Saturday, December 9, 2017

Delinquent oil and gas operators to face greater scrutiny

Chris Davis - According to a December 6 press release, the Government 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 in Alberta." Directive 67, developed by the government with the Alberta Energy Regulator (AER), will close a loophole that allowed companies to "walk away from wells or other oil and gas infrastructure without cleaning up". 

The new directive is in response to a 2016 decision by the Alberta Court of Appeal regarding the Redwater Energy Corp. bankruptcy which gave secured creditors priority over environmental cleanup concerns, and "other receivership cases that have been undermining the AER’s ability to ensure companies and operators are held accountable for their actions."  The AER is currently appealing the precedent-setting Redwater decision to the Supreme Court of Canada.   According to the government's press release,  the Orphan Well Association'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."

"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."

“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.” - Jim Ellis, president and CEO, Alberta Energy Regulator

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’re taking action to protect Albertans and the environment by ensuring consequences for those who try to get around the ‘polluter-pays’ principle. 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.” - Margaret McCuaig-Boyd, Minister of Energy

The AER approved Directive 67 on December 6, and it became effective that date as well. According to the directive, "Acquiring and holding a licence or approval for energy development in Alberta is a privilege, not a right. This new edition increases the scrutiny the AER applies to ensure that this privilege is only granted to responsible parties. Changes include requiring additional information at the time of application, increased discretion regarding the rejection of applications where an applicant poses a risk, and requirements for keeping corporate information up to date."

“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.” - Brad Herald, vice-president, Canadian Association of Petroleum Producers
The Alberta government has also provided 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."  In addition, a broader review of oil and gas liabilities is underway, the federal government is being lobbied change federal regulations "that would hold companies accountable for their environmental cleanup" "and for changes to bankruptcy laws, and municipalities province-wide will now receive credit for uncollectable taxes on disowned oil and gas properties."
“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.” - Marty Proctor, president and CEO, Seven Generations Energy Ltd.

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