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

Just Posted

Alberta RCMP caution citizens about signs of cybercrime

Police are reminding the public to be cautious while shopping online

Black Press Extreme Education and Career Fair coming to Red Deer College’s Cenovus Learning Commons

Central Albertans can connect with employers on Nov. 28 from 11 a.m. to 3 p.m.

WATCH: Stettler residents gather to observe Remembrance Day

Hundreds gather at the Stettler Performing Arts Centre to pay tribute

A flower, a poem, a campaign

Nowadays, Remembrance Day includes all wars that have occurred since the Great War.

Sandra Schmirler Foundation gives a $10,000 grant to Stettler Health Services Foundation

Funding will go to physiological monitors required for the two Panda warmers for the Labour and Delivery suites

‘We love you, Alex!’: Trebek gets choked up by ‘Jeopardy!’ contestant’s answer

The emotional moment came in Monday’s episode when Trebek read Dhruv Gaur’s final answer

Petition to ‘bring back Don Cherry’ goes viral after immigrant poppy rant

Cherry was fired from his co-hosting role for the Coach’s Corner segment on Nov. 11.

Imperial CEO says no to Aspen oilsands project until Alberta oil quotas gone

Imperial confirmed a plan to boost production from its Kearl oilsands mine

Three men charged after ‘targeted’ shooting, evacuation at Alberta mall

The accused, who range in age from 25 to 37, were arrested Sunday and remain in custody

VIDEO: Don Cherry says he was fired, not sorry for ‘Coach’s Corner’ poppy rant

Cherry denies he was singling out visible minorities with his comments

Disney Plus streaming service hits Canada with tech hurdles

Service costs $8.99 per month, or $89.99 per year, in Canada

Trudeau’s opponents: One gives him an earful, another seeks common ground

PM meets with Conservative leader Andrew Scheer and Saskatchewan Premier Scott Moe

Rona’s ‘truly Canadian’ ads are inaccurate, watchdog says

Ads Standards points out U.S.-based Lowe’s acquired Rona in 2016

Most Read