Bill 12: The Effects on Pipelines and Orphan Wells amid COVID-19

By the McLennan Ross Energy, Environmental & Regulatory Team


Introduction


On March 31, 2020, the provincial government introduced Bill 12, the Liabilities Management Statutes Amendment Act, 2020. Bill 12 proposes changes to the Oil and Gas Conservation Act ("OGCA") and the Pipeline Act, with the theme of enhancing cleanup obligations under both Acts. The Government states that Bill 12 is intended to provide increased authority to the Alberta Energy Regulator (“AER”) and the Orphan Well Association (“OWA”) to effectively maintain and manage orphan wells and associated infrastructure, while protecting landowners and ensuring environmental and public safety.

Under pressure to boost the Alberta economy in light of the recent COVID-19 pandemic, the Government hopes to facilitate increased remediation and reclamation work, creating new jobs. Earlier in March, the Alberta Government provided an additional $100 million to the OWA to help address the significant inventory of orphaned and abandoned wells, and sites that must be reclaimed. While the practical effect of Bill 12 is best seen as an increase in the authority of the OWA to utilize those funds, the general theme of the proposed amendments is that they will impose a positive obligation on licensees and working interest participants to provide “responsible management” of wells, facilities, and associated sites through their entire life cycle.

Increased Obligations


The most significant change to both Acts is the addition of new language to the OGCA and Pipeline Act that will impose on oil and gas operators a positive obligation to prevent impairment of and damage to their facilities and sites, and to remediate those facilities and sites if necessary. Currently, the statutes only address operators' obligations to suspend, abandon and reclaim wells, facilities and sites.
Consistent with this overall change, the Bill gives the OWA the authority to provide “reasonable care and measures to prevent impairment or damage” at wells and pipelines where a licensee or approval holder fails or is unable to do so in a manner that is satisfactory to the AER. The proposed amendments would also allow for entry onto the land in order to enact these measures. The OWA will also be able use the orphan well fund to monitor the behaviour and condition of orphan wells and facilities. These changes are significant, as they are intended to empower the OWA to deal with orphan wells and facilities before they become environmental liabilities. In addition, the use of the word “reasonable” will likely broaden the OWA’s ability to step in where it deems the participants have not met their standards.
The addition of “remediation” obligations along with the previous “reclamation” obligations could have a significant impact on cleanup obligations generally, as it could elevate those obligations to fall under the Tier 1 and Tier 2 guidelines under the Environmental Protection and Enhancement Act (“EPEA”). Again, when viewed in the context of the general theme of the Bill, this change will impose a positive obligation on licensees and working interest participants to remediate, as necessary, in accordance with OWA standards.

In addition, the proposed changes to the legislation will allow the OWA to utilize abandoned, viable wells to produce oil and operate pipelines with the consent of the owner/holder of the mineral rights. It will also give the OWA increased authority to bring in outside companies to operate these wells and pipelines until a buyer is found.


Takeaways


If passed, these new provisions will immediately result in new obligations on licensees and working interest participants to take reasonable care and prevent impairment and damage to wells and facilities. Bill 12 will give significantly broadened authority to both the AER and the OWA with respect to the management of orphaned and abandoned wells, as well as pipelines. The new provisions will create new opportunities for companies in both the energy and insolvency sectors to work with these bodies throughout the remediation and reclamation process.

For further information on potential new opportunities or obligations your business may have under these new provisions, please contact any member from our Environment, Energy, and Regulatory practice group.

No comments:

Post a comment