Collapse of Trident Exploration threatens to more than double orphaned wells in Alberta, Just as AER and Alberta government set up the dream escape: Trident bankrupts itself, walks away from 4,700 wells
CMAG will host Trident open house by Dan Singleton, June 12, 2019, Mountain View Gazette
The Central Mountainview Advisory Group (CMAG) will be hosting an open house to provide information to landowners and others impacted by the recent demise of Trident Exploration, say officials.
The public meeting is scheduled to take place at Reed Ranch School on June 25 from 6:30 to 8 p.m.
Based in Olds, CMAG is a synergy group that includes members from the community at large. It addresses issues around oil and gas development through open houses, mail-outs and other methods.
Speakers from the Alberta Energy Regulator (AER), Surface Rights Board and the Orphan Well Association are all scheduled to make presentations and answer questions at the June 25 open house, says CMAG facilitator Paula Hall.
“We will have them each make a presentation and then we will open up the floor for conversations,” said Hall. “This is really for people looking for next steps; what do I do now?
“There are some of our members who have been directly affected and they have said, ‘look, there are all these wells that are near our property and that our neighbours are dealing with.’ So we decided this matter is pressing for people in the community.”
Trident Exploration Corporation and Trident Limited Partnership ceased operations on April 30, terminating all of its 33 employees and 61 contracts.
The company has numerous wells and other facilities in Central Alberta, including in Mountain View County.
In Mountain View County, Trident Limited Partnership owes $393,600 in outstanding municipal taxes, $110,000 in school taxes, $9,600 in seniors’ housing requisitions, $3,000 in designated industrial taxes, and $50,700 in tax arrears, for a total of $567,700, while Trident Exploration Corporation owes $9,100 in municipal taxes, and a total of $10,270.
Questions can also be asked during the meeting, she said.
The AER has said it will “pursue all options to ensure that Trident’s infrastructure is transferred to responsible operators, safely decommissioned, or, as a last resort, transferred to the Orphan Well Association.
“Many of Trident’s wells were still operating, and once transferred to responsible operators, can still contribute to royalties.”
Overall, Trident’s total abandonment and reclamation obligations are estimated to be $329 million.
ERCB was EUB, ERCB before that, now it’s AER. With Jason Kenney (Steve Harper as puppet meister?) elected, stay tuned for the next name change to keep Albertan’s well bamboozled and heeled, waiting for unpaid lease money while hungrily dreaming of signing more leases with more companies (that will quickly walk away from promised payment and clean up, as has been ongoing for decades).
The growing problem of oil and gas companies not paying taxes or landowners, Local governments raise tax rates to make up for millions of dollars in unpaid bills by energy sector by Kyle Bakx, May 6, 2019, CBC News
Months before its demise, Trident Exploration made a plea to landowners to accept half of the payment it had promised to have the company’s natural gas wells on rural properties throughout Alberta.
The Calgary-based firm explained it was in dire financial straits and needed help to stay afloat.
Many of the landowners (mostly farmers) rejected the idea and still wanted full compensation.
In March, the natural gas company cut the payments anyway and said in a letter “we had a disappointing response to that request.”
The letter by Trident’s chairman and interim CEO Darren O’Brien painted a picture of the company’s problems:
Trident is under severe financial strains resulting from several factors beyond its direct control. A few of these factors include [the real reason, the company’s greed and lack of financial planning] (1) the ongoing and unprecedented low price of natural gas, (2) extremely high rural municipality taxes, (3) the high cost of operations, and (4) costs of surface lease rentals. As a result, every possible effort is being made to keep the company financially viable through these difficult times.
Less than two months later, the company ceased operations.
When a company is forced to shut its doors, there are unique circumstances related to its assets and operations, among other factors. However, broadly speaking, it’s been a common occurrence for oil and gas companies in Western Canada to fail since the oil price crash in 2014. [It’s been a common occurrence throughout the history of the oil and gas industry. It’s how companies walk from their environmental and financial obligations, or in simpler terms, take the profits and run, all enabled by federal and provincial politicians and regulators]
Since [long before] then, dozens — if not hundreds — of companies have gone bust. And many rural Alberta residents say problems associated with the industry are getting worse as municipalities struggle to collect taxes and landowners often go unpaid for allowing companies to operate on their property. The situation underscores how many people are affected by the struggles of the oilpatch, even if they aren’t employed in the sector.
While the majority of energy companies fulfil their financial obligations, those that don’t are having a significant impact.
‘We are making progress’: Fort McMurray still rebuilding 3 years after devastating wildfire
The Rural Municipalities Association (RMA) asked all of the 69 counties in Alberta how much money they failed to collect from the energy sector last year. Fifty-four responded with a collective total of more than $81 million.
Foothills County around Okotoks in Southern Alberta said it’s still owed $698,800, while Wood Buffalo around Fort McMurray has $14.5 million outstanding, according to the RMA.
Woodlands County, northwest of Edmonton, is short $4.3 million and the amount of unpaid taxes is about 22 per cent of the municipalities’ total tax levy and budgeted revenue for 2018.
The local government said the oil and gas sector’s failure to pay taxes could potentially have an impact on the “county’s viability and sustainability,” according to a news release in February.
The problem is also affecting municipalities in Saskatchewan.
“It’s an issue that is not going away,” said Al Kemmere, president of the RMA and elected councillor of Mountain View County, just north of Calgary.
‘It’s just a headache’
Bankrupt companies aren’t the only problem for local governments.
“Now, companies that are operating and continue to operate — are not paying their taxes, which makes it much more difficult to deal with from a collections point of view,” said Kemmere, who is advocating for policy changes with Alberta’s provincial government to help improve the situation.
Residents and business owners often have to bear the brunt of the energy sector’s failure to pay, since municipalities may increase taxes on everyone else to recoup funds, said Kemmere. [That’s the capitalist way]
Even when municipalities can’t collect taxes, they still have to pay the education portion of the taxes to the provincial government.
Landowners with oil and gas wells on their properties are still able to collect unpaid money from private companies, if they have the patience to go through a cumbersome process with the provincial government.
A farmer can apply to the province’s surface rights board to be paid. However, those landowners have to file individual paperwork for each oil and gas well on their property.
“I have some landowners with 50 or 60 leases, said Daryl Bennett, a landowner advocate in southern Alberta. “They have to make an application for every lease, every year. It’s just a headache.” [Of course it is. Intentionally set up this way to make sure most landowners don’t apply. Or apply once, then give up.]
A typical payment for one natural gas well can be about $4,000 a year.
Under Alberta law, landowners can’t refuse companies wanting to develop oil and gas below the surface of their land.
Bennett said landowners have to wait more than a year right now to get paid — and the surface rights board has a backlog of 2,700 files that they are hoping to clear by next winter.
“A lot of landowners don’t even know they can apply to the board,” he said. “Due to the lengthy delays, most landowners aren’t even bothering.”
The fact companies are breaking their lease agreements in the first place is a growing frustration for landowners because the problem doesn’t seem to improve.
“A lot of them are just getting really ticked off,” said Bennett. [But, talk to ripped off landowners, many want more leases!]
The Canadian Association of Petroleum Producers, which represents most oil and gas companies in the country, declined an interview request and said it was “unable to share any insight into this issue.” [Why would CAPP comment? They continue to rake in big dollars from companies, while landowners and municipalities get nothing]
Are you a landowner with unpaid surface rental payments?
Some excellent comments, notably by landowner and small farmer by Didsbury Alberta, mother of two, Diana Daunheimer
32 minutes ago
Reply to @Jerome Blake: We were rural landowners who came under the rule of the oil and gas sector. We soon found out that they could operate with impunity. Not only did we experience the dictating, but we had to put up with light pollution, noise pollution, workers thowing garbage out at the roadsides, workers driving like hell on the local roads and not slowing down, us getting exposed to toxins from nearby flaring and getting headaches and making asthma worse…. We, and some neighbours, balked at having a sour gas facility close by, but another neighbour about 4 km offered it on thei land. The couple involved both developed severe illnesses, and one has since died from a brain tumor. Sour gas attacks the central nervous system and young folks who have been stricken with mulitple sclerosis have directly blamed it on low dose sour gas emissions. And, and an acquaintance of ours from the Peace River area, had a niece who developed a brain tumor. The doctors at the Edmonton Cancer Clinic told the family that the tumor was specific to exposure to sour gas. In this regard, the industry, and governments, could give a coitus about us.
Reply to @Laine Vos: That is interesting when you consider the Ludwig case. I also know two people from the Area with brain tumours and one died early.
CAPP , ” declined an interview ” saying it is ” unable to share any insight into this issue “. CAPP has no problem making comments every other time but when they fail to escape scrutiny they lack the guts to be interviewed . CAPP is not Canada’s friend and this lobby organization is absolutely not operating with the interests of anyone but , their own goal to enrich their members.
Imagine the 40 years under con rule, if you would have started investing in green tech then.
Now you say you need the fossil fuel so you can invest now….
Short sighted greed……
Taxes for multinationals?Not in the age of corporatism. Obscene billionaires pay NO tax while those in extreme poverty are whacked with consumption taxes
Reply to @Matt Astell: If they were raking in $billions, hundreds wouldn’t be going bankrupt.
Reply to @Ian Chamberlain: Some just declare bankruptcy and leave, not wanting to pay for clean up cost..
All other oil producing countries are humming along just fine. Why can’t Canada get it’s stuff together and create policies that get this industry in Canada back on track?
Reply to @John Reed:
In the past four years alone, over $35 billion in subsidies to the industry have been implemented in Alberta. This does not include the fact that the industry pays almost no fees in enforcement fines, no money to public health or environmental damages, gets their water for free and gets to use our airsheds and land as dumping grounds for indsutry waste, also for free. They also have sweeping exemptions for carbon costs and a deduction scheme built into the MRR. The NDP decreased royalties to the lowest in the history of the province and subsidized more than any PC government and still the industry is incapable of staying solvent? I think it’s time to address what is wrong with their business model, not federal policies.
$26 billion to NWUpgrader, nearly one million per day is being paid by Albertans since June 2018, because the plant is not operational, but payments are due.
$2.6 billion to Keystone XL
$2 billion for upgrading bitumen
$1 billion plus for petrochemical startups
$1.6 billion average per year in Crown Royalty Reductions
$1 billion in emerging/marginal plays, MRR RMC carbon cost deductions and other incentive programs
$1+ billion for bitumen rail cars
$400 million in CCIR payments for innovation
$235 million for OWF
$50 million for Education Property Tax relief resulting from oil and gas linear defaults
$400+ million from AIMCO for funding nearly insolvent operators such as Calfrac and Perpetual
$160 million/year for otherwise flared solution gas royalty reduction
$250,000 per facility, per year for methane emissions reductions
$1 million just announced in clear fuel exemptions for drilling
$60-260 billion in unsecured oil, gas, bitumen and coal liabilities and over $9 billion in oil and gas debt held by ATB
Meanwhile Norway’s “Oil Fund” surpasses 1 trillion! And It’s dumping it’s “oil stocks”
You can bet conservative governments won’t have the backbone to tax oil companies. And they call this good fiscal management.
How can you write an article on this issue Mr. Bakx, yet fail to mention the Property Education Requistion Credit (PERC) program, implemented by the NDP, in response to delinquent oil and gas operators? Is it that readers would be even more outraged to learn that up to $50 million dollars is being taken from the Education Tax Fund, to compensate municipalities for their losses?
As for CAPP, Canadians should lobby to have them abolished. Industry operators do not have sufficient funding to pay for municipal taxes, surface lease payments, or for their hundreds of billions in liable assets, but can still afford to pay $4.64 per boe for membership with CAPP? Not to mention the tens of millions more each year, supporting an additional 200 industry groups, controlled oppostion eNGOs (examples, Pembina and Alberta EcoTrust) and the complex network of Synergy Alberta members. Governments should mandate that industry funding spent on lobbying, synergy and disingeneous stakeholder relations, is directed towards defaults and liabilties…instead of taking it from our children’s education fund.
Additional measures that need immediate attention:
Implement enforced timelines for reclamation and remediation of inactive and abandoned assets.
Increase the contributions to the OWF to a minimum of $100 million per year.
Update the AER LLR program to reflect true cost of liabilites and true value of assets and
prohibit the sale, transfer or licensing approvals to any operator with an LLR rating under 2.0.
Rewrite REDA so that the AER has a public interest and public health mandate, and are legally responsible for their regulatory actions or inactions.
Maybe crack down on the number of wholly owned subsidiaries operators use in the Bahamas etc, as tax havens.
Reply to @Diana Daunheimer: Two thumbs up! Network should have you write the article, not this little avocado toast eating ,Uber riding credit karma kid.
Reply to @Diana Daunheimer: “Up to $50 million dollars is being taken from the Education Tax Fund, to compensate municipalities for their losses.” Bad source to take money from, obviously, but reports say that Alberta actually needs $Billions to clean up their delinquent sites. The NDP’s solution was a bandaid but it did bring the issue to the fore. https://www.cbc.ca/news/business/orphan-wells-alberta-aldp-aer-1.5089254
Reply to @Kath Ayres: Thanks, yes, I know Mark Doiron, was in fact offered a position to work with this group on these issues, however, I declined because in my past 10+ years of interacting and seeking mitigation and solutions with the GoA, AER, APEGA, Alberta Health, eNGOs, Synergy Alberta, CAPP, the AUMA and the RMC (Kemmere is one of our local councillors), I view the situation as unredeemable, especially with Kenney now in power. I have met with Jason Nixon and Nathan Cooper, they will not provide solutions, but will only continue to pander to corporate pressures and interests, and give rise to more collusion and corruption. « less
Reply to @Diana Daunheimer: The alberta NDP would not have got in if they had been the NDP I know and have respected. Just goes to show that too much compromise, especially regarding industry and environment, only delays the inevitable tragic losses and contributes to public cynicism.
Reply to @Kath Ayres: Absolutely, the NDP capitalized on voter disdain for the status quo and created a platform of promises they likely never meant to keep regarding the industry in Alberta. Notley assured “fair share” of publically owned resources, a review of the mandate of the AER, increased environmental monitoring, a review of fracking and urban drilling and a robust climate plan.
Instead, once elected Notley decreased royalties to a historic low, quietly endorsed the AER which operates with no public interest or public health mandate, used backbenchers to push the review of fracking off the NDP AGM agenda, completely ignored urban drilling and the impacts resulting from, such as the 4.6 induced seismic event from fracking south of Red Deer, and gave the province a greenwashed climate plan and fraudulent fuel tax, dressed up as a carbon levy, along with sweeping exemptions, allowances, deductions and incentives for industry, resulting in no meaningful emissions reductions to date.
As I previously wrote to Notley, it’s remorseful how her government handled the energy industry in the province and perhaps it will weigh on their conscience as they witness the continued degradation of the environment and fiscal sustainability in the province. Expect their virtues to come raging back as leaders of the opposition, but don’t expect to see any material action. The NDP have proven to be the status quo and them some.
So let me get this straight.
We subsidize the industry for billions each year.
Offer the oil and resources for virtually free
They drill wherever they want, with ability to move onto anyone’s land.
The wells that are not profitable, they simple abandon in numbered companies, and walk away from the environmental disaster, leaving Canadians on the hook to pay upwards of 70 billion.
The wells that are profitable, they sit back and rake in the dough, but don’t pay taxes or land owners.
Norway has a much better model !
Reply to @Bob Johnson: You pretty much nailed it.
Oil companies get away with murder.
It’s OK…. Alberta has the Heritage Trust Fund to pay for the clean-up ?
Ooops, I forgot, the Alberta Conservatives STOPPED contributing to that way back in the 90’s because the Oil Patch thought the royalties were too high….. so it’s BROKE too !
The legacy after 40+ years of Alberta Conservative Gov’ts failed energy policies, where shareholder profits through an “all hogs to the trough” business model prevailed.
Alberta Cons squandered the resource revenues in the good times with NO foresight, now Albertan’s are left with the Bills to cleanup in the bad times.
Nothing quite like the taxpayer subsidizing of a multi billion dollar, totally for profit business. Big Oil is lauging at Albertan suckers all the way to the banks along with their new BFF, Jason.
Kenney said his government has more work to do in reviewing the Supreme Court’s decision before identifying how it can assist companies with compliance. He also said his government would be meeting with municipalities to raise concerns identified by Trident about high property taxes.
“There are a number of small and junior gas producers in Alberta that are running down their balance sheets, almost giving away their natural gas, because of market asset challenges,” he said.
“They simply can’t afford higher and higher municipal taxes in addition to the uncertainty created by the Redwater decision.”
Reply to @Eileen Kinley: Yup, the O&G sector of Alberta got themselves the best government money can buy.
Corporate welfare is a burden on us taxpayers.
Reply to @Allan Paakkola: Going to get a lot worse,with Jason
Shareholders before taxpayers and land owners. Corporatism at it’s best.
Reply to @Michael Klym: . . . and executives before shareholders!
And one of kenney’s election promises is to deregulate the oil and gas industry even more and cut the corporate tax rate from 12% to 8%. But I guess if they aren’t paying their share of taxes what difference does a tax rate cut mean.
The oil industry is well known for always pointing fingers at others re any problems they may encounter. How many times have we been assured that transportation of petroleum by pipeline, ship or other carrier is safe? And how many times have we, Canadian citizens, been left holding the bag for massive clean ups and environmental harm? And who will clean up that environmental mess in the tar sands?? Us. We always pay for this industry, and this industry always “puffs out its chest” when things are going well, and always comes whining and teary eyed when things are not going well for them. Bottom line. This industry is doing great harm to our environment, feels it has the right to rip people off, expects special treatment, and overall, feels that Canada somehow owes them something. I suggest they pay their own way, pay their bills, pay their taxes, accept the political and market realities, and if they cannot make it economically, shut down rather that whine and complain constantly. Frankly it is tiresome.
Wha..? Companies not paying their taxes and ripping off landowners? The same companies that are given massive tax breaks and subsidies that individual overtaxed Canadians can only dream of?
Say it ain’t so!
Reply to @Evan Mulligan: Which tax breaks and subsidies are those chief? Enlighten us.
Reply to @Jordan Talbot:
Here you go: https://www.iisd.org/faq/unpacking-canadas-fossil-fuel-subsidies/
Reply to @Evan Mulligan: Not only oil and gas. All types of big business. Aero, Ins., Auto, etc.
Reply to @Jordan Talbot:
Here’s a list of easily referenced subsidies, most announced in the past four years under the NDP in Alberta:
$26 billion to NWUpgrader (nearly a million per day, is being paid by Alberta taxpayers since June 2018, because the upgrader is not yet fully operational but the payments are due)
$2.6 billion to Keystone XL
$2 billion for upgrading bitumen
$1 billion plus, for petrochemical startups
$1.6 billion average per year in Crown Royalty Reductions
$1 billion in emerging/marginal plays, Modernized Royalty Review RMC carbon cost deductions and other incentive programs
$1+ billion announced for rail cars for bitumen transportation
$400 million in CCIR (formerly SGER) payments for innovation
$235 million for Orphan Well Fund
$50 million for Education Property Tax relief resulting from oil and gas linear defaults
$400+ million from AIMCO for funding nearly insolvent operators such as Calfrac and Perpetual, the latter of which is facing a lawsuit from the trustee in the transfer of useless wells to Sequoia, who fell into insolvency.
$160 million/year for otherwise flared solution gas royalty reduction
$250,000 per facility, per year for methane emissions reductions, final amount TBD
$1 million just announced in clear fuel exemptions for drilling
Not to mention the $60-260 billion in unsecured oil, gas, bitumen and coal liabilities and the approx. $9 billion that ATB has on the books in oil and gas debt. Remember it was ATB that filed the Redwater action, trying to limit their poor lending choices to oil and gas by arguing federal BIA legislation trumped provincial polluter pay regulations. Now that ATB can not renounce unproductive assets under their lending, they are stuck with the debt, as was the case with Trident, ATB’s client.
Maybe someone could explain to us regular folk just how we are paying $1.33 a litre at the pumps when a barrel of oil is selling for less than half of what it was when a barrel was $130-$140 a barrel ? If there was ever a time for Canada to go full steam ahead into renewable & green technology ; it is now . Seriously tired of being fleeced by oil companies .
And Jason Kenney says Alberta’s Oil & Gas Industry has been treated unfairly by the federal government. I’d say the environment and this planet have been treated unfairly by the Petroleum industry.
This is the seedy underbelly of Alberta’s O&G cartel. A seething toxic and corrupted cabal, ripping off Canadians at every turn.
An industry so evil that it spends billions to mislead people about climate science and climate change, buy politicians, and media , leaving its mess behind should surprise no one, Its what fossil fuels have always been about, destruction and exploitation
“Under Alberta law, landowners can’t refuse companies wanting to develop oil and gas below the surface of their land.”
Wow. The province created a law that you have no right to refuse oil and gas company operation on your own land?? Even when they are not paying up or cleaning up?? And this is in Canada’s supposed “free market” province!
Reply to @Jimmy Harding: The “right-wing” abandoned property rights long ago. Now they believe that the State has the right to annex your private property anytime it wants if there’s oil to be had… It’s really quite sad to see the “right-wing” become so communist in their view toward property rights.
The Canadian Association of Petroleum Producers, which represents most oil and gas companies in the country, declined an interview request and said it was “unable to share any insight into this issue.”
Orphaned wells, stiffed landowners, environmental damage, and greenhouse gas emissions… “Hey, not our problem! 🙂 “
Corporate Welfare is Job #1 in Ameri-Berta……………………….and the guy on the corner with a cup begging for coins is a Calgary Oil Slick executive……………………..parked his Land Rover around the corner
In 1980- NEP- despised by Alberta- The Federal Government, Pierre Trudeau and Marc Lalonde, wanted protection from the oil producers. Uneducated Albertans received their information from the producers and demanded the government to stop. Since that time- nothing and I mean nothing has benefitted Alberta. Today it is haunting the citizens and they still blame the government.
Executives of those companies still get their lucrative pay packages but they don’t pay their bills.
it’s going to get worse before it gets better. fracking is leading to a huge financial bubble of debt.
What a mess,refuse to clean up wells and left a 70 billion dollar bill,refused to pay taxes. And this is what Albertans celebrate……Good Grief.
Reply to @Craig Macneil: Global said it could be as high as 260 billion.
Like all billionaires, they simply can’t afford it.
CAPP is “unable to share any insight into this issue.” This pretty much sums up CAAP on any issue.
Junior producer cites gas prices, tax bills, court decision as it shuts down by The Canadian Press with files from Sammy Hudes, May 1, 2019, Calgary Herald
Junior oil and gas company Trident Exploration Corp. says it is ceasing operations and will turn over care of its 4,700 wells to the Alberta Energy Regulator.
In a news release, the privately held Calgary-based company says its abandonment and reclamation obligations are estimated to be $329 million and it doesn’t expect any financial recovery for shareholders or unsecured creditors.
It says it terminated 33 employees and 61 contractors on Tuesday.
In the release, the company blames its demise on low natural gas prices and high lease and property tax bills, along with capacity constraints on TransCanada Corp.’s NGTL gas pipeline system.
It says a restructuring and sales process with its lenders failed due to issues it linked to January’s Supreme Court of Canada decision on insolvent Redwater Energy.
The high court ruled that energy companies must fulfil their environmental obligations before paying back creditors in the case of insolvency or bankruptcy, overturning lower court decisions that had favoured bankruptcy law over provincial environmental responsibilities.
“As many have speculated and we have now unfortunately proven, the Redwater decision has had the unintended consequence of intensifying Trident’s financial distress and accelerating unfunded abandoned well obligations,” the company stated.
“Without regulatory collaboration and clarity, Trident is unable to address its near-term liquidity needs and has no financial ability to continue operating. We fear that many other companies may falter without clear, sound policymaking post-Redwater.”
In a statement, the AER said it had been working with Trident “for several weeks to address concerns about its ability to continue operating to ensure that their assets end up in the hands of responsible operators and that end-of-life obligations are addressed to the greatest extent possible.”
The regulator said after learning Monday that Trident would cease operations, it ordered the company to address end-of-life obligations for its energy licenses by decommissioning its sites, posting financial security, or transferring the sites to responsible energy companies.
But two days later, the AER was told the company’s directors resigned after terminating employees and contractors, without having addressed regulatory obligations, it stated in a release. The AER said it would “assess all options for possible enforcement.”
“While we are aware of the difficult market conditions Trident has endured, we also have a responsibility to ensure that safety and environmental requirements are being met,” it stated.
“The AER will ensure that the public and the environment are protected and will assess any high-risk sites to ensure there are no immediate risks . . . The AER will pursue all options to ensure that Trident’s infrastructure is transferred to responsible operators, safely decommissioned, or, as a last resort, transferred to the Orphan Well Association. Many of Trident’s wells were still operating and, once transferred to responsible operators, can still contribute to royalties, keep Albertans working, and deliver value to our economy.”
Why is this major story tucked away on page 8 of the Calgary Herald.
This is another example of the failure of the Alberta government to regulate and control companies that are given permits to operate wells and then can walk away from their environmental responsibilities leaving the cost of clean up and capping of wells to the taxpayer. Shame!
The collapse of an Alberta natural gas producer threatens to more than double the inventory of orphan oil and gas wells in a province already struggling with a spike in unfunded cleanup costs by The Globe and Mail, May 1, 2019
Calgary-based Trident Exploration Corp. said it ceased operations effective April 30, leaving behind a $329-million bill to clean up 4,700 wells it says are being transferred to the Alberta Energy Regulator (AER).
The company blamed a combination of weak natural gas prices, high municipal taxes and inflated lease payments. It said it failed to secure AER support to restructure its operations in a “timely fashion” and does not expect any recovery shareholders and unsecured creditors.
The case is the first major one following a landmark Supreme Court ruling earlier this year – and it shows its unintended consequences rather than its benefits.
In January, the top court ruled that energy companies cannot walk away from their obligations to clean up oil and gas wells in bankruptcy cases, and that environmental responsibility supersedes the interests of secured creditors.
In the case of insolvent Redwater Energy Corp., it overturned lower-court rulings that essentially allowed the company’s creditors to hive off and sell the most profitable wells and dump the remainder on the rest of the industry, which contributes to a fund that is used to clean up spent wells and managed by the Orphan Well Association.
Environmental advocates cheered the decision, saying that it would prevent companies from taking advantage of a system that favoured the interests of investors over the need to remediate the landscape.
But some oil-industry officials and analysts had warned it would create a chill over investment in the hard-hit sector when it is needed most, especially among smaller companies carrying hefty environmental liabilities on their balance sheets.
Trident, which produces about 67,500 thousand cubic feet a day of gas equivalent from operations in northern and central Alberta, said the court decision and lack of pipeline capacity had created a “treacherous” environment for energy investors.
“As many have speculated and we have now unfortunately proven, the Redwater decision has had the unintended consequence of intensifying Trident’s financial distress and accelerating unfunded abandoned well obligations,” the company said in a release. The AER did not immediately respond on Wednesday.
With the industry downturn that began in 2014, the number of oil and gas sites that no longer have a solvent owner has ballooned, forcing the previous NDP government in Alberta to extend $235-million in loans to the industry to accelerate cleanup. The number of orphan wells swelled to 4,349, up from 545 in 2014, after a string of corporate bankruptcies.
Still unknown is the fate of nearly 3,300 wells stemming from the bankruptcy of Sequoia Resources Corp., which failed in March 2018. The company left the AER with a cleanup bill of $225-million, and the trustee in the case has sued Perpetual Energy Corp. and its chief executive officer Sue Riddell Rose – which sold Sequoia its initial assets – to recover costs.
Perpetual and Ms. Riddell Rose are seeking to have the case tossed out, arguing they were not responsible for Sequoia’s failure. A judge’s decision is pending.
A Globe and Mail investigation into the problem of unfunded environmental liabilities in the oil patch, published in November, found the numbers of orphan wells could balloon across Western Canada due to regulations that allow companies to idle unprofitable ones indefinitely – or transfer them to thinly financed rivals.
The Globe reported that 20 per cent of all oil and gas wells in the three Western provinces are inactive, and that there are 54,147 more inactive wells today than there were in 2005. Such wells no longer produce oil and gas, but have not been plugged. Some have languished for decades.
Alberta’s new United Conservative Party government has said it would streamline the process for abandonment and environmental reclamation to reduce costs and increase the rate at which wells are formally deemed abandoned.
However, it said it would work with the AER and industry to overhaul the system to make sure liabilities are covered without discouraging investment in the industry.
Shuttered junior gas company simply walked away from 4,700 wells, says Alberta Energy Regulator, Calgary-based company says abandonment and reclamation obligations estimated at $329 million by Sarah Rieger, Mya 1, 2019, CBC News
The Alberta Energy Regulator says junior gas company Trident Exploration Corp. shut down abruptly Tuesday without responding to an order to properly manage its 4,700 wells — adding to the more than 3,000 orphan wells already awaiting remediation in the province.
Trident terminated 33 employees and 61 contractors on Tuesday, the company said in a news release.
The privately held Calgary-based company said its abandonment and reclamation obligations are estimated to be $329 million and it doesn’t expect any financial recovery for shareholders or unsecured creditors.
Regulator was working with company for weeks
The Alberta Energy Regulator said it’s been working with Trident for weeks to ensure the company’s assets end up with “responsible operators” and that end-of-life obligations for wells are addressed.
On Monday, Trident told the regulator it would be closing, so the AER ordered the company to decommission sites, post financial security or transfer the sites to other energy companies
But on Tuesday, the AER said Trident’s directors ceased operations, terminated employees and then resigned — without responding to the order or addressing any regulatory obligations.
“Trident does not have the funds to operate its infrastructure or enter into creditor protection. As a result, they have decided to walk away, leaving more than 4,400 licensed sites, many of them active, without an operator,” the regulator said in an emailed release.
AER spokesperson CaraTobin said most companies they work with are able to come to an outcome that works for all parties, but this was not one of those situations.
“We are still working on our options,” said Tobin. “Generally speaking, yes, a situation like this is concerning.”
The company blamed its demise on low natural gas prices and high lease and property tax bills, along with capacity constraints on TransCanada Corp.’s NGTL gas pipeline system in the release.
The AER acknowledged natural gas has experienced weak prices, but said that doesn’t erase the company’s obligations.
“While we are aware of the difficult market conditions Trident has endured, we also have a responsibility to ensure that safety and environmental requirements are being met,” the AER said.
Trident also said a restructuring and sales process with its lenders failed due to issues it linked to January’s Supreme Court of Canada decision on insolvent Redwater Energy.
Fram drilling files for bankruptcy by Dennis Webb, May 3, 2019, gjsentinel
The company that hoped to drill more than 100 oil wells south of Palisade and east of Whitewater has filed for Chapter 7 bankruptcy, possibly putting an end to that project and also meaning state and federal agencies could end up being responsible for plugging other local wells it owns.
The filings by Fram Operating and its owner, Fram Americas, both of Colorado Springs, means that the companies go out of business and nonexempt property is liquidated and the proceeds distributed to creditors. Fram Americas is owned by Fram Exploration AS in Norway.
In March 2018, the Bureau of Land Management approved Fram’s Whitewater Unit Master Development Plan, under which it hoped to drill 108 wells from 12 pads 15 miles southeast of Grand Junction. The BLM had estimated the project could result in production of 8.7 million barrels of oil over 20 years.
The project was supported in some quarters due to the jobs, tax revenues and other economic benefits that could result, but opposed by activists groups and others due to concerns about potential air, water, traffic and other impacts.
Fram’s bankruptcy could mean the end of the project unless it can be sold during the liquidation process. Kenneth Buechler, the attorney representing Fram in the bankruptcy proceedings, said bankruptcy law generally provides that contractual rights existing at the time of bankruptcy become property of the bankruptcy estate, and another asset the trustee in the case potentially could sell. But he said he didn’t know if there would be restrictions on any possible sale of the Fram project or items that need to be cured, such as when it comes to the pertinent oil and gas leases.
“This (bankruptcy) isn’t surprising to us at all,” said Emily Hornback, staff director of the Western Colorado Alliance activist group.
She said opponents of the Whitewater project have been raising questions for years about the financial solvency of Fram. She said it’s fortunate Fram’s financial situation came to light before work proceeded on the project, so the public isn’t left holding the bag on cleanup costs.
But both the Colorado Oil and Gas Conservation Commission and BLM could end up having to handle plugging of wells Fram already owns in Mesa and Delta counties unless those wells are sold to another company. Buechler said the bankruptcy filing resolves millions of dollars worth of potential long-term liability for Fram when it comes to well plugging and other environmental issues, and he noted that it posted required bonds to cover such circumstances.
“I assume that the government authorities will plug the wells since the companies are no longer in business,” he said.
The question is whether bonding would suffice to cover plugging and other reclamation-related costs. COGCC records suggest Fram has posted a total of $250,000 in plugging bonds, an amount higher than the $60,000 blanket bond normally required of a company operating fewer than 100 wells, with the higher amount reflecting a high number of inactive Fram wells.
However, Fram Operating’s bankruptcy filing lists the COGCC as an unsecured creditor with a $3.85 million claim for well plugging and abandonment costs, and lists the BLM as having a claim for $1.54 million for such costs. It says there’s a similar claim of $550,000 against it by the North Dakota Industrial Commission.
Both the COGCC and BLM are aware of Fram’s bankruptcy filing. “We are determining what our next steps are,” said BLM spokesman David Boyd.
The BLM also requires bonds to cover cases when companies don’t end up plugging wells and reclaiming well sites.
Altogether, Fram Operating lists nearly $6.2 million in liabilities and about $625,000 in assets. Fram Americas shows only about $374,000 in liabilities and assets totaling $42 million, for oil and gas properties, equipment, leases and other holdings.
But Buechler characterized those as alleged assets, adding, “who knows what these things are actually worth.” And he said there is a large amount of potential unknown tax liability and unknown liabilities to other parties that will have to be sorted out by the trustee.
Fram Americas’ bankruptcy filing lists the Mesa County Treasurer’s Office as having a $13,655 claim against the company. Fram Operating’s filing shows separate claims of about $36,000, $52,000 and $93,000 due to the federal Office of Natural Resources Revenue, with some of those claims involving debt that has gone into collection proceedings.
Buechler said Fram’s demise was precipitated by the death of company official Tim Rickert not quite a year ago. “He was the guy that was running the show,” Buechler said.
He said Rickert knew what Fram’s assets were worth and how to manage them, and after his death others in the company realized they couldn’t keep up with running things.
Mesa County Commissioner John Justman said he hadn’t heard of Fram’s bankruptcy but the news is disappointing.
“I was looking forward to them being successful at what they were doing, but I hadn’t heard anything from them for probably a year, year and a half, I suppose,” he said. “I guess personally I was hoping that they would be successful and add to our economy and add to our jobs and so forth.”
Refer also to
Did Trident Exploration frac drinking water aquifers like Encana did in the Horseshoe Canyon play in Alberta?
Below: 2002 and 2010 (includes 750 wells by Trident Exploration) shallow frac’d Horseshoe Canyon CBM wells in Alberta, from Trident Exploration Corp’s 2010 presentation