Mixed feeling about the reclamation of old well sites and pipelines continue to heat up as there are speculations that reviving Alberta’s idle wells could heat up the energy patch.
Alberta’s landscape has suffered massive depressions there are increasing number of idle oil and gas wells scars. According to data, there are about 84,100 idle wells in the region and the government fears that at this rate taxpayer money will be required to clean up the mess oil and gas producers have left.
According to Tony Nicholas a farmer in the region, he is still doubtful about the current oil and gas well site reclamation situation. He expressed that with the increasing number of wells in his province, it gets very difficult for him to use farming equipment but nonetheless he gets paid between $2,000 and $3,000 per year for the inconvenience.
He went on saying “it’s a fact that they are a nuisance. You have to go around them, but you get something for it.”
It is the duty of every gas and oil company to do cleanups and reinstate the landscape but this has not been done consistently in the past.
But things are now taking a turn with the new rules put in place by the Alberta Energy Regulator, it now prevents financially insecure companies from claiming liabilities to unaffordable levels.
The new law states that the province may require a payment from oil and gas companies who made deals that result to the value of the company’s asset drops to twice of its recovery liabilities to ensure cleanups. But they fail to make to the agreement; the province can deny giving out the Crown license to the new owner.
Proper check will be done on company’s license liability rating to decide whether they should pay a deposit.
In the past, companies were required to have a license liability rate as minimal as 1.0 but presently they are required to have at least 2.0.
Dave Humphreys, vice president of operations at Calgary-based intermediate producer Birchcliff Energy explained that “regulations have become tougher with the introduction of the new laws… and specifically the amount of unfunded liability the companies are bearing.”
Companies are now left with no option but to comply with the new rules.
For a company to be able to leave a well, it takes two to five years to acquire a provincial reclamation certificate and this also determined by the amount of cleanup work that is to be done.
According to the statistics of RBC Dominion Securities oil and gas analyst Shailender Randhawa in his latest studies, there are over 93,000 oil and gas wells in Western Canada that have been lying idle for over six months as many buyers do not sell off the lands but rather just turn off the taps.