Effective October 8, 2026: who can issue, the unaltered AER form, and where a DFB is not accepted.
Education only / verify at source / not legal or placement advice. Regulatory security requirements change, and every licensee’s security deposit turns on the Alberta Energy Regulator’s own assessment. Global Guarantors publishes industry education drawn from public regulator documents. We don’t publish premiums, quotes, brokerage or legal advice. Confirm the current edition of Directive 068, the AER-approved form, and the advice of your own counsel and advisors before acting. Questions about security deposits go to the AER at [email protected].
Start here: Why obligees require bonds · Commercial surety primer · Surety bond vs letter of credit · Surety vs insurance + indemnity · Glossary
On October 8, 2026, the Alberta Energy Regulator (AER) published a revised edition of Directive 068: Security Deposits and announced it in Bulletin 2026-42. The new edition was released and took effect the same day, and it replaces the edition issued April 21, 2026.
Directive 068 governs how the AER calculates, collects, uses and refunds security deposits under the Oil and Gas Conservation Rules (OGCR), the Geothermal Resource Development Rules (GRDR) and the Brine-Hosted Mineral Resource Development Rules (BMR), and which forms of security it will take.
Section 1.3 of the directive lists five changes:
For surety markets, the second change matters most. In the bulletin’s words, the AER “will now accept surety bonds in the form of an AER-approved DFB from licensees of oil, gas, geothermal, and brine-hosted mineral developments.” Section 4 of the directive now reads: “The AER will accept only cash, LOCs, and DFBs meeting the requirements of this directive to satisfy its security deposit requirements under the OGCR, GRDR, and BMR. Some exceptions apply to the use of DFBs.”
The bulletin describes the audience as “licensees of oil, gas, geothermal, and brine-hosted mineral developments.” Those are the developments governed by the OGCR, GRDR and BMR.
Section 1.2 of Directive 068 adds one group that is easy to miss. Oilfield waste management facilities are approved rather than licensed, so the directive says “licence” and “licensee” are to be read as also including “oilfield waste management approvals and oilfield waste management applicants and approval holders.” The sample bond in Appendix 3 reflects this: it names the principal as the “Licensee/Approval Holder/Applicant.”
Directive 068 “does not apply to security programs administered under the specified enactments (e.g., the Mine Financial Security Program, which is a liability management program under the Environmental Protection and Enhancement Act).”
The October 2026 change extends surety bonds to energy licensees. It is not the first time the AER has accepted surety.
In Bulletin 2025-43 (December 17, 2025), the AER revised the rules for the Mine Financial Security Program (MFSP) and the Rock-Hosted Mine Liability Process (RMLP), which cover oil sands, coal and rock-hosted mining. Under those programs, the AER said it would accept an AER-approved demand forfeiture bond from surety providers with active operations in Canada and “at least an A− rating (or equivalent).”
Keep the two regimes apart: the A− threshold belongs to the mining programs, and Directive 068 uses different wording, covered next.
Like any surety bond, the DFB is a three-party arrangement. In the Appendix 3 sample:
The directive doesn’t address how the surety and licensee settle up. As with surety bonds generally, the surety typically expects its principal to repay any amount it pays out, usually under an indemnity agreement. (See surety vs insurance and indemnity, commercial surety and surety claims basics.)
Requirement 18 of Directive 068 sets the issuer test:
“The DFB must be issued by a provider with active operations in Canada and an A or higher rating (or equivalent) from a credit-rating agency acceptable to the AER.”
Requirement 18 frames the test around where the provider operates. Separately, the opening recital of the sample bond in Appendix 3 describes the surety as “a corporation created and existing under the laws of Canada, and duly authorized to transact the business of suretyship in the Province of Alberta.” The directive doesn’t explain how that recital applies to a surety that operates in Canada through a branch of an insurer incorporated elsewhere, so confirm eligibility with the AER before relying on a particular provider.
Bulletin 2026-42 shortens the rating wording to “an A rating (or equivalent),” but the directive’s “A or higher” text is the operative one, and the rating must come from a credit-rating agency acceptable to the AER.
Not publicly disclosed as of October 9, 2026: which credit-rating agencies the AER considers acceptable. Neither Directive 068 nor Bulletin 2026-42 names any. Before relying on a particular rating, confirm with the AER that the agency is acceptable.
Section 4.3 is direct: “The AER-approved DFB is the only form of surety bond acceptable to the AER.” Requirement 19 adds: “The licensee must use the AER-approved DFB form without alteration.”
The sample form in Appendix 3 says the same at the top: “Other than the fields, the text of this form is not to be altered in any way. The AER will not accept forms with altered text.” The parties fill in the blanks; they don’t negotiate the wording.
Requirement 8 applies to both LOCs and DFBs: the instrument “must designate the AER as the beneficiary and include applicable information to designate which program or application the security deposit requirement is provided for.” The sample DFB itself names the AER as Obligee.
What to verify at the source: Bulletin 2026-42 says the DFB “will be available on our liability management forms webpage.” As of October 9, 2026, that page did not list a DFB for oil, gas, geothermal or brine-hosted mineral security. The only published text is the blank sample in Appendix 3 of the Directive 068 PDF, titled “Demand Forfeiture Bond for OGCA, GRDA, and MRDA (brine).” The surety bond form already on that page belongs to the mining programs and is a different document. Check the AER’s liability management forms page for the energy-licensee DFB before you prepare one.
The description below comes from the sample form in Appendix 3 of Directive 068. It explains how the instrument is built, and the final form the AER posts could differ.
What it secures. The sample defines “Regulatory Obligations” broadly, covering operational, closure, abandonment, remediation, reclamation and liability obligations across the life cycle of the principal’s wells, facilities, sites, licences and approvals, whether those obligations exist now or arise later.
How the AER claims. If the AER “determines in its sole discretion” that the principal hasn’t met those obligations, it delivers a Notice of Claim (Schedule A to the form) to the surety by registered letter and email.
How fast the surety pays. Under the sample form, the surety must pay “within ten (10) business days of receipt of a Notice of Claim,” up to the bond amount, “without regard for any objection, defences, or arguments that may be raised by” the principal. The sample also says the surety undertakes to pay “upon a simple written request by way of any Notice of Claim, without limitation and/or conditions” (clause 4), and that its obligations are “absolute and unconditional notwithstanding any changes to the Regulatory Obligations” (clause 5, subject to the bond-amount cap in clause 11). On those terms, the sample’s payment mechanics look more like the on-demand standby letter of credit in Appendix 1 than like a conventional performance bond, where a surety typically investigates a claimed default before deciding whether to pay.
Partial claims. The AER may submit multiple Notices of Claim for partial draws. Each payment immediately reduces the amount still available (clause 11).
Changes and governing law. Apart from an increase, the sample bond can’t be modified without the AER’s consent, and Alberta law governs.
Amending a DFB. Under Requirements 21 and 22, an amended DFB that increases the amount must reach the AER for acceptance before the deadline for the increased security. A corporate name change or amalgamation requires an amended DFB within 30 days. The directive adds: “The AER retains discretion whether to accept a new or amended DFB.”
The sample attaches a one-page claim template, Schedule A. It is addressed to the surety’s claims department, identifies the bond number, the principal and the AER as obligee, and declares that the principal “has failed to comply with or satisfy one or more of the Regulatory Obligations.” It is sent “with the fully executed Bond attached,” directs payment of the bond amount “or other lesser amount, as applicable,” asks for payment “within ten (10) business days” with payment instructions, and is copied to the principal. The template has no fields for itemizing the obligations missed or attaching evidence.
Clause 2 of the sample and Requirement 20 set the sequence when a surety wants to end a DFB:
| Point | What happens |
|---|---|
| Notice (day 0) | Surety sends notice by registered letter and email to the AER ([email protected]) and to the licensee; Requirement 20 adds registered mail to the AER’s Chief Financial Officer at least 90 days before termination. |
| Within 60 days of the AER’s receipt | The licensee must provide replacement financial security “in at least the same amount as this Bond in a form acceptable to the Obligee.” |
| If not replaced in 60 days | The surety, “at its sole discretion,” either pays the full bond amount to the AER “within seven (7) business days” or confirms in writing that the bond “will remain in full force.” |
| Day 90 (earliest) | The bond and its accruing responsibility terminate after the last day of the 90-day notice period, but only if replacement security was provided in time. |
What to verify at the source: the sample counts the 90 days from the notice and the 60 days from the AER’s receipt of it, and doesn’t say exactly when the seven business days begin. Confirm the dates with the AER if a notice is given.
Section 4.3 states that the DFB “will not be accepted in all instances where a security deposit is required.” It then gives an example:
“For example, the AER will not accept a DFB where a security deposit is provided as a means to address a spend-related requirement (e.g., to address a shortfall in spend related to closure quota or closure plan).”
Closure-quota and closure-plan spend shortfalls are examples, not a complete list. The broader rule is that a DFB is not available where the security deposit addresses a spend-related requirement.
Section 3.2, on licensee quota obligations, points the same way. It notes that “there are exceptions that apply to the forms of security accepted for licensee quota obligations (see section 4).”
What to verify at the source: Section 3.2 also lets a licensee that meets an AER threshold elect to post a security deposit equal to its full licensee quota instead of doing the closure work (“security deposit in lieu”). The directive doesn’t say outright whether a DFB can be used for that voluntary deposit. Given how the spend-related exclusion is framed, expect a DFB not to be available for licensee-quota security, and confirm with the AER at [email protected] before planning around it.
The second headline change affects the existing LOC market.
Under Requirement 14, an LOC must say that if the issuing financial institution decides not to renew, it must notify the AER’s Chief Financial Officer by registered mail 90 days before the expiry date. Requirement 15 applies the same 90-day period when an issuer wants to cancel an LOC before its renewal date. The sample standby LOC in Appendix 1 now reads “90 days prior” for both.
The change applies to new and amended LOCs. Both requirements carry the same transition rule:
“Existing LOCs executed before the effective date of this directive may continue under their current terms, which include 60 days notice, until the LOC is amended or replaced.”
So an LOC already on file keeps its 60-day term until it is amended or replaced. LOCs issued from October 8, 2026, and existing LOCs that are later amended for any reason (for example, an increase under section 4.2.3 or a name change under Requirement 17) should carry 90 days. Section 4.2.3 doesn’t restate the notice period, so confirm the wording with your issuing institution and the AER.
Otherwise, LOCs must still be renewable, irrevocable, in the prescribed form, issued in the licensee’s exact legal name by an “eligible financial institution” (federally regulated Schedule I and II banks, ATB and Alberta-based credit unions), and set to renew automatically without amendment.
The table below compares how each form of security works under Directive 068. It does not compare cost. Pricing, collateral and capacity depend on the provider and the licensee, and Global Guarantors does not publish them.
| Question | Demand forfeiture bond (§4.3, App. 3) | Letter of credit (§4.2, App. 1–2) | Cash (§4.1) |
|---|---|---|---|
| Who provides it | A provider with active operations in Canada and an A or higher rating (or equivalent) from a credit-rating agency acceptable to the AER | An eligible financial institution (Schedule I/II bank, ATB, Alberta-based credit union) | The licensee, or a third party on its behalf with a signed letter of authorization |
| Form | AER-approved DFB only, used without alteration | Renewable, irrevocable, in the form prescribed by the directive, automatic renewal without amendment | Cash, cheque, money order, bank draft or electronic transfer |
| How the AER draws | Notice of Claim; sample form requires payment within 10 business days; partial claims allowed | Demand draft (Appendix 2 sample); partial drawings permitted under the sample LOC | Held by the AER in interest-earning trust accounts |
| Exit or notice | Surety gives at least 90 days’ notice; under the sample form, termination takes effect only if replacement security is posted within 60 days | 90 days for nonrenewal or cancellation (new and amended LOCs); existing LOCs keep 60 days until amended or replaced | Refund when eligible (§7) |
| Changes | Amended DFB for increases (before the deadline) or name change/amalgamation (within 30 days); AER retains discretion to accept | Amendment for increases by the stated date; name change/amalgamation within 30 days | Additional deposit as directed |
| Where not accepted | Spend-related requirements, e.g. closure-quota or closure-plan spend shortfalls (examples, not a full list) | No equivalent exclusion stated | No equivalent exclusion stated |
| On refund | Returned, or amended or substituted for a reduced amount | Returned, or amended or substituted for a reduced amount | Refunded to the licensee, with accumulated interest only when eligible for a refund |
One rule applies across all three forms. Under section 5, security “can be collected at any time and used for any of the intended purposes” under the OGCR, GRDR and BMR. If it falls short, the difference “constitutes a debt payable to the AER or to the AER to the account of the Orphan Fund.”
Under section 4, a licensee “may change the form of its security deposit from one form of security to another, provided that the requirements of this directive are met in full.” In practice: confirm the deposit isn’t spend-related (§4.3), confirm the surety meets Requirement 18, and use the AER-approved form unaltered with the program designated (Requirements 8, 9 and 19). The AER retains discretion to accept it. The LOC or cash on file “will only be returned to a licensee once the replacement security deposit has been received and processed by the AER.” Under section 7, a refund may be warranted where “the security has been replaced with other security acceptable to the AER,” after a holistic assessment.
What to verify at the source: section 3.3 says security held under rescinded programs “will be held in the form it was submitted” during the transition, and section 7 says a Directive 067 new licensee “is not eligible for a security refund.” The directive doesn’t say how either applies to a change of form, so confirm with the AER first.
Oilfield waste management facilities (new §3.1.3). A licensee applying for a new or amended approval for an oilfield waste management facility other than an oilfield landfill “may be required” to post a security deposit. The AER decides after reviewing the application and holistically assessing the licensee. Manual 023 provides the percentage range applied to the facility’s estimated liability, and the AER will require the deposit before approving the application.
How the security amount is set. Under section 3, the AER relies on a holistic licensee assessment focused on the Directive 088 licensee capability assessment factors. It may use Directive 011 liability values, Directive 001 site-specific liability, future cash flows, and “any other amount that AER considers appropriate in the circumstances.” The directive sets the amount separately from the form of security.
Interest on cash deposits. Under section 7, “the AER will only refund accumulated interest when a licensee is eligible for a refund of the security deposit.” Under section 6, interest from rescinded directives is held as interest, not security.
Bank statements. References to monthly bank statements are removed.
Can a DFB cover a closure quota shortfall? No. Closure-quota and closure-plan spend shortfalls are the AER’s own examples of spend-related requirements a DFB can’t address (§4.3).
Do existing letters of credit have to move to 90 days’ notice now? No. They keep 60 days until amended or replaced (Requirements 14–15).
Is the AER-approved DFB form posted? Not as of October 9, 2026; only the Appendix 3 sample is published. Bulletin 2026-42 says the form “will be available on our liability management forms webpage.”
Which credit-rating agencies does the AER accept? Not publicly disclosed as of October 9, 2026.
Does Directive 068’s DFB apply to oil sands or coal mining security? No. Directive 068 excludes specified-enactment programs such as the MFSP, which has had its own surety route, with a different rating threshold, since Bulletin 2025-43.
This is a general checklist, not advice for any specific licensee.
Retrieved or confirmed 2026-10-09 (PT).
