Alberta oil and gas owners who abandon wells face more scrutiny as regulation loophole closed

Left to right: Deron Bilous, Minister of Economic Development and Trade, Margaret McCuaig-Boyd, Minister of Energy, Shannon Phillips, Minister of Environment and Parks and David MacLean, VP Canadian Manufacturers and Exporters.

Alberta loaned $235-million to Orphan Well Association to clean up old wells

Oil and gas producers that walk away from wells or other infrastructure without doing the required cleaning up will face tougher scrutiny the next time they try to start a new company. The announcement from the Alberta government and the provincial regulator as the number of abandoned wells in need of reclamation rose from 1,861 wells in Nov., up from 705 wells in March 2015.

Abandoned well AlbertaViews.com photo.

The Alberta Energy Regulator’s Directive 67 was amended to close a loophole created by the 2016 Redwater decision by the Alberta Court of Appeal and other receivership cases that have been undermining the Province’s ability to ensure companies and operators are held accountable for their actions.

This case is currently being appealed to the Supreme Court of Canada by the AER.

“The stronger rules will help prevent individuals who leave liabilities behind from returning to the industry without proper safeguards in place,” Jim Ellis, president and CEO of the AER, said in a press release.

“Albertans permit companies to produce and profit from the province’s energy resources with the expectation that they address end-of-life abandonment and reclamation obligations.”

Changes made to Directive 67 will support companies that behave responsibly and help shield them from potential further increases in the number of orphan wells, which are reclaimed through a fund industry pays into under the polluter-pays principle.
Alberta recently loaned $235-million to the Orphan Well Association to accelerate the clean up of old wells over the next three years.“Closing this loophole helps ensure Albertans are protected from financial and environmental liabilities, and that the vast majority of companies that behave responsibly are protected from those who attempt to offload their obligations onto others,” Energy Minister Margaret McCuaig-Boyd.

Industry says it is pleased with the government’s initiative to reduce environmental and financial risk to Albertans.

“We consider operating in Alberta a privilege, not a right. Enhanced disclosure of information and increased evaluation of an operator’s compliance is a step in the right direction to ensure this privilege is only granted to those companies with a demonstrated history of responsible operations,” says Brad Herald, vice-president, Canadian Association of Petroleum Producers.

“We support provincial efforts that help ensure licences are granted to companies with the sound financial capacity, compliance history and professional expertise to responsibly operate through the life cycle of oil and natural gas development, from lease acquisition to reclamation,” said Marty Proctor, president and CEO, Seven Generations Energy Ltd.

Related actions taken by the government include launching a broader review of oil and gas liabilities to determine long-term solutions, lobbying the federal government for changes to bankruptcy laws that would hold companies accountable for their environmental cleanup, and supporting municipalities province-wide with a credit for uncollectable taxes on disowned oil and gas properties.

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