Orphan wells could cost province $100 million

New regulations could cost industry $3 billion, taxpayers $100 million: auditor general

There are more than 300 orphan oil and gas wells in B.C., and more could be added with recent bankruptcy. | BCOGC

Gaps in B.C.’s oil and gas legislation could stick companies with a $3 billion bill and leave taxpayers on the hook for up to $100 million if operators don’t clean up their wells before abandoning them, the province’s auditor general said March 14.

Carol Bellringer said in a new audit report that the number of inactive wells that had not been decommissioned almost doubled to 7,474 from 3,800 between 2007 and 2018. The cleanup cost estimate comes from the BC Oil and Gas Commission (BCOCG).

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

The OGC is responsible for regulating oil and gas activities to protect public safety and the environment.

Inactive wells are decommissioned by permanently sealing them with cement.

Restoring a site means remediating any contamination and restoring the land to its original condition.

The BCOCG becomes responsible for well cleanup when an operator goes bankrupt or cannot be located. That’s when use of the province’s orphan well fund is triggered.

“The orphan fund, which is funded through security deposits and a tax on operators’ 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.

Her report said the number of orphan sites increased to 326 from 45 between 2015 and 2018. It noted that the BCOGC anticipates orphan site numbers and associated restoration costs will continue to increase.

The BCOCG 2019-22 service plan, released as part of the government’s February budget, said insolvencies and orphan assets have continued to be a commission primary focus as the number of orphan sites in B.C. as of December 2018 had risen by 106 wells  from a total of 220 in March 2017.

One company alone, operating in B.C.’s northeast and now in receivership, has left between 300 and 500 wells facing possible designation as orphan – or abandoned – at a potential cost of $40 million to $90 million to the BCOGC.

See related story, Province aims to clean up hundreds of orphan well sites.