Results 1 to 16 of 16

Thread: Supreme Court says environmental cleanup comes before creditors for orphan well owners.

  1. #1

    Default Supreme Court says environmental cleanup comes before creditors for orphan well owners.

    Cue the howls of outrage from the right that companies shouldn't be responsible for cleaning up their messes.

    Supreme Court rules energy companies cannot walk away from old wells

    Energy companies cannot abandon old oil and natural gas wells in the case of bankruptcy, the Supreme Court of Canada says in a decision released Thursday.


    The top court's ruling overturns two lower court decisions that said bankruptcy law has paramountcy over provincial environmental responsibilities in the case of Redwater Energy, which became insolvent in 2015. That meant energy companies could first pay back creditors before cleaning up old wells. In practical terms, that means energy companies could walk away from old oil and gas wells, leaving them someone's else's responsibility.


    The top court ruled 5-2 to overturn the earlier ruling. In doing that, it said bankruptcy is not a licence to ignore environmental regulations, and there is no inherent conflict between federal bankruptcy laws and provincial environmental regulations.

    https://www.cbc.ca/news/business/sup...ells-1.4998995

  2. #2
    C2E Continued Contributor
    Join Date
    Jul 2015
    Location
    Downtown Edmonton
    Posts
    1,674

    Default

    Quote Originally Posted by kkozoriz View Post
    Cue the howls of outrage from the right that companies shouldn't be responsible for cleaning up their messes.

    Supreme Court rules energy companies cannot walk away from old wells

    Energy companies cannot abandon old oil and natural gas wells in the case of bankruptcy, the Supreme Court of Canada says in a decision released Thursday.


    The top court's ruling overturns two lower court decisions that said bankruptcy law has paramountcy over provincial environmental responsibilities in the case of Redwater Energy, which became insolvent in 2015. That meant energy companies could first pay back creditors before cleaning up old wells. In practical terms, that means energy companies could walk away from old oil and gas wells, leaving them someone's else's responsibility.


    The top court ruled 5-2 to overturn the earlier ruling. In doing that, it said bankruptcy is not a licence to ignore environmental regulations, and there is no inherent conflict between federal bankruptcy laws and provincial environmental regulations.

    https://www.cbc.ca/news/business/sup...ells-1.4998995
    I'm writing a technical report on this matter. Thanks for the link!
    There was no need to change that plaque. We are the City of Champions.

  3. #3
    C2E Hard Core Contributor
    Join Date
    Jul 2007
    Location
    asia
    Posts
    2,621

    Default

    Quote Originally Posted by kkozoriz View Post
    Cue the howls of outrage from the right that companies shouldn't be responsible for cleaning up their messes.
    This decision probably works to the benefit of right-wing politicians, and anyone else who promotes the energy industry. If the taxpayer were getting soaked for the cleanup, that could create a major backlash. But this way, with a SCOC ruling, the politicians can just say "Well, the courts have decided, nothing we can do about it tsk tsk tsk" and leave it at that.

  4. #4
    C2E Continued Contributor
    Join Date
    Sep 2013
    Location
    I don't even know anymore :/
    Posts
    1,232

    Default

    It's to everyone's benefit, doesn't mean there would be people upset about it though. There are a lot of people out there who believe the short-term bottom line trumps all.

  5. #5
    C2E Hard Core Contributor
    Join Date
    Jul 2007
    Location
    asia
    Posts
    2,621

    Default

    Quote Originally Posted by seamusmcduffs View Post
    It's to everyone's benefit, doesn't mean there would be people upset about it though. There are a lot of people out there who believe the short-term bottom line trumps all.
    Yeah, the oil companies will be upset, obviously. But I wouldn't expect to see a lot of right-wingers taking their side. They'd basically be demanding that the much lionized "taxpayer" foot the bill for clean-up.

    The only thing that might be an influence is if companies that were planning a future investment in the oil patch say they might decide to cancel if the deal includes being billed for the clean-up in the event of bankruptcy. But even then, I can't see many politicians taking up that particular cause.

  6. #6
    C2E Hard Core Contributor
    Join Date
    Mar 2006
    Location
    St. Albert
    Posts
    2,070

    Default

    The ignorance here is stunning. Orphan Oil Wells are cleaned up by the Orphan Well Association. This is an Alberta organization funded by Oil Companies. These companies will be happy that they aren't stuck with the bill.

  7. #7
    C2E SME
    Join Date
    Dec 2009
    Location
    Downtown Edmonton
    Posts
    10,993

    Default

    This could well significantly impact the investment climate in the energy industry. This doesn't benefit "everyone", someone has to lose here. Lenders are going to either stop lending to energy/drilling companies or ask for higher rates, more security, etc etc in return for carrying more risk that if and when they go out of business, they're in line behind the environmental cleanup costs.

    The SC decision makes sense to me, at least on a brief review of the issue. But this is another thing further eroding the competitiveness and attractiveness of the energy industry in the province and country. Couple that with Fort Mac wanting to ban all new or renewed camps in the vicinity of it, and it's not been a good week for the oil patch.

    Quote Originally Posted by ralph60
    The ignorance here is stunning. Orphan Oil Wells are cleaned up by the Orphan Well Association. This is an Alberta organization funded by Oil Companies. These companies will be happy that they aren't stuck with the bill.


    Unfortunately the OWA is quite underfunded, and is not able to keep up with the latest round of bankruptcies.

    https://www.cbc.ca/news/business/alberta-orphan-wells-1.4543559

    In Alberta, energy companies are charged a levy that supports a fund paying for the clean-up of old wells and other abandoned infrastructure. Until recently, bankrupt companies contributed to the costs of cleaning up their sites through the insolvency process.
    But since the first lower court ruling in 2016, 1,800 AER-licensed sites have been abandoned, with estimated liabilities of more than $110 million. In the same period, the Orphan Well Association's inventory more than tripled from almost 1,200 to more than 3,700.

    The annual levies charged to industry to support the fund have soared to $30 million in 2017 from $15 million in 2014. The planned levy for 2018 is $45 million.

    Lawyer Ken Lenz, representing the OWA at the hearing, said the association can't do the work in front of them unless it gets further levies every year, which is out of its control.

    "Of course we'll try and perform the work that we can but, frankly, on a balance sheet basis, we're insolvent," he said.

    One of the main reasons the OWA was created in the early 1990s was to avoid those clean-up costs falling to the public.
    Strange you didn't mention that. Did you intentionally leave that out? Or are you also, you know, ignorant?
    Last edited by Marcel Petrin; 31-01-2019 at 03:53 PM.

  8. #8

    Default

    Quote Originally Posted by ralph60 View Post
    The ignorance here is stunning. Orphan Oil Wells are cleaned up by the Orphan Well Association. This is an Alberta organization funded by Oil Companies. These companies will be happy that they aren't stuck with the bill.
    Stunning? You must have a vast knowledge of issues compared to, say, me.


    From March 2018:

    Orphan wells: Alberta’s $47 billion problem | The Western Producer

    “Its demise, if it occurs, would add at least another 2,300 oil and gas wells and possibly as many as 4,000 to the list of energy infrastructure sites on Alberta farm and ranch land that will require reclamation.

    The trouble is that Sequoia, like many other energy companies that have entered receivership or gone bankrupt in recent years, cannot cover the cost of that reclamation.

    The Orphan Well Association, a non-profit organization funded by the energy industry and the province, can’t either. As of Feb. 28, it had 1,038 wells on its list for reclamation and a plan, using existing funds and a government loan of $235 million, to clean up about 700 wells in the next three years.
    It also has a list of more than 1,900 orphan wells on its list for abandonment or suspension, along with more than 3,600 pipeline segments.

    What of those, the newly abandoned energy assets, and others that might fall to economic ruin in coming years?

    Landowners — Alberta farmers and ranchers — could be left with...”



    https://www.producer.com/2018/03/orp...llion-problem/
    Last edited by KC; 31-01-2019 at 06:42 PM.

  9. #9
    C2E Continued Contributor
    Join Date
    Jul 2015
    Location
    Downtown Edmonton
    Posts
    1,674

    Default

    Quote Originally Posted by KC View Post
    Quote Originally Posted by ralph60 View Post
    The ignorance here is stunning. Orphan Oil Wells are cleaned up by the Orphan Well Association. This is an Alberta organization funded by Oil Companies. These companies will be happy that they aren't stuck with the bill.
    Stunning? You must have a vast knowledge of issues compared to, say, me.


    From March 2018:

    Orphan wells: Alberta’s $47 billion problem | The Western Producer

    “Its demise, if it occurs, would add at least another 2,300 oil and gas wells and possibly as many as 4,000 to the list of energy infrastructure sites on Alberta farm and ranch land that will require reclamation.

    The trouble is that Sequoia, like many other energy companies that have entered receivership or gone bankrupt in recent years, cannot cover the cost of that reclamation.

    The Orphan Well Association, a non-profit organization funded by the energy industry and the province, can’t either. As of Feb. 28, it had 1,038 wells on its list for reclamation and a plan, using existing funds and a government loan of $235 million, to clean up about 700 wells in the next three years.
    It also has a list of more than 1,900 orphan wells on its list for abandonment or suspension, along with more than 3,600 pipeline segments.

    What of those, the newly abandoned energy assets, and others that might fall to economic ruin in coming years?

    Landowners — Alberta farmers and ranchers — could be left with...”



    https://www.producer.com/2018/03/orp...llion-problem/
    In all my research, I have no idea where they got that 47 billion dollar number and have concluded that it's alarmism. The OWA inventory has about 3500 wells, lines, and facilities under it's inventory and a great surge of these are the byproduct of the Lexin fiasco (worth a google). So far, the OWA has successfully led the completion and abandonment of 700 some wells thanks to funding from the industry as a whole and further support from the NDP. Yes, we're facing a surge of orphans, however all signals show it to be a short term phenomena.

    The only way I could see them getting that number is if every oil company went into bankrupty and the 200 thousand+ wells in Alberta all fell into the inventory.

    This is however, very great news. It sets precedent and holds lenders and creditors responsible when their clients go insolvent.
    There was no need to change that plaque. We are the City of Champions.

  10. #10

    Default

    I believe this below was the worst, worst case scenario. (And of course it makes a great headline and of course media doesn’t try to put such information into any meaningful perspective.) As such I recall that someone got into huge trouble for this transparency and openness.


    Cleaning up Alberta’s oilpatch could cost $260 billion, internal documents warn | Globalnews.ca

    “...
    Until now, the public has been told the liabilities have been calculated at about $58 billion, far less than Wadsworth’s estimate.

    ...
    The AER said Wadsworth’s presentation provided “a snapshot in time of estimated total liability” and was based on a “worst-case scenario” of a complete industry shutdown.

    This seems to contradict a statement in Wadsworth’s presentation that the estimates are “likely less than the actual cost.”

    https://globalnews.ca/news/4617664/c...ocuments-warn/
    How they see this as a contradiction I don’t know. If you have 10 scenarios spanning a range from best to worst cost then any estimate and any actual costs may very well be less than the worst case scenario.



    The age old phrase “worst case” must now be confusing a lot of people.


    Alberta regulator apologizes for spooking public with $260-billion cleanup cost estimate | Globalnews.ca

    “Wadsworth has declined to give an interview about his remarks and the regulator said earlier this week in a statement that the estimates he released were based on a worst-case scenario involving a “complete and immediate” shutdown of the entire industry.

    But following the media report, the regulator went further, suggesting the decision to use the numbers in the presentation was a mistake.“We want to apologize for the concern and confusion that this information has caused,” said the statement.

    “The numbers are staggering – $260 billion in total liability, which is $200 billion more than we have consistently reported. This particular estimate was created for a presentation to try and hammer home the message to industry that the current liability system needs improvement.”


    https://globalnews.ca/news/4621955/a...cost-estimate/
    Bolding mine
    Last edited by KC; 31-01-2019 at 07:33 PM.

  11. #11
    C2E Continued Contributor
    Join Date
    Jul 2015
    Location
    Downtown Edmonton
    Posts
    1,674

    Default

    Quote Originally Posted by KC View Post
    I believe this below was the worst, worst case scenario. (And of course it makes a great headline and of course media doesn’t try to put such information into any meaningful perspective.) As such I recall that someone got into huge trouble for this transparency and openness.


    Cleaning up Alberta’s oilpatch could cost $260 billion, internal documents warn | Globalnews.ca


    The AER said Wadsworth’s presentation provided “a snapshot in time of estimated total liability” and was based on a “worst-case scenario” of a complete industry shutdown.

    This seems to contradict a statement in Wadsworth’s presentation that the estimates are “likely less than the actual cost.”

    https://globalnews.ca/news/4617664/c...ocuments-warn/
    I'd say again that that is a bit of alarmism. Regulators have a way of over estimating costs in a bid to gain more awareness to their cause and gaining better funding. Anyone with any knowledge of the process of abandoning old facilities and wells knows that most operators handle these on a case by case basis as they become less and less economical. The capital benefits these wells provide to the operator far outweigh the costs and abandonment, and operators are 99.9% of the time pretty responsible in the way they handle these matters.

    Also, you wouldn't assume all wells are going to be handed over to the OWA. I believe what you'll see is enhanced liability rating systems employed by lenders and insurance to protect them from the prospect of dealing with these facilities/wells.
    There was no need to change that plaque. We are the City of Champions.

  12. #12

    Default

    Quote Originally Posted by Stevey_G View Post
    Quote Originally Posted by KC View Post
    I believe this below was the worst, worst case scenario. (And of course it makes a great headline and of course media doesn’t try to put such information into any meaningful perspective.) As such I recall that someone got into huge trouble for this transparency and openness.


    Cleaning up Alberta’s oilpatch could cost $260 billion, internal documents warn | Globalnews.ca


    The AER said Wadsworth’s presentation provided “a snapshot in time of estimated total liability” and was based on a “worst-case scenario” of a complete industry shutdown.

    This seems to contradict a statement in Wadsworth’s presentation that the estimates are “likely less than the actual cost.”

    https://globalnews.ca/news/4617664/c...ocuments-warn/
    I'd say again that that is a bit of alarmism. Regulators have a way of over estimating costs in a bid to gain more awareness to their cause and gaining better funding. Anyone with any knowledge of the process of abandoning old facilities and wells knows that most operators handle these on a case by case basis as they become less and less economical. The capital benefits these wells provide to the operator far outweigh the costs and abandonment, and operators are 99.9% of the time pretty responsible in the way they handle these matters.

    Also, you wouldn't assume all wells are going to be handed over to the OWA. I believe what you'll see is enhanced liability rating systems employed by lenders and insurance to protect them from the prospect of dealing with these facilities/wells.
    Mostly agree. However presenting a worst case scenario as alarmist as the media spun it is nonsensical. It is what it is and the guy was obviously up front about it. Presenting a best case scenario as a-best-case-scenario is also not head in the clouds thinking or manipulation. However presenting either or any scenario as more probable than other equally probable scenarios is wrong.


    Would be interesting to know if the $260 billion liability is close to the actual aggregate liability or if the estimate is higher due to some higher cost estimate for reclamation costs of abandoned wells vs operator/owner well reclamation costs.
    Last edited by KC; 31-01-2019 at 07:40 PM.

  13. #13
    C2E Continued Contributor
    Join Date
    Jul 2015
    Location
    Downtown Edmonton
    Posts
    1,674

    Default

    Quote Originally Posted by KC View Post
    Quote Originally Posted by Stevey_G View Post
    Quote Originally Posted by KC View Post
    I believe this below was the worst, worst case scenario. (And of course it makes a great headline and of course media doesn’t try to put such information into any meaningful perspective.) As such I recall that someone got into huge trouble for this transparency and openness.


    Cleaning up Alberta’s oilpatch could cost $260 billion, internal documents warn | Globalnews.ca


    The AER said Wadsworth’s presentation provided “a snapshot in time of estimated total liability” and was based on a “worst-case scenario” of a complete industry shutdown.

    This seems to contradict a statement in Wadsworth’s presentation that the estimates are “likely less than the actual cost.”

    https://globalnews.ca/news/4617664/c...ocuments-warn/
    I'd say again that that is a bit of alarmism. Regulators have a way of over estimating costs in a bid to gain more awareness to their cause and gaining better funding. Anyone with any knowledge of the process of abandoning old facilities and wells knows that most operators handle these on a case by case basis as they become less and less economical. The capital benefits these wells provide to the operator far outweigh the costs and abandonment, and operators are 99.9% of the time pretty responsible in the way they handle these matters.

    Also, you wouldn't assume all wells are going to be handed over to the OWA. I believe what you'll see is enhanced liability rating systems employed by lenders and insurance to protect them from the prospect of dealing with these facilities/wells.
    Mostly agree. However presenting a worst case scenario as alarmist as the media spun it is nonsensical. It is what it is and the guy was obviously up front about it. Presenting a best case scenario as a-best-case-scenario is also not head in the clouds thinking or manipulation. However presenting either or any scenario as more probable than other equally probable scenarios is wrong.


    Would be interesting to know if the $260 billion liability is close to the actual aggregate liability or if the estimate is higher due to some higher cost estimate for reclamation costs of abandoned wells vs operator/owner well reclamation costs.
    Possibly. Their mining liabilities seem exaggerated, but when you do a bulk calculation of all aggregate wells and facilities and multiple by an average cost of completion and abandonment, you get an extraordinary number.

    This however isn’t an accurate description of its what they’re going off of. To abandon a shallow vertical can’t be compared to a multi stage horizontal for example as costs are 15 fold for one against the other.

    I could run some numbers next week through geoscout and try and get a decent estimate. His estimate seems extraordinarily high though from a quick look.

  14. #14

    Default

    Quote Originally Posted by KC View Post
    Mostly agree. However presenting a worst case scenario as alarmist as the media spun it is nonsensical. It is what it is and the guy was obviously up front about it. Presenting a best case scenario as a-best-case-scenario is also not head in the clouds thinking or manipulation. However presenting either or any scenario as more probable than other equally probable scenarios is wrong.

    Would be interesting to know if the $260 billion liability is close to the actual aggregate liability or if the estimate is higher due to some higher cost estimate for reclamation costs of abandoned wells vs operator/owner well reclamation costs.
    $260 Billion may be the TOTAL liability of the estimated 400,000 wells out there as a worst case.

    I don't know what the cost to permanently seal every oil and gas well and clean up all the sites including fracking sites, the tar sands reclamation and all the SAG installations. Many sites have already been cleaned up and sealed and the majority of the others will be done by responsible companies. What's left over is the issue. Not only companies that have gone bankrupt recently and those that will in the future but also all those legacy wells that are 50 to 100 years old.




    The drilling platform on Dingman No. 1, 1914, probably before the well struck the reservoir
    Source: Provincial Archives of Alberta, P1303
    http://www.history.alberta.ca/energy...6/default.aspx

    Map: Alberta littered with inactive oil and gas wells
    https://globalnews.ca/news/2301432/m...and-gas-wells/


    Western Canada Well Report
    http://www.capp.ca/~/media/capp/cust...nts/258247.pdf
    Last edited by Edmonton PRT; 01-02-2019 at 08:20 AM.
    Advocating a better Edmonton through effective, efficient and economical transit.

  15. #15

    Default

    This article is great! Includes some decent information.


    Why Is Well Decommissioning So Slow In Canada? | OilPrice.com
    By David Yager - Feb 19, 2016


    “Of the nearly 450,000 wells ever drilled in Alberta, 44 percent are still producing or in active service (example injection and observation wells), while 38 percent have been either partially or completely decommissioned. A whopping 77,658 are inactive. That doesn’t mean all of these wells must be decommissioned. There are several reasons good commercial reasons why a well can be inactive but not yet deemed ready for the graveyard. These include: ...”

    “...Regardless of when this is done and why, Alberta’s current active and inactive well inventory will require WD on nearly 275,000 wellbore in the next 20 to 30 years, depending how long they produce for. The potential opportunity for OFS these wellbores will create when decommissioned is charted below at average costs of $100,000, $200,000 and $300,000 per well. This generates really big numbers. ...”

    https://oilprice.com/Energy/Crude-Oi...In-Canada.html
    Last edited by KC; 02-02-2019 at 02:04 PM.

  16. #16
    C2E Continued Contributor
    Join Date
    Jul 2015
    Location
    Downtown Edmonton
    Posts
    1,674

    Default

    Quote Originally Posted by KC View Post
    This article is great! Includes some decent information.


    Why Is Well Decommissioning So Slow In Canada? | OilPrice.com
    By David Yager - Feb 19, 2016


    “Of the nearly 450,000 wells ever drilled in Alberta, 44 percent are still producing or in active service (example injection and observation wells), while 38 percent have been either partially or completely decommissioned. A whopping 77,658 are inactive. That doesn’t mean all of these wells must be decommissioned. There are several reasons good commercial reasons why a well can be inactive but not yet deemed ready for the graveyard. These include: ...”

    “...Regardless of when this is done and why, Alberta’s current active and inactive well inventory will require WD on nearly 275,000 wellbore in the next 20 to 30 years, depending how long they produce for. The potential opportunity for OFS these wellbores will create when decommissioned is charted below at average costs of $100,000, $200,000 and $300,000 per well. This generates really big numbers. ...”

    https://oilprice.com/Energy/Crude-Oi...In-Canada.html
    Wells can be inactive for a variety of different reasons, quite often, many wells with get shut-in until the economic viability of their operation improves. If your well only produces a cube or two a day of oil and your lifting costs are more than 250 per cube, then you're not gonna run the well until oil prices improve.
    There was no need to change that plaque. We are the City of Champions.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •