The rapid pace set by the Orphan Well Association means it cannot always wait until crops are off or conditions are ideal
Alberta’s Orphan Well Association has set itself a rapid pace in decommissioning and reclaiming oil and gas well company assets that come under its authority.
There are a lot of them.
Lars De Pauw, executive director of the OWA, said the association will spend $200 million this year and $217 million next year on that work and is making steady progress. Funds come mostly from the oil and gas industry, though the OWA does have interest-free repayable loans from the Alberta and federal governments.
De Pauw provided information during the Feb. 4 Red Bow Ranching Conference, noting landowners can contact the Alberta Energy Regulator to learn who is responsible for any oil and gas well sites or infrastructure on their land.
The OWA has a website list of sites under its management that is updated every month.
As of Feb. 1, for example, there were 1,973 orphan wells on its list as well as 3,556 pipeline segments, said De Pauw.
A site or well is only designated as an orphan when the AER has reviewed the well, facility, pipeline or associated site and when there is no legally responsible or financially viable party. As well, orphans are designated only after insolvency proceedings involving the former operator have occurred, said De Pauw.
Insolvencies have risen markedly since the economic decline in the energy sector. Several large companies have left the field and their departure can create confusion among landowners about who is responsible.
De Pauw said the OWA recently added 668 sites from Calgary-based Houston Oil and Gas, which ceased operations in November 2019. Trident Energy, which ceased operations in May 2019, is still in the receivership process and about 900 wells may be designated as orphans, though that has not yet occurred.
About 300 wells formerly operated by Point Loma Resources and 750 by Bow River Energy Ltd. are in a similar situation. The approximately 2,300 wells formerly operated by Sequoia Resources Corp. are still subject to legal proceedings and are thus not on the OWA list either.
“I think our organization very clearly recognizes that many landowners have been adversely impacted by these defunct operators as they’re going through this insolvency process,” said De Pauw.
“It’s pretty clear that when companies are going bankrupt they do stuff related to the surface rights.… They also could do things that are inappropriate with the condition of the site. So we definitely realize that when we step into a site that has been orphaned, that the likelihood of the landowner being adversely impacted historically is a very clear situation.”
Many landowners have reported energy company efforts to reduce lease payments or not pay them at all. Many companies owe back taxes to the municipalities in which they have sites, a figure estimated to be more than $170 million.
De Pauw noted the OWA cannot pay back rent to landowners, though that is a frequently posed question. Application for payment of owed lease fees must be made to the Surface Rights Board.
Similarly, the OWA is not responsible for weed control on the sites, which is another rampant problem. If landowners undertake weed control themselves, they can include those expenses in any applications they make to the SRB.
If a site on private land is designated as an orphan, the landowner will receive a package in the mail containing information on the OWA, information on how to apply to the SRB for lease payments and information on what work is planned. After a site inspection, a sign is posted indicating OWA responsibility.
The contractor doing the reclamation is expected to let the landowner know when it will occur.
The rapid pace set by the OWA means it cannot always wait until crops are off or land and weather conditions are ideal before doing the work, said De Pauw. Its authority is delegated by the AER so it has legal access under legislation.
“Even though we have the legal authority to do this access, we have a positive relationship with most of the landowners.”
He added that some are adamant that the OWA not enter their land and unless there is a safety or environmental issue, it will comply.
“However, we are obligated to let the Surface Rights Board know that our access has been restricted and they can take that into consideration when they pay or do not pay any kind of surface rent payments. I guess its kind of, ‘you can’t have your cake and eat it too,’ if you’re looking to get those rents,” De Pauw said.
With many sites on its list, priorities need to be set. At the top are sites that threaten public safety. Next are sites near each other that can be managed efficiently. The third priority is chronological, focusing on the amount of time since a site was deemed an orphan.