B.C. energy regulator faces possible $90 million tab for orphan wells

Province shifting from orphan well tax to liability levy to meet obligations

 DrillRig-DanielAzocar-iStock
Photograph By DANIELAZOCAR/ISTOCK

An energy company operating in B.C.’s northeast and now in receivership has left 300 to 500 wells facing possible designation as orphan – or abandoned – at a potential cost of $40 million to $90 million to the B.C. Oil and Gas Commission (BCOGC).

The figures were delivered in the provincial energy regulator’s 2019-20 to 2021-22 service plan released as part of the provincial budget Feb. 19.
B.C. has an orphan well tax, aimed at covering costs of abandonment and restoration of orphan wells, test holes, production facilities and pipelines. The current tax is $0.06 per cubic metre of oil production and $0.03 per 1,000 cubic metres of marketable gas.

This spring, Currie said, that tax will be eliminated and a liability levy phased in over three years. MORE

Supreme Court rules energy companies cannot abandon old wells

Supreme Court of Canada has overturned Redwater Energy lower court decision

An orphan well site near Carstairs, Alta., awaiting proper abandonment and reclamation. (Government of Alberta)

The Supreme Court of Canada has ruled that energy companies cannot abandon their responsibility to clean up old oil and natural gas wells in the case of bankruptcy.

The court ruled 5-2 to overturn the earlier ruling. In doing that, it said that bankruptcy is not a license to ignore environmental regulations.

The Redwater case has been watched closely across the country. Ontario, British Columbia and Saskatchewan all intervened in the case, supporting the Alberta Energy Regulator’s position that the polluter must pay for clean-up before creditors are paid back their loans.

Alberta has been dealing with a tsunami of orphaned oil and gas wells in the past five years. In 2014, the Orphan Well Association listed fewer than 200 wells to be reclaimed. The most recent numbers show there are 3,127 wells that need to be plugged or abandoned, and a further 1,553 sites that have been abandoned but still need to be reclaimed. MORE