Orphan wells slowly but surely being decommissioned
The work of reclaiming orphaned oil and gas wells across the province is slow going, but proceeds apace.
There are currently 66 orphaned sites in Cypress County awaiting decommission, said Lars De Pauw, President of the Orphan Well Association, with 89 more in various states of reclamation, 56 simply waiting for vegetation to appear for Reclamation Certificate purposes, and 91 having finished their reclamation process.
This may seem like a small number compared to the present 2,626 inactive wells in the county, but these inactive wells have not, in fact, been orphaned.
“For a well to be orphaned, that means that there’s no financially or legally viable party available anymore to take care of that asset,” said De Pauw. “And so what that means is like in the oil and gas industry, there’s a lot of fractional ownership in assets. So there might be something called a working interest participant in a well, for example, so well might be 90% with one company and 10% with another one. And for to be designated as an orphan it needs to be 100% defunct companies.”
Inactive wells may be owned by companies that are doing well and will not be orphaning the site, explained De Pauw, as the “inactive” status simply means that the well is not currently producing.
“Landowners individually would typically have an agreement with a company, and it’s just that one company. It’s called the licensee. And that company would be the one that they have to say the surface lease with. It’d be the one that has the sign on the gate with contact information,” said De Pauw.
But if that company went bankrupt, it doesn’t mean that site would be orphaned. There’s other processes for non orphans, said De Pauw, who added that it is always important to remind people that if a company is going through an insolvency proceeding which includes bankruptcy receivership or trustee ship, that they would not be designated as orphans until the end of that process.
There are a lot of processes that go into reclamation, said De Pauw, but overall efforts are going well.
In the County of Forty Mile, there are currently 40 orphaned wells awaiting decommission, with 218 in the process, 27 awaiting vegetation, and 107 certificates have been issued. OAW spent $4,420,468 on these endeavours in the previous year.
“Our program broadly has been very positive, from at least a perspective of getting the work done,” said De Pauw. “And I think one of the things that we always kind of explained to people is that this isn’t a process that happens, like within the order of days.”
He went on the explain that from start to finish, reclamation of an orphaned well is a process that takes years, but this doesn’t mean that progress isn’t being made.
“I would say, specifically, in the two counties, things have been going well,” said De Pauw, “I think there’d be some individuals who, they might have a story of not going well, but you have to look at the broad picture; we’ve been doing, you know, 1000s of sites across the province every year for multiple years. And we continue to do that on an annual basis.”
OWA is funded by the oil and gas industry, as a safety net to ensure a sustainable energy industry, said De Pauw, and he was sure to stress that there are many wells that are being managed by responsible companies.
“So on an annual basis, there’s an annual orphan fund Levy. And that’s allocated to all producers in the province based on a sort of allocation based on total liability, sort of equivalent calculation,” said De Pauw. “So it’s a big component that people say there’s a lot of landowners who say, well, we’re funded by the taxpayers. And that’s not the case.”
“Most importantly, we continue to work on our inventory, and we’re making great progress and moving through it,” said De Pauw. “Again, prioritizing the sites that are the highest risk first, and we are going to be very well funded for the next five years. So we’re optimistic that we’re going to continue to make an ongoing, significant dent in the numbers across the province.”