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Supreme Court rules energy companies cannot abandon old wells

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  • Supreme Court rules energy companies cannot abandon old wells

    About time. Companies cannot abandon the wells and leave the govt (tax payers) holding the bag for the clean up.
    Alberta's Orphan Well Association is funded by the industry but no way near the funds required to clean up the massive amount of wells that are abandoned and will be in the next little while.
    The Supreme Court of Canada has ruled that energy companies cannot abandon old oil and natural wells in the case of bankruptcy.

  • #2
    Yeah, its about paying for the cleanup before paying the bank back, in the event of a bankruptcy... and it makes a lot of sense.

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    • #3
      Originally posted by squish View Post
      Yeah, its about paying for the cleanup before paying the bank back, in the event of a bankruptcy... and it makes a lot of sense.
      I think it makes more sense for the government to be pre-charging the cleanup fee.

      Part of the royalty structure should (and I believe already does) include the cleanup fee. We shouldn't be relying on private sector to clean up. If the company wants to do the cleanup themselves they can do so, and the government can give that pre-charged fee back.

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      • #4
        Originally posted by imschatz View Post

        I think it makes more sense for the government to be pre-charging the cleanup fee.

        Part of the royalty structure should (and I believe already does) include the cleanup fee. We shouldn't be relying on private sector to clean up. If the company wants to do the cleanup themselves they can do so, and the government can give that pre-charged fee back.
        They do have companies post a bond before drilling, but it hasen't been enough to cover the increase in bankruptcies.

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        • #5
          Originally posted by squish View Post

          They do have companies post a bond before drilling, but it hasen't been enough to cover the increase in bankruptcies.
          I've read a lot of companies just create tons of smaller shell corps down to the level of an individual well, then when it's tapped out they just pull out and declare bankruptcy on the shell corp - passing along the costs to the gov't for cleanup. Super shady. Glad this is going to attempt to put an end to that kind of practice.

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          • #6
            It's too bad this doesn't apply to companies that close gas stations and walk away without remediating the site. Far too many brownfield sites around!

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            • #7
              Originally posted by carmen16 View Post
              It's too bad this doesn't apply to companies that close gas stations and walk away without remediating the site. Far too many brownfield sites around!
              This is immediately what I thought of when I read the SC decision. I know this doesn't hold water for the City, but I agree wholeheartedly that companies should be responsible for these cleanups after the fact. Charge half a penny or two at the pumps for that reason alone. We're paying for it anyways, but at least there's funds set aside for it.

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              • #8
                Squish can clarify I'm sure but don't mining companies like these jokers mining gold in Alaska on Discovery Channel have to have a bond to re-mediate sites when they are done tearing up the land?

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                • #9
                  Originally posted by Sofaking View Post
                  Squish can clarify I'm sure but don't mining companies like these jokers mining gold in Alaska on Discovery Channel have to have a bond to re-mediate sites when they are done tearing up the land?
                  Yes, they do for sure, at least in Canada. To get the license in the first place they have to show a remediation plan, then actually carry it out. One part of one of the shows actually showed Dave Turin working on the reclamation, and it actually looked quite good. Trouble is when and if they go bankrupt mining, in which case hopefully their bond is enough to cover their reclamation.

                  In the states, there was a thing called the EPA "Superfund" that allowed the EPA to take over old mine sites and begin reclamation and monitoring. But that was tax dollars to my knowledge.

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                  • #10
                    Originally posted by carmen16 View Post
                    It's too bad this doesn't apply to companies that close gas stations and walk away without remediating the site. Far too many brownfield sites around!
                    I used to monitor and test those sites. At least in cities there is some hope for remediation, but in small towns where the land is essentially "worthless" there is no hope at all.

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                    • #11
                      All the supreme court ruling says is that cleanup costs jump ahead of creditors in bankruptcy, I suppose not unlike employee wages. If an oil company goes bankrupt with no real assets to sell the company will have no ability to pay for cleanup or pay its wages etc. What this does probably do is increase the cost of borrowing for oil producers because the lender has a lot less security than they did before.

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                      • #12
                        Originally posted by Bignorm View Post
                        All the supreme court ruling says is that cleanup costs jump ahead of creditors in bankruptcy, I suppose not unlike employee wages. If an oil company goes bankrupt with no real assets to sell the company will have no ability to pay for cleanup or pay its wages etc. What this does probably do is increase the cost of borrowing for oil producers because the lender has a lot less security than they did before.
                        Oh yeah, for the companies this will be a cost, and for the lenders it will be a liability. They will have to actually have set aside money for abandonment and not spent on anything else. But I can't think of a different way to do it that is more fair, where the abandonment actually gets done.

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                        • #13
                          Originally posted by Bignorm View Post
                          All the supreme court ruling says is that cleanup costs jump ahead of creditors in bankruptcy, I suppose not unlike employee wages. If an oil company goes bankrupt with no real assets to sell the company will have no ability to pay for cleanup or pay its wages etc. What this does probably do is increase the cost of borrowing for oil producers because the lender has a lot less security than they did before.
                          It will for sure increase the cost of borrowing for producers and there will be banks that just start saying no to lending to any smaller producers because at the end of it, it's the banks that will be taking the losses. I know the argument will be made by some that it's ok if the banks take the losses because they make billions every year. But that isn't the reality, banks have an obligation to shareholders to maximize return, just like any other business, so not taking risks on files where the probability of losses in down times is very high, they'll just avoid lending to those particular files.

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                          • #14
                            Originally posted by flatlandriderfan View Post

                            It will for sure increase the cost of borrowing for producers and there will be banks that just start saying no to lending to any smaller producers because at the end of it, it's the banks that will be taking the losses. I know the argument will be made by some that it's ok if the banks take the losses because they make billions every year. But that isn't the reality, banks have an obligation to shareholders to maximize return, just like any other business, so not taking risks on files where the probability of losses in down times is very high, they'll just avoid lending to those particular files.
                            BUt the alternative is to either not clean up the wells, or have the tax payer pay to clean them up. Which is preferable?

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                            • #15
                              Originally posted by squish View Post

                              BUt the alternative is to either not clean up the wells, or have the tax payer pay to clean them up. Which is preferable?
                              So having financial institution lose the money is a good alternative? Like I said, the banks will just back away from lending to those smaller producers so most of them won't even be able to even start up business so the likelihood of having to choose between your two alternatives will be greatly reduced

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