Alberta regulator closes loophole to reduce number of orphan wells

The Alberta Energy Regulator is cracking down on bankrupt energy companies that walk away from abandoned wells, leaving taxpayers with the bill for the cleanup.

The AER and the Alberta government are closing a loophole in Directive 67, which only required a company to supply an address, have some insurance, and pay a small down payment.

The AER now has the authority to grant a licence with conditions or refuse to grant one at all based on past poor behaviour.

The lack of scrutiny allowed directors and owners of delinquent companies to form another company and apply for a new licence.

Jim Ellis, president and CEO of the AER, said the regulator will now evaluate past performance.

“So these compliance issues can be operational compliance, pipeline issues, emission issues,” Ellis said. “Or they can be the fact that they haven’t paid their bills.”

Ellis said missed payments include royalties, municipal taxes and fees payable to the Orphan Well Association.

“Those are indicators of past poor performance and we’re going to have a look to that to make sure these are companies that aren’t going to continue that under a new company as they move forward,” he said.

The changes come in light of the so-called Redwater decision that the AER and the Orphan Well Association have appealed to the Supreme Court of Canada.

The court granted leave to appeal and will hear arguments in February.

Lower courts ruled that creditors, not the costs of clean-up, should be paid first when bankrupt companies sell their assets.

The AER and the Orphan Well Association are concerned the ruling allows bankrupt companies to walk away from abandoned wells.

The government says other companies have used the Redwater case to justify abandoning their assets.

The number of orphan wells now sits at 1,861, compared to 705 in March 2015.

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