Al­berta En­ergy Reg­u­la­tor to ask tougher ques­tions of oil well ap­pli­cants

The Recorder & Times (Brockville) - - BUSINESS - BOB WE­BER

ED­MON­TON — Al­berta’s en­ergy reg­u­la­tor wants to keep bad operators out of the oil­patch to re­duce the bal­loon­ing num­ber of bank­rupt com­pa­nies who have walked away from un­prof­itable wells.

“We will be re­quir­ing more in­for­ma­tion at the time a per­son or a com­pany ap­plies for li­cence el­i­gi­bil­ity,” Jim El­lis, head of the Al­berta En­ergy Reg­u­la­tor, said Wed­nes­day. “We’ll have more dis­cre­tion to deny li­cence ap­pli­ca­tions where the ap­pli­cant poses a risk to the pub­lic or to the en­vi­ron­ment.”

Al­berta has been deal­ing with a surge of aban­doned wells since a 2016 court rul­ing al­lowed a bank­ruptcy trustee to cut un­prof­itable wells loose from the tally of com­pany as­sets. A Queen’s Bench judge and the Al­berta Court of Ap­peal have found that fed­eral bank­ruptcy law su­percedes pro­vin­cial en­vi­ron­men­tal rules.

That case is now be­fore the Supreme Court.

Since the so-called Red­wa­ter

Our sys­tems weren’t de­signed for what we’re see­ing right now so we’re hav­ing to close these loop­holes.” Jim El­lis, head of the Al­berta En­ergy Reg­u­la­tor

de­ci­sion, more than 1,800 wells rep­re­sent­ing more than $100 mil­lion in li­a­bil­i­ties have been aban­doned.

The reg­u­la­tor will now ex­am­ine the his­to­ries of com­pa­nies — as well as their direc­tors — ap­ply­ing for li­cences to drill a well. Staff will look for ev­i­dence of poor reg­u­la­tory com­pli­ance or non-pay­ment of bills such as taxes, roy­al­ties and other in­dus­try levies.

“Those are in­di­ca­tors of past poor per­for­mance and we’re go­ing to have a look to en­sure that these are com­pa­nies that aren’t go­ing to con­tinue that.”

The reg­u­la­tor won’t have the power to ex­am­ine an ap­pli­cant’s books, al­though it does re­quire com­pa­nies to meet a cer­tain as­setto-li­a­bil­ity ra­tio.

El­lis said the prob­lem lies in fed­eral leg­is­la­tion, as well as a three-year down­turn that has left many good-faith operators in dire straits. But he said clos­ing what he called a loop­hole will help.

“I don’t want to (sug­gest) that we’ve got a huge is­sue, that we’ve got hun­dreds and hun­dreds of com­pa­nies do­ing this.”

He said the changes should re­duce the num­ber of fail­ing com­pa­nies trans­fer­ring good as­sets to a new en­tity and aban­don­ing the bad ones.

“No­body saw us in a low cy­cle for three years. Our sys­tems weren’t de­signed for what we’re see­ing right now so we’re hav­ing to close these loop­holes.”

El­lis said the reg­u­la­tor is con­sid­er­ing ap­pli­ca­tions from “a cou­ple” of com­pa­nies that have direc­tors who have had pre­vi­ous prob­lems.

He also said the reg­u­la­tor could pos­si­bly re­voke li­cences retroac­tively. The agency is work­ing with the gov­ern­ment on a re­quire­ment for po­ten­tial drillers to post a bond be­fore mov­ing ahead, he added.

En­ergy Min­is­ter Mar­garet McCuaig-Boyd said Al­berta’s cur­rent li­cence re­quire­ments of a pro­vin­cial ad­dress, some in­sur­ance and $10,000 no longer suf­fice.

“While we wait for the Supreme Court to hear a chal­lenge to the Red­wa­ter case, we’re here to­day to tell those operators who would cir­cum­vent their re­spon­si­bil­i­ties that enough is enough,” she said.

Aban­doned wells are left to the in­dus­try-funded Or­phan Well As­so­ci­a­tion to be cleaned up.

Brad Her­ald of the Cana­dian As­so­ci­a­tion of Petroleum Pro­duc­ers wel­comed Wed­nes­day ’s an­nounce­ment.

“It’s time to put an end to com­pa­nies that can walk away from oil and gas in­fra­struc­ture with­out fol­low­ing through on their com­mit­ments to clean up sites,” he said.

“This de­ci­sion will re­duce the cost pres­sures on Al­berta’s oil and gas sec­tors by help­ing to mit­i­gate risk to the health of the Or­phan Well As­so­ci­a­tion.”

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