Inactive and orphan oil and gas wells a growing concern

By Deirdre Mitchell-MacLean Times Contributor

When junior gas company Trident Exploration Corp. shut down abruptly on April 30 without responding to an order to properly manage its 4,700 wells, it added to the more than 3,000 orphan wells already awaiting remediation in Alberta.
That, on top of the staggering number of inactive wells in the province.
According to the Orphan Well Association (OWA), there are approximately 170,000 inactive wells in Alberta, representing about 37 per cent of all wells in the province.
This number has not changed since Alberta surface rights advocates met with the previous government’s rural caucus in Strathmore a mere two years ago, in July of 2016. One area in Wheatland County, north and south of Carseland near Range Road 260 has seen an increase of orphaned assets this year.
The OWA releases updated land lease addresses publicly. As of June 5, 2019, the area around Carseland has added 10 wells to be abandoned by the non-profit organization. There are also five facilities, more than 40 segments of pipeline and 35 sites for reclamation in the same location according to the inventory list.
Not every inactive well becomes an “orphan” well.
“If companies have gone bankrupt and there is no legally responsible party, the AER may designate the wells, facilities, pipelines and associated site as ‘orphaned,’” said Shawn Roth, senior advisor, external communications with Alberta Energy Regulator (AER).
The OWA only takes over responsibility for inactive wells that once belonged to companies that are no longer legally or financially responsible for the wells; that is, companies that have become insolvent. In the Carseland area, just over 98 per cent of the assets now in the hands of the OWA formerly belonged to Anterra Energy Inc., which went into receivership in 2017 and became insolvent as of January this year. Inactive wells belonging to companies that are still in operation are the responsibility of the well, facility, pipeline or site owner for the asset’s lifetime.
“The OWA operates under the delegated legal authority of the AER, and is financially and legally separate from the AER,” said Roth. “The OWA’s annual budget is paid for by oil and gas operators annually through the OWA levy. The 2019 OWA levy amount is $60 million.”
Even so, a 2017 report out of the University of Calgary’s School of Public Policy brought attention to the fact there is no regulatory timeline to reclaim the land around inactive wells. Lucija Muehlenbachs, who authored the report, stated the “deemed liability of … inactive wells is so large, presently, that the fund would be insufficient to cover the costs” if all inactive wells were to be abandoned to the OWA.
While Roth stated inactive wells can be returned to active, producing wells, Muehlenbach’s research indicated that even if incentives such as increased oil or gas prices were realized, less than 12 per cent of inactive wells would be reactivated.
“Policies should recognize that most inactive wells will likely never produce oil or gas again,” stated Muehlenbachs in her report.
Surface rights advocates say they are concerned about the reclamation process and who will be responsible for maintenance and clean up in the future.
Roth also stated the “AER is working with the Government of Alberta, who is responsible for setting policy, to ensure that industry – not the Alberta taxpayer – remains responsible for cleanup activity and costs.”
Inactive wells are still required to be turned off for safety reasons, but as Muehlenbachs noted, the “longer a well is inactive, the higher the likelihood that its owner may no longer be around to arrange and pay for its official abandonment.”
In 2014, the AER introduced the Inactive Well Compliance Program which has seen non-compliance decrease by over 40 per cent. The AER noted they began 2017 with just over 30,000 inactive wells and had increased compliance for over 5,000 wells during the previous year. New numbers released in July show the program is continuing to work to bring more licensees into compliance with regulations for inactive wells.