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Operators in Alberta are required to submit a formal declaration regarding the operating effectiveness of their controls over ERCB measurement and reporting requirements. The purpose of this declaration is to reduce the ERCB’s reliance on substantive audits and to instead, rely on the effectiveness of operators’ controls.
This directive applies to all operators subject to ERCB measurement and reporting requirements and reporting to the Petroleum Registry of Alberta (PRA) and applies to conventional oil, heavy oil, crude bitumen and natural gas facilities. Mineable oil sands are not required to comply with this directive.
The process to comply with Directive 76 virtually mirrors Section 404 of the Sarbanes-Oxley Act (“SOX 404”) or Canada’s National Instruments 52-109; however, the focus is on internal controls over measurement and reporting rather than on financial reporting.
Many of us may remember the early days of SOX 404 when companies in effect documented all of their business processes and tested all of their controls. This resulted in companies wasting valuable time and financial resources to achieve compliance. Operators should embrace the lessons learned from the past and implement a “pure” top-down, risk-based approach that will meet the compliance requirements in a practical and cost-effective manner.
We recommend that operators adopt a top-down, risk-based approach to achieve sustained compliance as outlined below:
Step 1: Scope and Plan Evaluation
Step 2: Document Processes and Controls
Step 3: Evaluate Risks and Controls
Step 4: Test Key Controls
Step 5: Report Results
Complying with Directive 76 can be a complex and overwhelming process. Companies that act now will be in a better position to provide their declarations with comfort and avoid the repercussions of failing to comply.
At MNP, our internal control specialists have teamed with measurement specialist to help operators through each step of the compliance process.
For more information on how to successfully implement Directive 76, please contact Gordon Chan, CA, Enterprise Risk Services National Lead or any member of the Enterprise Risk Services team.
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