A pumpjack works at a well head on an oil and gas installation near Cremona, Alta., Saturday, Oct. 29, 2016. Alberta’s Orphan Well Association is warning that the financial failure of Calgary junior producer Houston Oil and Gas Ltd. leaves more than 1,400 wells without a responsible owner. THE CANADIAN PRESS/Jeff McIntosh

Failure of Houston Oil & Gas threatens to create up to 1,400 orphan wells

There is a growing backlog of abandoned wells

The latest failure of a Calgary-based junior oil and gas producer could add more than 1,400 wells to a provincial inventory of orphaned petroleum assets, warns the Alberta Orphan Well Association.

The total estimated abandonment and reclamation bill associated with wells, pipeline segments and other assets owned by Houston Oil & Gas Ltd. is $81.5 million, says the industry-funded organization that steps in when operators of oil and gas facilities can’t or won’t meet their obligations.

The OWA intervened to ask the Court of Queen’s Bench to appoint a receiver for Houston Oil after the company told the Alberta Energy Regulator its precarious financial status meant it could no longer look after its wells.

The court’s decision to appoint Hardie & Kelly Inc. as receiver means there’s hope that at least some of the assets will be sold to responsible new owners, said OWA executive director Lars De Pauw in an interview.

“Ideally, they’d all go to somebody else from an operational standpoint and that’s what the role of a receiver would be,” he said.

A growing backlog of abandoned wells prompted the Alberta government to loan the association $235 million in 2017 to hasten cleanup but De Pauw said that while the money helps, OWA still hasn’t been able to keep up.

“When the loan was announced, there were 1,400 wells to be decommissioned. Since that time, we’ve done 1,200. And now we have 3,400 left to do,” he said.

Industry levies are expected to continue to rise to pay for cleanup and to repay the loan, he said.

The annual levy has climbed from $15 million a few years ago to $60 million in the current fiscal year and is expected to be $65 million next year.

In May, the association asked the court to appoint a receiver for private Trident Exploration after it abruptly stopped operations and laid off all its staff.

The receiver has since sold about one quarter of its 4,400 wells, pipelines and other assets, De Pauw said.

There have been 10 insolvencies declared by Canadian oil and gas companies so far this year, said Alan Tambosso, president of Sayer Energy Advisors in Calgary.

“Although the numbers are all over the map, we generally state that in a typical year there are roughly eight to 10 oil and natural gas producers which become insolvent,” he said in an email.

“We don’t necessarily catch the ones which quietly slip away, so the numbers could be higher for any particular year.”

Sayer statistics show that insolvencies jumped to 20 in 2015 as global oil prices fell, then spiked to 28 in 2016 as American benchmark oil prices tumbled as low as US$27 per barrel. They moderated to 17 in 2017 and six in 2018.

The Alberta Energy Regulator suspended all of Houston’s licences for wells producing natural gas containing toxic hydrogen sulphide on Aug. 30 after the company warned it would have to shut down all of its oil and gas operations due to its financial distress.

Last month, the AER ordered all of Houston’s licences suspended and noted it hadn’t paid $1.34 million in levies it owed to the orphan well fund.

It said Houston had advised it no longer had any employees.

The company’s production is about 95 per cent natural gas, mainly from wells in southeastern Alberta.

Dan Healing, The Canadian Press

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Central Alberta naturalists fear pristine headwaters will be contaminated by coal mine

Chutes of the Ram constitute one of Earth’s ‘most beautiful’ spots

Every Albertan eligible for COVID-19 testing

22 new cases confirmed on Friday

Sylvan Lake’s Lakefront Park public washrooms open

A team will work to regularly clean the washrooms resulting in periodic 20-minute closures

Fast-food restaurants serving up free non-medical masks

Free protection will come in packages of four

Sylvan Lake Customs and Classics show cancelled

The annual Show and Shine was scheduled for July 11

Facing changes together: Your community, your journalists

Sylvan Lake News is firmly committed to seeing you through the changes ahead, but we need your help

Facing changes together: Your community, your journalists

Sylvan Lake News is firmly committed to seeing you through the changes ahead, but we need your help

COVID-19 cancelled their wedding plans, so they married on a B.C. mountaintop

Ceremony was live streamed to friends and family around the world

International student worry about pandemic as decisions loom on travel to Canada

Zohra Shahbuddin is weighing whether to enrol this fall or put off coming to Canada until next year

How finding a ministerial home for CMHC caused ‘madness’ in November

The Canada Mortgage and Housing Corp. manages the national housing strategy

‘What do we do now?’ Labour dispute at Regina refinery nears 6 months

About 700 unionized workers were locked out by refinery owner, Federated Co-operatives Ltd., Dec. 5

Police need more than an unverified tip to avoid drug-case entrapment: top court

Police need more than an unverified tip to avoid drug-case entrapment: top court

N.S. police received warnings in 2011 about man who would become mass killer

N.S. police received warnings in 2011 about man who would become mass killer

Trudeau acknowledges ‘anti-black racism’ in U.S., with ‘work to do in Canada’

Trudeau acknowledges ‘anti-black racism’ in U.S., with ‘work to do in Canada’

Most Read