LEXIN WOES COULD IMPACT MAJOR OIL COMPANIES.
Companies face tens of millions in liabilities
CALGARY • Major Canadian oil companies could face tens of millions of dollars in liabilities as a result of tiny Lexin Resources Ltd.’s insolvency and its inability to clean up over 1,500 oil and gas wells in Alberta, which has doubled the number of orphan wells in the province.
Receivership documents reviewed by the Financial Post show 51 companies — including major Calgarybased producers Canadian Natural Resources Ltd., Exxon Mobil Canada and Husky Energy Inc. — may be held at least partially liable for Lexin’s wells as a result of their ownership in some of those assets.
These companies were copied on correspondence between the Alberta Energy Regulator and Lexin before the regulator took the unprecedented step of pushing Lexin into receivership on March 21 because the company failed to comply with multiple regulatory orders. Lexin has a complicated ownership structure. The AER believes it is a subsidiary of Vancouver- based MFC Bancorp Ltd., a publicly listed company. MFC did not respond to a request for comment.
AER spokesperson Tracie Moore said the regulator normally holds the existing licensee and its partners — in this case, Lexin and the 51 energy companies — responsible for reclamation work, but “there are instances where the AER may consider pursuing previous operators.”
Lawyers and consultants say Lexin’s situation is the result of a wider problem in Alberta, where major oil and gas producers defer the liability to clean up their non- producing wells indefinitely or sell off the wells and a portion of the liability to smaller producers like Lexin.