Red Water Flashcards
How many abandoned wells with reclamation?
155,000
Generally the company will continue to pay the landowner a small yearly lease fee rather than pony up ? or more to do a proper reclamation.
$100,000
Recently estimated to number about ?, they’re known as orphan wells because the former owner left their care to other industry players and, potentially, to the public.
2,900
All of these wells pose a series of risks: to nearby homes and communities from released gas and explosions; to the local environment from water and soil contamination; and to the global environment from leaking greenhouse gases
Any wells that did come from bankrupt companies were managed by the ? (OWA), a non-profit unique to Alberta that remediates abandoned wells, pipelines and other oil and gas facilities.
Orphan Well Association
But two factors have recently clashed to turn these wells—particularly the orphans—into an urgent story.
- The first is the evisceration of the oil and gas industry since ?, bankruptcies foisted more wells on the OWA than it can manage.
- The second involves two matters of law that are central to determining whether or not the public will be on the hook for the cleanup.
- federal government Bankruptcy and Insolvency Act (BIA) which, according to a decision allow creditors of bankrupt companies to jump in front of the provincial oil and gas regulator when it comes to divvying up bankrupt companies assets.
- federal paramountcy, federal bankruptcy law trump Alberta’s rules around abandoned wells
2014
Court of Appeal’s April 2017 decision in Orphan Well Association v. Grant Thornton Ltd.
The court ruled (in a split decision) that the federal law did trump the provincial.
This means Redwater’s orphaned wells—and those of many other bankrupt companies—pose ? to the established order, to the industry that might have to share in the cost of cleaning them up, and ultimately to the public, who could end up backstopping the operation.
risks
The C.D. Howe Institute took a crack last September at gauging the total cost of Alberta’s well liabilities. It estimated that the reclamation cost just for the wells orphaned at the time would be between $129-million and ?. Then the institute applied a financial stress test on still solvent companies and found the potential exposure ranges from $338-million to ?, depending on future bankruptcy rates and well cleanup costs. Those numbers are set to climb steeply after the March bankruptcy of Sequoia Resources, which had licences for 2,300 wells.
$257-million
$8.6-billion
For a while, times were good and few companies were going bankrupt, so nobody noticed the discrepancy. Then something happened that nobody predicted—??. “Oil was supposed to be $200 a barrel by now,” Stewart says, “and we’d stop paving the streets in Calgary with asphalt because it’s too expensive and we’d just move to gold instead.” But fracking did happen, the price of oil and gas went in the toilet and investments in the oil and gas sector suddenly didn’t look so good. Cue the effort to unload the worst of the liabilities.
hydraulic fracturing
The provincial government, for its part, has loaned $235-million to the OWA to clean up orphan wells, although that amount is already ? in light of the Sequoia bankruptcy
insufficient
