LETTER TO ALL OPERATORS - July 1995
Alberta Energy and Utilities Board
640 - 5 Avenue SW
Calgary AB
T2P 3G4
Canadian Association of Petroleum Producers
2100, 350 - 7 Ave SW
Calgary AB
T2P 3N9
Small Explorers and Producers Association of Canada
Suite 1040
717 - 7 Avenue SW
Calgary AB
T2P 0Z3
TO: All Oil, Gas, and Oil Sands Operators
WELLS INACTIVE FOR MORE THAN TEN CONSECUTIVE YEARS
As members of the Fund Advisory Committee (FAC), which administers the industry funded restricted Abandonment Fund (orphan wells), the Alberta Energy and Utilities Board (AEUB), the Canadian Association of Petroleum Producers (CAPP) and the Small Explorers and Producers Association of Canada (SEPAC) share a mutual concern with respect to the number of wells in the Province of Alberta that have been inactive for more than 10 consecutive years. Many of these wells appear to have little economic value and may pose an increasing risk to the public and the environment because the care and attention directed to these has traditionally been less than that afforded to producing wells. More importantly, the financial liability for these wells with respect to the completion of the subsurface abandonment and the reclamation of the well site and access road will be substantial. This is of particular concern to the FAC because this category of well is viewed as representing a high risk for the creation of orphan wells in the future. This in turn would place significant demands on the resources of the Abandonment Fund which the FAC has a mandate to protect. The FAC advises that it will recommend to the AEUB that the measures identified in later sections of this letter be implemented effective 1 July 1996.
By definition, the AEUB considers a well to be inactive 1 when there is no recorded production or injection from any event in the well over the past 12 consecutive months. Currently, there are over 12 000 wells that have been inactive for more than 10 consecutive years; these wells are licensed to approximately 600 licensees. Statistics on types of wells and age categories, based on a AEUB survey carried out in December 1994, are presented in an attachment to this letter. Based on current trends, the number of wells in this category is projected to increase to 21 000 wells by the end of the century.
1 Excludes wells used as observation wells, training wells, brine source wells, wells used for LPG storage, farm gas wells and wells that have been abandoned.
The responsibility for reducing the population of wells that has been inactive for more than 10 consecutive years and the corresponding abandonment/reclamation liability for these wells rests with the licensee and working interest participants. To this end, the FAC will recommend that the AEUB implement action outlined below to promote the timely abandonment of uneconomic wells and to ensure that licensees meet their financial obligations respecting abandonment and reclamation.
Effective 1 July 1996, the AEUB should require the licensees of wells that have been inactive for more than 10 consecutive years to submit, within 60 days, a program outlining how the number of wells will be reduced. It is expected that the program would outline the wells which will be abandoned, transferred or re-activated and would provide a definitive schedule for the completion of this work. Operations proposed under the program should be completed by 31 December 1997, unless the AEUB approves a longer compliance schedule. Should a licensee wish to retain the inactive well status for any of the wells which have been inactive for more than 10 consecutive years, then the licensee should be required to satisfy the AEUB as to the productive capability of the well or failing that, to establish an abandonment deposit for the well. The first instalment of the abandonment deposit should be in place by 31 March 1997. The Oil and Gas Regulations should be amended accordingly to reflect the changes in requirements for wells that have been inactive for more than 10 consecutive years.
These requirements are not as yet cast in stone and the undersigned would encourage all interested parties to provide input on the possible changes, improvements or alternative ways to address this problem to the AEUB or their respective industry association. Questions or comments pertaining to the above can be directed to Mr. Ken Hunt of the AEUB's Drilling and Production Department at 297-6486.
C. Belanger
Chair, AEUB
D. J. Manning, QC
President, CAPP
G. Newhouse
Chairman, SEPAC
Attachment
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