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Alberta moves to better deal with delinquent oil and gas operators

Brad Herald, vice-president, Canadian Association of Petroleum Producers, Margaret McCuaig-Boyd, Minister of Energy, Jim Ellis, president and CEO, Alberta Energy Regulator.
Brad Herald, vice-president, Canadian Association of Petroleum Producers, Margaret McCuaig-Boyd, Minister of Energy, Jim Ellis, president and CEO, Alberta Energy Regulator.

The province of Alberta is building on recent moves to protect Albertans and the environment while ensuring a fairer liability system for oil and gas companies operating there.

 The provincial government worked with the Alberta Energy Regulator (AER) on amending a key requirement, known as Directive 67, to close a loophole. Officials from companies that walk away from wells or other oil and gas infrastructure without cleaning up will now be subject to greater scrutiny and AER discretion if they apply to start new companies.

"We're taking action to protect Albertans and the environment by ensuring consequences for those who try to get around the ‘polluter-pays' principle, said Minister of Energy Margaret McCuaig-Boyd. "Closing this loophole helps ensure Albertans are protected from financial and environmental liabilities, and that the vast majority of companies that behave responsibly are protected from those who attempt to offload their obligations onto others."

Changes made to Directive 67 will support companies that behave responsibly and help shield them from potential further increases in the number of orphan wells, which are reclaimed through a fund which industry pays into under the polluter-pays principle.

"We consider operating in Alberta a privilege, not a right. Enhanced disclosure of information and increased evaluation of an operator's compliance is a step in the right direction to ensure this privilege is only granted to those companies with a demonstrated history of responsible operations," commented Brad Herald, vice-president, Canadian Association of Petroleum Producers.

"We're pleased with the government's initiative to reduce environmental and financial risk to Albertans. We support provincial efforts that help ensure licences are granted to companies with the sound financial capacity, compliance history and professional expertise to responsibly operate through the life cycle of oil and natural gas development, from lease acquisition to reclamation," added Marty Proctor, president and CEO, Seven Generations Energy Ltd. 

Additional action the government has taken to protect Albertans includes:

  • A $235-million loan to the Orphan Well Association (OWA) to accelerate the cleanup of old wells across the province over the next three years.
  • Launching a broader review of oil and gas liabilities to determine long-term, made-in-Alberta solutions.
  • Lobbying the federal government for changes to bankruptcy laws that would hold companies accountable for their environmental cleanup.
  • Supporting municipalities provincewide with a credit for uncollectable taxes on disowned oil and gas properties.

This most recent action stems from the 2016 Redwater decision by the Alberta Court of Appeal and other receivership cases that have been undermining the AER's ability to ensure companies and operators are held accountable for their actions. This case is currently being appealed to the Supreme Court of Canada by the AER.

"The stronger rules will help prevent individuals who leave liabilities behind from returning to the industry without proper safeguards in place. Albertans permit companies to produce and profit from the province's energy resources with the expectation that they address end-of-life abandonment and reclamation obligations. The revised Directive 67 is one way we are working to enforce those obligations," said Jim Ellis, president and CEO, Alberta Energy Regulator.

Many other receivership cases within Alberta have used the precedent from the Redwater decision in disclaiming assets, raising Alberta's orphan well inventory dramatically. The OWA's inventory increased to 1,861 wells that were in need of reclamation in November of this year, up from 705 wells in March 2015.

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