FINDING A GOOD HOME
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.