The Alberta government introduced legislation on May 18, 2017, that would allow it to lend the Orphan Well Association (OWA) $235 million to speed up proper abandonment and reclamation of a growing number of oil and gas well sites that no longer have a responsible owner.
The provincial government estimates that this loan will lead to up to 1,650 new jobs in reclamation work over the next three years, reducing the liability facing the OWA by approximately one-third. Alberta has an estimated 180,000 active wells, 83,000 inactive wells and 69,000 abandoned wells.
If the legislation is passed, the province said it would finance the loan by using the $30 million provided in the recent federal budget to backstop a loan much larger and at more favourable rates than the OWA could access on its own.
Orphan Well Association
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. It has an annual budget of $30 million, which is scheduled to increase to $60 million in the 2019-20 fiscal year. According to the Government of Alberta, this budget and its increase will be entirely covered by industry levies.
As of March 2017, the OWA had an inventory of 2,084 orphaned wells to go through closure activities (1,394 to be abandoned, 690 to be reclaimed). The agency closed 185 wells last year.
The annual budget for the OWA is $30 million and is scheduled to increase to $60 million in the 2019-20 fiscal year. This budget and its increase will be entirely covered by industry levies.
The loan program would be in addition to the ongoing closure and reclamation operations done every year by the OWA. The loan will be repaid to the Alberta government over a 10-year period. Repayment will be funded through the existing orphan fund levy paid by industry and managed on the OWA’s behalf by the Alberta Energy Regulator.
In addition to the OWA loan program, the Alberta government said it is working with industry and experts to find ways to better protect Albertans and the environment over the long term by improving the policies for managing old oil and gas liabilities.
To see the original release, visit: www.alberta.ca