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.
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