B.C. lacking tools to force companies to clean up inactive oil and gas wells

B.C.’s auditor general has found nearly 7,500 inactive oil and gas wells have not been decommissioned in the province, nearly double the number compared to 2007.

Auditor General Carol Bellringer says the BC Oil and Gas Commission estimates that decommissioning inactive wells and restoring sites will cost operators $3 billion.

In B.C., oil and gas operators are not required to decommission wells and restore well sites unless the BC Oil and Gas Commission explicitly orders them to do so to address specific safety or environmental issues on a case-by-case basis.

“We found that gaps in legislation meant that the OGC lacked the regulatory tools to compel operators to decommission and restore well sites in a timely way,” Bellringer said.

Abandoned well ruling from Supreme Court ‘credit negative’ for energy firms, says Moody’s

The auditor general report found there were 7,474 inactive wells across the province in 2018, compared to 3,800 in 2007.

Another 3,198 wells are designated as decommissioned but not yet restored. In total there are more than 10,000 wells no longer in service.

Bellringer estimates the operator liability of all oil and gas wells in B.C. is $2.8 billion.

When an oil and gas operator goes bankrupt in the province or cannot be located, the Oil and Gas Commission designates the operator’s site as orphaned and the commission becomes responsible for the decommissioning and restoration work.

Bankrupt energy companies can’t abandon old oil wells, Supreme Court rules

Orphan sites have boomed in the province, going up from 45 to 326 between 2015 and 2018. The auditor general found the commission is anticipating the number of orphan sites to go up and with it so will the cost.

“The Orphan Fund, which is funded through security deposits and a tax on operator’s production, is meant to cover the costs of restoration, but it was short by $16.6 million in 2016 and $13.1 million in 2017,” Bellringer said.

WATCH: Orphaned Wells Exhibit

In 2018, the B.C. legislative assembly passed amendments to the Oil and Gas Activities Act to provide the Oil and Gas Commissioner with the authority to require operators to restore sites, and greater flexibility to collect and use revenue from operators to restore orphan wells.

The audit did not account for the change and the commission has been working on accompanying regulations that will detail the requirements, including timelines to decommission wells and restore sites.

The Oil and Gas Commission agreed with all the recommendations put forward in the report, including a recommendation to ensure the Oil and Gas Commission completes its work on regulations to ensure “operators decommission and restore wells sites in a timely manner.”

“The passing of Bill 15 in 2018 provides the commission with the authority to develop regulations for timely restoration outcomes,” reads the commission’s response.

© 2019 Global News, a division of Corus Entertainment Inc.

You May Also Like

Top Stories