible capital assets

9,000(11,500)-

9,000(11,500)

12,109(14,037)

Net capital investment(2,500)-(2,500)(76)(2,004)

Annual operating (deficit)

$

-

$

-

$

-

$

846

(a) Adjustments are for grant revenues and associated expenditures received from the Government of Alberta to implement a component of
the Climate leadership plan.

18