The number of ownerless oil and gas wells awaiting cleanup in Canada's energy heartland of Alberta rose by one-quarter within a three-month period following a May court ruling that prioritized creditors over cleanup costs in company bankruptcies, official data showed.
By the end of the fiscal second quarter of 2016 on Sept. 30, Alberta had 1,423 so-called "orphan" wells without legal owners that needed cleanup. That was an increase of more than 300 from the previous quarter, according to data from Alberta's Orphan Well Association (OWA).
Just four and a half years ago, there were only 26, and the increased number of orphan wells has put added pressure on the OWA. The government-backed nonprofit, which takes responsibility for orphan wells, compiles numbers four times every fiscal year ending March 31.
Alberta has more than 79,000 inactive wells. Such wells become orphans when their operators go out of business. These wells can potentially leak contaminants if not properly decommissioned.
In May, toward the end of the first quarter, an Alberta judge ruled that proceeds from asset sales of insolvent junior producer Redwater Energy Corp. should go first to secured creditors, rather than to cleanup. The company had 19 producing wells and 70 nonproducing wells as of May.
Uncertainty over distribution of funds after bankruptcy proceedings has hampered energy asset sales in Alberta. But the court decision, while providing clarity, also increased the chance that more wells from insolvent companies will be left for the OWA to clean up.
OWA Chairman Brad Herald, also the vice president of Western Canada operations of the Canadian Association of Petroleum Producers, said the rising number of orphans caused by operators going out of business has stretched the nonprofit's resources.
"Certainly, there is pressure on the system right now from those failures," he said on Nov. 21.
But the association is still able to cope and has adapted by shifting resources away from the reclamation part of the cleanup process, a 10-year second step that returns the ground to its previous state, Herald said. The association can still meet that reclamation target if it devotes more resources years later, when it is in a position to do so.
OWA's parent agency, the Alberta Energy Regulator, which instituted stricter rules for asset sales after the May court decision, said it has appealed and is awaiting a decision.
"AER continues to assert that companies must not be allowed to walk away from their financial responsibilities," spokesman Ryan Bartlett said in an email.
Recommended Reading
Exxon Mobil Guyana Awards Two Contracts for its Whiptail Project
2024-04-16 - Exxon Mobil Guyana awarded Strohm and TechnipFMC with contracts for its Whiptail Project located offshore in Guyana’s Stabroek Block.
Deepwater Roundup 2024: Offshore Africa
2024-04-02 - Offshore Africa, new projects are progressing, with a number of high-reserve offshore developments being planned in countries not typically known for deepwater activity, such as Phase 2 of the Baleine project on the Ivory Coast.
Deepwater Roundup 2024: Americas
2024-04-23 - The final part of Hart Energy E&P’s Deepwater Roundup focuses on projects coming online in the Americas from 2023 until the end of the decade.
E&P Highlights: March 15, 2024
2024-03-15 - Here’s a roundup of the latest E&P headlines, including a new discovery and offshore contract awards.
E&P Highlights: Feb. 16, 2024
2024-02-19 - From the mobile offshore production unit arriving at the Nong Yao Field offshore Thailand to approval for the Castorone vessel to resume operations, below is a compilation of the latest headlines in the E&P space.