Introduction
On March 10, 2022 the BC Oil and Gas Commission (Commission) issued a News release highlighting its progress on addressing orphan well sites. There is a significant difference with BC’s progress compared to Alberta’s. It is very encouraging to see our neighbor learning from Alberta. In this post I will explain why I believe this is an important proactive step and provide a high-level comparison of Alberta and BC’s progress.
The BC Orphan Site Reclamation Fund
The Commission is a single-window regulatory agency that is responsible for overseeing oil, gas, and geothermal operations in British Columbia, it was established on July 30, 1998. The Commission oversees activities throughout the life cycle from the exploration to reclamation stages.
Similar to Alberta, the number of Orphan Sites in BC have been steadily increasing every year, with last year’s number more than doubling due to operator insolvencies during the fiscal year, see chart below.
| Fiscal Year | Number of Orphan Sites in BC |
| 2014/15 | 40 |
| 2015/16 | 45 |
| 2016/17 | 220 |
| 2017/18 | 307 |
| 2018/19 | 346 |
| 2019/20 | 357 |
| 2020/21 | 770 |
The Commission implemented a new Orphan Site Restoration Levy, funded by operators, on April 1, 2019. A designation of “orphan” allows the Commission to use the Orphan Site Reclamation Fund to decommission and clean up the site. During the 2020/21 fiscal year the Commission had a budget of approximately $45 million, $15 million from the federal government COVID-19 stimulus program and $30 million from levies and on-hand security. With the additional funding the Commission was able to restore 61 orphan sites in 2020/21, 36 above their original target of 25. At the end of 2021 approximately 500 orphan well sites were decommissioned and 140 sites were reclaimed.
BC Oil and Gas Commission’s Orphan Decommission Plan
The Commission’s overall goal is restore orphan sites within 10 years of orphan site designation and deactivate pipelines and abandon high priority wells within 1 year. It utilizes an Area Based Closure to look for efficiencies to conduct as much closure work as possible and lower costs. In the fiscal year 2020/21 the Commission worked on 515 sites. Below is the status of restoration work for the 2020/21 fiscal year.
How BC Compares to Alberta
In Alberta, the Orphan Well Association (OWA) is the organization responsible for addressing orphaned sites. The OWA was formed in 2002. A site is deemed orphaned after the Alberta Energy Regulator (AER) conducts an investigation to determine if there is a responsible party. If a site does not have a legal responsible and/or a financially viable party to deal with the closure work than the AER will designate the site as orphaned. In Alberta the legislation allows for the AER to direct working interest participants (WIP) to clean up a site if the licensee is unable. BC does not have the same legislation and WIPs are not responsible for any closure costs.
The OWA is mainly funded by the Orphan Fund Levy, first time licensee fees, and regulator directed transfer fees, all of which are paid by oil and gas producers. In addition to these funds the OWA also received repayable loans from the Province of Alberta and the Government of Canada, and a grant from the Government of Canada. For the 2020/21 fiscal year the budget for closure work for the OWA was $392.2 million compared to the Commission’s budget of $45.
The OWA’s inventory of orphan sites is much larger than the Commissions. As of March 1, 2022 the OWA Orphan Inventory Lists includes 2,709 Orphan Sites for decommissioning (which includes 1,888 orphan wellbores and 320 orphan facilities), 2,700 Orphan pipelines for decommissioning, and 5,845 orphan sites for reclamation. Note, these numbers do not include legacy wells under long term care and custody or sites that the AER has not deemed orphaned yet. The OWA 2020/21 Annual Report states that since 2002 it has decommissioned approximately 5,100 orphan wells and reclaimed over 1,200 sites. Since 1998 the Commission has decommissioned approximately 500 sites and about 140 have been reclaimed.
Closing
It was difficult to get exact numbers for an accurate comparison, but it is clear that Alberta has a significantly larger number of orphan sites than BC. It will take the OWA a much longer to address all of the orphan sites then it will for BC. BC must have recognized the need to address orphan sites in the early stages before the inventory of orphan sites became difficult to manage. I suspect BC learned from Albert’s failure to address orphan sites in a timely manner and now the OWA is struggling to keep up.
About Allum Energy Advisory Service
Allum Energy Advisory Service is an energy regulatory advisory service. It has extensive experience with Alberta energy regulations. Alanda Allum, Senior Advisor, worked at the AER for 20 years in a variety of roles and 2 years as an independent regulatory advisor. If you have questions about the Commission’s orphan program or if you have questions about the AER’s Liability programs, including the mandatory closure spend targets and how to report it, please contact Allum Energy Advisory Service.