Oil and gas liabilities management

Addressing safety

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
• providing a loan for the Orphan Well Association (OWA) to speed up work to clean up oil and gas sites

Quick facts

• In Alberta, there are currently approximately 459,000 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 (PDF, 319 KB) – which includes a series of mechanisms and requirements to improve and expedite reclamation efforts – will 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 new 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.
• Provides practical guidance for struggling operators to  help them manage and maximize their assets, and maintain their operations. Doing so will protect Albertans from the financial and environmental burden of more inactive or orphaned sites – while ensuring operators meet their environmental responsibilities.
• Puts an improved system in place to assess the capabilities of oil and gas operators to meet their regulatory liabilities obligations, prior to receiving regulatory approvals, and enable the regulator to reach out proactively to provide support before operators are struggling.
• Establishes five-year rolling spending targets for reclamation that every active site operator must meet. This initiative includes the AER’s area-based closure program, through which companies work together to share the cost of cleaning up multiple sites in an area.
• Establishes a formal opt-in mechanism for landowners to nominate sites for clean up. These sites must then be reviewed by the regulator, with operators responsible for justifying why a site should not be immediately brought through closure stages.
• Implements a process to address legacy and post-closure 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.
• The framework includes the 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 current 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 has matured, a new approach is 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.

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.

In 2017, the Alberta government loaned the OWA $235 million (PDF, 1.8 MB) to accelerate the reclamation of oil and gas well sites that no longer have a responsible owner. Under 'A Blueprint for Jobs', announced as part of Budget 2020, the loan was extended by $100 million for a total of $335 million in the Orphan Well Loan Program.

As of December 31, 2021, the OWA has spent the full $335 million available through the Orphan Well Loan Program, generating approximately 271 direct jobs, and has 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 January 1, 2022, the OWA has repaid approximately $84 million.

The Liabilities Management Statutes Amendment Act, which came into effect June 15, 2020, expands the role of the OWA, enabling the association to better manage and accelerate the clean-up of wells, infrastructure and pipelines that do not have a responsible owner.

Definitions

Orphan

• A well or facility confirmed not to have anyone responsible or able to deal with its closure and reclamation.

Inactive

• A well or associated facility where activities have stopped due to technical or economic reasons. Not all sites in this category are orphaned. Many may be reopened and produce again at a later date.

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:

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

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