FIND­ING A GOOD HOME

Alberta Oil - - FOCUS ON REGULATION -

Some of Al­berta’s aban­doned wells are long-lost or­phans, whose own­ers left them decades ago. They are looked af­ter by the Or­phan Well As­so­ci­a­tion (OWA), an in­dus­try-funded, non-profit or­ga­ni­za­tion unique to Al­berta. It man­ages the aban­don­ment of wells and an­swers to the AER, which col­lects the Or­phan Fund Levy from oil firms. Its re­mit spans into an­other cen­tury. Two years af­ter Adolf Hitler came to power Ten­well Gas & Oil drilled its only well in Ver­mil­lion, Al­berta, aban­don­ing it three years be­fore WWII ended. In 2014, the OWA in­stalled a soil gas man­age­ment sys­tem to stop its meth­ane leaks.

But some of the prov­ince’s 170,000 aban­doned wells be­came or­phaned more re­cently as the cri­sis hit home. In 2014/15, the OWA man­aged over $16 mil­lion of or­phan aban­don­ment and recla­ma­tion work as the num­ber of or­phan wells need­ing aban­don­ment soared 700 per­cent to 591 from the year be­fore, partly due to bank­rupt­cies. Brad Her­ald, who’s also an OWA di­rec­tor, says, “We are on course to have an ex­tra 180 wells this year, which is up sig­nif­i­cantly from last year, and there are big re­ceiver­ships pend­ing, in­clud­ing Spy­glass, which may add more.” OWA’s man­date is to work with li­a­bil­i­ties not as­sets. LIF Di­rec­tor Deirdre Macht says, “There are 230 com­pa­nies at zero for their LLR (be­low thresh­old)—if they roll into OWA, which we call ‘the morgue,’ they’re done.”

Her­ald, how­ever, says just be­cause a com­pany goes into re­ceiver­ship doesn’t mean all its wells end up aban­doned as things can sell in re­ceiver­ship for 25 cents on the orig­i­nal dol­lar—the as­sets are repriced so OWA doesn’t see th­ese wells. Low oil prices also drive up the num­ber of aban­doned wells as fall­ing con­trac­tor prices al­low more wells to be aban­doned for less money, he says.

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