3rd edition
Authors:	Duncan Kenyon, Nikki Way, Andrew Read, Barend Dronkers, Benjamin Israel, Binnu Jeyakumar, Nina Lothian
Publisher:	Pembina Institute
Publish Date:	October 2016
PDF Download:	[Landowners' Guide]              [Landowners' Primer]
Initiation Phase
Exploration Phase
Development Phase
Pipelines and Other Infrastructure
Environmental Impacts
Abandonment and Reclamation                 Closing Down and Reclaiming Wells                 Well and Pipeline Abandonment and Related                  Questions                 Reclamation of Well and Other Sites                 Operator Insolvency and Orphan Wells
Compensation, Rights, and Hearings
Appendices

Well and Pipeline Abandonment and Reclamation

After a project is completed and production has ceased, a company is required to abandon and reclaim the well, pipeline, and all associated lands and facilities. This section explains the requirements and obligations a company has to abandon and cap a well, and reclaim all specified land associated with the well or pipeline. It also lays out important questions for you to consider if the company is planning on reclaiming the well site on your land. Lastly, this section introduces the Orphan Fund, and the process for wells that are ‘orphaned’ when a project fails to be properly abandoned and reclaimed because a company has declared bankruptcy.

Well Abandonment

The process for shutting down dry wells and wells no longer in use is referred to as “well abandonment.” The well abandonment process includes down-hole abandonment, where cement plugs are set into the hole to prevent fluids from travelling through the geologic formations; remedial cementing to secure the sheath of the well, if needed, and finally surface abandonment, where the well is closed at the surface. The Alberta Energy Regulator (AER) does not give a well the status of “abandoned” until surface abandonment is complete. AER Directive 020: Well Abandonment sets out the requirements.

Abandonment is the permanent dismantling of a well or facility. Abandoned wells are different from suspended, shut-in, and orphaned wells. See Appendix E Glossary for definitions.

There are two main types of abandonment:

• Open-hole abandonment refers to the down-hole and surface abandonment of a dry hole (one that was not brought into production). It is carried out after drilling is complete but before the rig is released from the site.
• Cased-hole abandonment refers to the down-hole and surface abandonment of a completed or cased well, which occurs when all oil or gas extraction has ceased.

Surface abandonment includes removal of all the wellhead equipment, but not the reclamation of the lease site, which takes place sometime after abandonment is complete. Reclamation is regulated by the AER, which issues reclamation certificates once certain criteria are met.

A company is required to notify all affected landowners/occupants in the area of any planned surface abandonment; however, the AER does not specify how much notice the operator must give. Non-routine abandonment — which includes abandonment of wells associated with a salt cavern, re-abandonment of a well, and other criteria as listed in Directive 020 — requires the company to get approval from the AER before starting work.

In all cases, before abandoning a well, the company must ensure that no oil or gas is flowing through the well casing that could contaminate groundwater or rise to the surface. A company has to set cement plugs — of sufficient length and number — to cover all non-saline groundwater zones, to prevent substances from flowing into groundwater in porous zones. After plugging, the wellbore must be filled with non- saline water.

At the surface, the well casing must be cut off at least one metre below the final surface of the land (or at least two metres if the well is within 15 km of urban development or where there is a special farming practice, such as deep tillage, drainage works, or peat lands). It is then capped with a steel plate that is designed to prevent build-up of pressure, while still blocking access to the casing at the surface. This surface abandonment must be completed within a year of the down-hole abandonment operations. Directive 020 also sets out specific requirements for different types of well and different regions of the province.

Oilsands evaluation wells and test hole wells are drilled only for core samples and are not intended to be completed. For these wells, downhole abandonment must be completed within 30 days after drilling has finished or prior to rig release. Surface abandonment must be completed immediately after downhole operations.

The AER’s Directive 079 requires a permanent 5 m setback on abandoned wells, to prevent anyone building on or near an abandoned well. This is aligned with the Municipal Government Act Subdivision and Development Regulation, which stipulates that developers and property owners who apply for a subdivision or development permit must identify the location of abandoned wells when applying for subdivision. Directive 079 exempts shallow wells of less than 150 m, and in some circumstances exempts or reduces the setback for other wells such as oilsands evaluation wells. If the AER and the licensee determine that a setback isn’t required, the applicant for subdivision can obtain a letter from the AER to support the decision by the municipal approving authority to grant an exemption.

Questions to Ask Regarding Reclamation of Wells and Facilities

It is important to get answers to the following questions to ensure that there is no contamination left on your land. You could be held liable if you fail to tell a prospective purchaser of any known contamination.

Have you been notified by a company about its intent to abandon and reclaim a well?

They should contact you before they start any reclamation work.

Have you told the company of any areas that need special attention during the reclamation process?

You should check that they locate old sumps and other areas that might need special attention.

How much topsoil will be replaced?

The percentage required will depend on when the well was drilled.

How does the company propose to verify that the surface is fully restored to equivalent capability?

One growing season may not be enough to verify that the site is fully reclaimed.

Have you visually checked that the work has been conducted to your satisfaction?

You should ensure that reclamation is complete and there is no contamination on your land.

After discussions, has the company failed to rectify any problems with the reclamation that you identify?

If so, notify the AER, using the Upstream Oil and Gas Facility Complaint Form that the company is required to give you.

Has the company conducted gas migration testing?

AER requires gas migration testing to be conducted on all wells that do not have a surface casing vent assembly. The AER recommends that all wells be tested for gas migration prior to abandonment.

Has the company given you a copy of the documents that they submit to the government when applying for a reclamation certificate?

You should check that you agree with the information on the reclamation application and ask for a Phase 2 assessment if there are gaps in the company’s documentation or if it does not agree with your recollection of events.

Questions to Ask Regarding Pipeline Reclamation

It is advisable to get answers to the following questions regarding any pipeline reclamation taking place on your land.

Have you been notified by a company about its intent to abandon or remove a pipeline?

They should contact you before they start any reclamation work.

Will the pipeline be left in the ground or removed?

Abandonment in place will result in less disturbance, but you should inform the company if you have good reasons to request the pipeline be removed. Operators are not typically required to remove the pipeline at reclamation.

Do you have any concerns about the pipeline abandonment?

If so, try to resolve them with the company and, if they cannot be resolved, inform the AER.

Have you any concerns about the reclamation of the pipeline right-of-way?

If so, inform AER.

Inactive Wells, Orphan Wells and Pipelines

Every year, some wells are cased-hole abandoned because a company may no longer find it economic to produce oil or gas, but may not wish to abandon and reclaim a well in case economic conditions change or technology improves to the point where productivity can increase.

As of July 2014, there were approximately 80,000 inactive wells in Alberta, of which 37,000 failed to meet the periodic inspection, pressure testing and maintenance standards outlined in the AER’s Directive 013.

The AER introduced the inactive well compliance program (IWCP) in 2014 to address the growing number of inactive wells in Alberta. Starting April 1, 2015, companies are required to bring 20% of their inactive wells into compliance every year. This means the wells should either be reactivated or suspended as per Directive 013: Suspension Requirements for Wells or be abandoned as per Directive 020: Well Abandonment.

Between April 2014 and March 2015, the number of new orphan wells increased significantly — from 162 wells to 705. This was primarily due to an in “increase in corporate insolvencies combined with updates that the AER made to the liability management system in 2013 and 2014, and the procedural changes made by the AER in 2012 to speed up the designation of orphans.”

The Orphan Fund was created in the early 2000s to properly abandon and reclaim orphan wells, pipelines, and certain facilities (including flare pits and drilling sumps) and their associated sites, which do not have a legally liable party to deal with the abandonment and reclamation (such as when a company declares bankruptcy). The Orphan Fund is administered by the Orphan Well Association (see Orphan Well Association) and is a joint industry–government initiative financed by a levy on industry and other AER fees, so there is no cost to the landowner or occupant.

A company is required to pay you, as the landowner, annual compensation for the surface lease, even if a well is not operating. If you are no longer receiving annual compensation you should contact the Surface Rights Board (see The Role of the Surface Rights Board).

To avoid new orphan wells in the future, the AER has a Licensee Liability Rating Program, which assesses a company’s assets and liabilities and requires a security deposit from those companies who might be at risk of having insufficient assets to pay for the correct abandonment and reclamation of their wells and facilities.

A company may try to sell off wells that are no longer very productive to smaller companies with lower operating costs, in a process known as “offloading”. In some cases the company goes out of business and its wells become “orphaned.” However, the AER will examine how the transfer of a well licence will affect both companies’ liability management rating. The AER can also designate companies to the Orphan Well program if in the AER’s opinion a company is insolvent or not financially viable but is still active on a corporate registry.

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