|Authors:||Duncan Kenyon, Nikki Way, Andrew Read, Barend Dronkers, Benjamin Israel, Binnu Jeyakumar, Nina Lothian|
|Publish Date:||October 2016|
|PDF Download:||[Landowners' Guide] [Landowners' Primer]|
|Pipelines and Other Infrastructure|
|Abandonment and Reclamation|
Closing Down and Reclaiming Wells
Well and Pipeline Abandonment and Related
Reclamation of Well and Other Sites
Operator Insolvency and Orphan Wells
|Compensation, Rights, and Hearings|
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.
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:
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.
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.
It is advisable to get answers to the following questions regarding any pipeline reclamation taking place on your land.
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.