Addressing Liability

The Alberta government is working to address the issue of inactive and decommissioned/abandoned oil and gas sites by implementing an improved, new upstream oil and gas liability management system.

Quick facts

  • In Alberta, there are currently approximately 466,000 total wells in the province. A breakdown of the well inventory, including active, inactive, decommissioned and reclaimed wells can be found on the Alberta Energy Regulator website.
  • The inventory of orphan wells and sites for abandonment and reclamation can be found on the Orphan Well Association website.

Liability Management Framework

A new framework to manage oil and gas liabilities was announced in 2020, and includes a series of mechanisms and requirements to improve and expedite reclamation efforts. It is designed to enable industry to better-manage the clean up of oil and gas wells, pipelines and facilities at every step of development, from exploration and licensing, through operations, mergers and acquisitions, abandonment, reclamation, and post-closure. Setting clear expectations throughout the life cycle of oil and gas projects will provide certainty to industry and landowners, who will now have a defined opportunity to ensure the timely clean-up of sites on their property.

The liability management framework upholds the polluter-pay principle, ensuring that industry is responsible for clean up costs, in a way that is fair and manageable. The framework components include:

  • A new Holistic Assessment and Licensee Capability Assessment system in place to assess the capabilities of oil and gas operators to meet their regulatory liabilities obligations, prior to receiving regulatory approvals. The Licensee Management Program enables the regulator to reach out proactively to provide support before operators are struggling.
  • An Inventory Reduction Program to increase the amount of closure work occurring in Alberta. This includes closure spend quotas and a closure nomination process for landowners.
  • A process to address legacy sites – or sites that were abandoned, remediated or reclaimed before current standards were put in place, and sites that have received reclamation certificates and the operator’s liability period has lapsed. A panel was established to consider how to address this gap, bringing these sites up-to-date with the current environmental requirements.
  • An expanded role of the Orphan Well Association set out in The Liabilities Management Statutes Amendment Act – which came into effect June 15, 2020 – enabling the association to better manage and accelerate the clean-up of wells, infrastructure and pipelines that do not have a responsible owner.

Alberta’s previous approach to governing the clean up of these wells was put in place decades ago, when the oil and gas industry was largely focused on growing production and building new infrastructure. As the province’s oil and gas sector matured, a new approach was required to more actively manage reclamation of sites throughout their life cycle. This means working on the existing sites that require clean up and keeping new sites from joining the inactive and orphan inventories in the future.

The Alberta Energy Regulator is responsible for implementing many components of the liability management framework. More details are available under liability management on the regulator site. 

Reducing orphaned wells

The OWA is an industry-funded agency that works to close and reclaim infrastructure from oil and gas companies that no longer exist. This involves removing equipment, sealing wells and ensuring the safety of the site for the public.

Between 2017 and 2020, the Alberta government loaned the OWA $335 million to accelerate the reclamation of oil and gas well sites that no longer have a responsible owner. 

As of December 31, 2021, the OWA spent the full $335 million available through the Orphan Well Loan Program, generating approximately 271 direct jobs. OWA reported the following program results from its effort to address the growing inventory of orphaned sites:

  • a total of 3,512 wells abandoned;
  • 4,282 pipelines decommissioned; and
  • 2,303 sites reclaimed

The work resulting from this loan is in addition to the OWA’s ongoing work. The money received from industry through the annual Orphan Fund Levy is used by the OWA to repay the loan. As of April 2023, the OWA has repaid approximately $121.8 million.

Definitions

Orphan

  • A well or facility confirmed not to have anyone responsible or able to deal with its closure obligations (for example. Abandonment, remediation and reclamation.)

Inactive

  • A well or associated facility where activities have stopped due to technical or economic reasons for 6 or 12 months, depending on the type of well and its potential risks to the public or environment. Some sites may be reopened and produce again at a later date. Wells that are inactive require additional work to suspend the well or facility to ensure that the public and environment are protected while it’s inactive.

Abandoned

  • A site that is permanently dismantled (plugged, cut and capped) and left in a safe and secure condition. These are also often referred to as decommissioned sites.

Remediation

  • The process of cleaning up a contaminated well site to meet specific soil and groundwater standards.

Reclamation

  • The process of replacing soil and re-establishing vegetation on a wellsite so it can support activities similar to those it could have supported before it was disturbed.

Contact

Connect with Alberta Energy and Minerals:

Hours: 8:15 am to 4:30 pm (open Monday to Friday, closed statutory holidays)

Address:
Alberta Energy and Minerals
North Petroleum Plaza
9945 108 Street
Edmonton, Alberta  T5K 2G6