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On Thursday, April 2, 2020, Bill 12: Liabilities Management Statutes Amendment Act, passed the third reading in the Alberta Legislature. The Bill will enable the Orphan Well Association (OWA) to better manage and accelerate the clean-up of wells or sites which do not have a responsible owner. The goal of this bill is to fast-track well and site cleanup work and boost employment in the oil services sector. The bill is currently waiting for Royal Assent.
This week’s article will look at the Bill and examine what it means for the industry.
The OWA to produce wells and operate pipelines
Perhaps the most significant change to come from Bill 12 is the ability for the OWA to produce oil from wells and operate pipelines that fall into the orphan well program. This means that viable wells that find themselves orphaned due to the economic crunch will be kept on stream until buyers emerge, rather than having them lie dormant or abandoned. This could help reduce the fees required to support the OWA program.
The immediate potential impact of this change is that the OWA could bring in other companies, such as service companies or even nearby producers, to run these wells and pipelines. This opens job opportunities in the areas with viable wells in the OWA and increases the need for operators to have a sense of the full opportunities and synergies in their areas of operations.
Figure 1- OWA wells by concentration
Expanding the roles and responsibilities of the OWA and the AER to help reduce the number of orphan wells
Bill 12 would amend two pieces of provincial legislation both The Oil and Gas Conservation Act and The Pipeline Act. These amendments, when paired with the $100 million loan extended to the OWA in March, give the OWA and AER more authority to fast-track well and site cleanup work, providing safe and isolated work for operators currently affected by the dual crises of COVID-19 and the ongoing oil and gas price war. This will help Alberta continue to meet its environmental liability obligations, leaning on the expertise of the AER to determine which wells need to be abandoned and which could continue producing.
With the increased work done through the OWA, it remains essential for producers to stay on top of their working interest obligations. If you have working interest in wells that are in OWA, they may quickly become expenses as the OWA ramps up their abandonment work, as could wells and facilities you currently share with companies that may become insolvent in the coming months. With the uncertainty currently facing our industry, it’s more important than ever to track down all your working interest partners and assess their viability and to have a full sense of working interest obligations of potential acquisitions.
Figure 2 – The top 20 fields with wells in the OWA.
XI Technologies can help producers navigate this new bill, both by providing Synergy Reports with AssetBook to help find potential opportunities with wells set to be operated by the OWA and with working interest information for all wells in Alberta with ARO Manager. For more information on the role working interests play in ARO and how XI Technologies addresses that importance, watch this video from a recent webinar on the subject. For a more in-depth look at ARO Manager book a personalized demo, or contact XI Sales.
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