Supreme Court rules energy companies cannot abandon old wells

[lerriuqs]

Why would it be a liability to the lenders? The bank won’t be taking on the risk or responsibility for abandoned wells.

Because cleanup costs will go before their loan repayment making it harder for them to recover what’s owed in the event of a bankruptcy.

[C.M.Burns]

Good in theory, but one thing (pipelines across provincial borders) is a Federal jurisdiction, while regs around well abandonment is provincial law.

Why did it take a Supreme court ruling? Because two lower courts found in favor of Redwater (or rather their bank) in this particular case. In times like these, this will be something that actually hurts producers quite a lot, but to me its a cost of doing business.

It's almost like we should have a streamlined and sane regulatory environment so that energy companies can devote resources to things like well cleanup instead of producing 37,000 page reports for license applications.

[squish]

It's almost like we should have a streamlined and sane regulatory environment so that energy companies can devote resources to things like well cleanup instead of producing 37,000 page reports for license applications.

Yeah, but the companies involved in both are completely different. Also upstream/downstream parts of companies operate independently.

[voice of reason]

Because cleanup costs will go before their loan repayment making it harder for them to recover what’s owed in the event of a bankruptcy.

It has the potential to turn loans that are most like a mortguage, into ones that look like a Visa card.

[jollyrider]

It's almost like we should have a streamlined and sane regulatory environment so that energy companies can devote resources to things like well cleanup instead of producing 37,000 page reports for license applications.

There should be a way that clean up cost go to an independent legacy fund either a fix amount when well is drilled or royalties from a well, rather then transfer of responsibilities once the well is sold along its life.

[goaltender61]

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?

There sure seems to be a lot of big piles of gravel all around Dawson city from the dredges back in the day but I would guess that was before rules came in for placer mines

[goaltender61]

Supreme Court rules energy companies cannot abandon old wells

Why does it take a ruling from the supreme court to make oil and mining companies clean up their mess. Cops get upset with me and charge me for tossing one empty beer can out my truck window. It's not fair.

Truth be told all producers try and push off abandoning wells as it is cash out with no return but will the new AER regulations you don't have that option anymore and major oil and gas producers abandon far more wells every year than they drill the problem comes when someone goes bankrupt and simply walks away leaving the tax payer and industry on the hook. That will change now

Some shallow oil or gas wells are fairly strait forward to abandon pull the rods and tubing squeeze some cement in the perforated zone cut the casing and cap it and your done but deeper complex multi zone wells with sour gas or leaking vent flows can take months. I worked on some abandonments at turner valley that were drilled pre WW 2 and you never knew what you were going to pull out of the well as they kept terrible records.

There are at least 20,000 unproductive wells scattered around Alberta and I'm not sure how many in Saskatchewan and Manitoba

[jenius]

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There are at least 20,000 unproductive wells scattered around Alberta and I'm not sure how many in Saskatchewan and Manitoba

Wow. This problem is a wee bit larger than I thought. Maybe they are just a little late closing loopholes.

[squish]

There sure seems to be a lot of big piles of gravel all around Dawson city from the dredges back in the day but I would guess that was before rules came in for placer mines

Yes, for sure, or the old coal mine tailings south of Estevan.

[jollyrider]

Wow. This problem is a wee bit larger than I thought. Maybe they are just a little late closing loopholes.

Some more on this.

[Marcus Aurelius]

What a mess. The Feds covering the interest of the provincial loan to industry sure was nice.

[jenius]

Some more on this.

$200billion. Sounds like "sales tax".

[jollyrider]

$200billion. Sounds like "sales tax".

I think $200B is an exaggeration but half of that could be the real cost at current dollars. Like Marcus Aurelius says, what a mess. Some of these wells / wellsites might never be cleaned up.

[squish]

Some more on this.

I'd say their numbers are a little screwy (not uncommon for the tyee). 300k/well for abandonment would only be on the most severe deepest craziest wells out there. AS I said, most use a number of around 50k, as high as 80k.

The 200 billion number is if every company in Alberta went bankrupt and were unable to pay their liabilities. Most wells are owned by giants like CNRL, Husky, Shell etc who will not have trouble paying their abandonment costs. The fear is though that they often sell to smaller companies who might have trouble, but I would think they will take setting aside capital for that more seriously now.