An Alberta court case is boosting environmental clean-up costs in other provinces by Dan Healing, The Canadian Press, September 22, 2016, Calgary Herald
Companies buying energy assets in Saskatchewan and British Columbia are facing higher deposit costs for environmental remediation after a precedent-setting court case in Alberta that dealt with abandoned oil and gas wells.
In a letter sent last month to operators of wells, pipelines and other energy assets in Saskatchewan, the provincial Ministry of Economy (ECON) warns that all applications to transfer government licences for wells as part of sales transactions will be treated as “non-routine” from now on.
“All licence transfer applications will be reviewed in detail and ECON will consider all relevant factors in calculating transfer deposit requirements,” it says. “In addition to increased deposit requirements, ECON may incorporate additional conditions with licence transfer approvals which may impact the decision to proceed with certain transactions.
“In particular, licence transfers involving a high percentage of potentially uneconomic infrastructure will be very closely reviewed and deposit requirements set accordingly.”
In an email, spokesman Phil Rygg of the B.C. Oil and Gas Commission said it, too, is requiring security deposits for certain assets being sold in cases where deposits would not have previously been required.
“This decision is applied on a case-by-case basis,” he wrote.
Regulators in Western Canada are watching closely after a ruling from the Alberta Court of Queen’s Bench in May granted the receiver for bankrupt producer Redwater Energy the right to sell the private company’s best assets, thus gaining the best payback for its creditors, and disclaim or abandon inactive assets for which estimated environmental cleanup costs were higher than resale value.
The receiver had advised the Alberta Energy Regulator that of the 127 wells, pipelines or other infrastructure for which Redwater Energy held licences, it would only take possession of about 20.
In response, the regulator issued a directive for companies trying to sell assets before licence transfers would be allowed. According to the directive, a company’s asset value has to be twice as much as the costs of environmental remediation of orphan wells.
The regulator later softened its stance, saying companies can apply for special consideration or make a deposit to allow transactions to go ahead.
Over the summer, the number of orphan wells in Alberta has ballooned by 500 to more than 1,280, said Brad Herald, chairman of the Alberta Orphan Well Association, which is administered by government and industry associations.
He said the Redwater decision has added to the rising count of orphan wells, but it’s unclear by how much, given general industry hardship caused by more than two years of low oil prices.
He said the higher number of orphan wells is bound to put “upward pressure” on the $30 million per year currently paid by the province’s energy industry to secure and clean up abandoned oil and gas wells.
Brad Wagner, director of liability management for Saskatchewan’s Ministry of Economy, said the decision to send a warning letter to operators was made after his department saw a report this summer from the receiver assigned to sell the assets of bankrupt oil and gas producer Tuscany Energy.
The report suggested Tuscany Energy’s assets — including dozens of heavy oil wells in Saskatchewan — might be sold in pieces, a process that could result in the best assets finding buyers and the worst being abandoned, Wagner said.
He said the Alberta decision has the potential to affect Saskatchewan because many energy companies operate in both provinces. [Was that the intent with the AER suing Redwater?]
“We’re putting each (licence) transfer under a microscope,” said Wagner. [To better dump the costs onto citizens, and let bad companies and investors/banks escape their legal responsibilities?]
He said no licence transfers have been denied as yet but the size of deposits has been steadily rising. The deposits are held as a guarantee for environmental remediation and refunded to the company once it has proven it has the financial ability to clean up oil and gas wells.
An appeal of the Redwater decision launched by the Alberta government, the AER and the Alberta Orphan Well Association is to be heard in October.
Both B.C. and Saskatchewan have applied to intervene in the case to present evidence of its potential impact in their jurisdictions.
“If the decision is upheld, I think we would look to more permanent policy change, regulation change,” said Wagner. [Emphasis added]
[Refer also to:
2016 08 16: More and more energy companies not making payments to Saskatchewan, Alberta landowners. Why would they? Landowners, urgent with greed, signed leases they didn’t read, with few legal protections. Multi-billion dollar profit-taker CNRL asks for 30% property tax cut. Do landowners ripped off by oil companies get tax cuts? Do citizens and communities with their water, land and air poisoned by frac companies get tax cuts?
2016 06 28: AER calls itself a regulator? A law enforcer? Legally immune, grossly over paid, law-violating scaredy-cat more like it. AER backtracks again, to keep angry oil patch execs and banks happy.
2016 06 23: Just more AER hot air or a slick devious plan? Alberta looks at different ways of making sure companies clean up old wells (Who is to fix the aquifers Encana frac’d?), AER warns it could go after directors & executives to ensure proper reclamation
2016 06 20: All part of the decades-long plan to hang big oil’s housekeepping on ordinary families while companies run for the hills? Oil bust [Or greed & corruption?] leaves states with massive well cleanup
2016 06 12: Timing is everything. Why did AIMCo (ATB/Heritage Fund connected) announce $200 Million (bailout?) investment in “Quite leveraged” Calfrac on same day NDP Rural Caucus try to get Nielle Hawkwood’s frac ban resolution on floor of NDP’s Annual Convention?
2016 05 27: “Where does the buck stop?” AER to appeal ruling on oil, gas cleanup obligations. Chief Justice Wittmann found Alberta’s oil and gas licencing regime to be unconstitutional relating to money, but not in Ernst’s “valid” constitutional claim against AER relating to drinking water contamination by oil and gas