Dead Well Glut Has Alberta Regulators Scrutinizing Oil Licenses

(Bloomberg) -- Alberta's government is giving its energy regulator new authority to scrutinize and reject applications for oil and gas production licenses to try to slow the growth of the province's inventory of abandoned wells.

The Alberta Energy Regulator will now be able to reject license applications from companies or individuals that have previously had compliance issues or have failed to pay the cost of remediating abandoned wells, officials said during a press conference today. The AER also will be able to conduct ongoing reviews of licensees.

Alberta's energy producers have been grappling with the rising cost of remediating abandoned wells since a 2016 court decision allowed defunct companies to dump those expenses onto an industry-funded cleanup group called the Orphan Well Association. Since that ruling, known as the Redwater decision, more than 1,800 wells have been disclaimed, with an estimated value of more than C$100 million ($78 million), officials said.

“These increasing demands are putting a strain on the financial resources of both the association and the industry as a whole,” Alberta Energy Minister Marg McCuaig-Boyd said. “If we don't take action, the OWA's inventory will likely keep growing.”

The Supreme Court of Canada has agreed to hear an appeal of the Redwater decision that was lodged by the energy regulator and the cleanup association. The changes announced Wednesday have the support of the Canadian Association of Petroleum Producers, the industry's largest trade group.

To contact the reporter on this story: Kevin Orland in Calgary at korland@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Carlos Caminada, Christine Buurma

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