The number of ownerless oil and gas wells awaiting cleanup in Canada's energy heartland of Alberta rose by one-quarter within a three-month period following a May court ruling that prioritized creditors over cleanup costs in company bankruptcies, official data showed.
By the end of the fiscal second quarter of 2016 on Sept. 30, Alberta had 1,423 so-called "orphan" wells without legal owners that needed cleanup. That was an increase of more than 300 from the previous quarter, according to data from Alberta's Orphan Well Association (OWA).
Just four and a half years ago, there were only 26, and the increased number of orphan wells has put added pressure on the OWA. The government-backed nonprofit, which takes responsibility for orphan wells, compiles numbers four times every fiscal year ending March 31.
Alberta has more than 79,000 inactive wells. Such wells become orphans when their operators go out of business. These wells can potentially leak contaminants if not properly decommissioned.
In May, toward the end of the first quarter, an Alberta judge ruled that proceeds from asset sales of insolvent junior producer Redwater Energy Corp. should go first to secured creditors, rather than to cleanup. The company had 19 producing wells and 70 nonproducing wells as of May.
Uncertainty over distribution of funds after bankruptcy proceedings has hampered energy asset sales in Alberta. But the court decision, while providing clarity, also increased the chance that more wells from insolvent companies will be left for the OWA to clean up.
OWA Chairman Brad Herald, also the vice president of Western Canada operations of the Canadian Association of Petroleum Producers, said the rising number of orphans caused by operators going out of business has stretched the nonprofit's resources.
"Certainly, there is pressure on the system right now from those failures," he said on Nov. 21.
But the association is still able to cope and has adapted by shifting resources away from the reclamation part of the cleanup process, a 10-year second step that returns the ground to its previous state, Herald said. The association can still meet that reclamation target if it devotes more resources years later, when it is in a position to do so.
OWA's parent agency, the Alberta Energy Regulator, which instituted stricter rules for asset sales after the May court decision, said it has appealed and is awaiting a decision.
"AER continues to assert that companies must not be allowed to walk away from their financial responsibilities," spokesman Ryan Bartlett said in an email.
Recommended Reading
TGS, SLB to Conduct Engagement Phase 5 in GoM
2024-02-05 - TGS and SLB’s seventh program within the joint venture involves the acquisition of 157 Outer Continental Shelf blocks.
2023-2025 Subsea Tieback Round-Up
2024-02-06 - Here's a look at subsea tieback projects across the globe. The first in a two-part series, this report highlights some of the subsea tiebacks scheduled to be online by 2025.
StimStixx, Hunting Titan Partner on Well Perforation, Acidizing
2024-02-07 - The strategic partnership between StimStixx Technologies and Hunting Titan will increase well treatments and reduce costs, the companies said.
Tech Trends: QYSEA’s Artificially Intelligent Underwater Additions
2024-02-13 - Using their AI underwater image filtering algorithm, the QYSEA AI Diver Tracking allows the FIFISH ROV to identify a diver's movements and conducts real-time automatic analysis.
Subsea Tieback Round-Up, 2026 and Beyond
2024-02-13 - The second in a two-part series, this report on subsea tiebacks looks at some of the projects around the world scheduled to come online in 2026 or later.