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15th March 2019
...continued from Part 1

B.C. orphan well sites increase by 48 per cent in last two years

According to an affidavit from James O’Hanley, the oil and gas commission’s vice-president of applications, filed as part of Ranch’s receivership proceedings, B.C. has 326 designated orphan well sites, of which 310 require further restoration.

That number has climbed from March 2017, when there were just 220 designated orphan sites, according to the B.C. Oil and Gas Commission’s service plan.

Restoration costs vary from site to site but the average cost to abandon and reclaim a site is approximately $370,000, Hanley said in his affidavit.

At that price, it would cost $114.7 million to reclaim the 310 well sites already designated as orphans.

But only $13.9 million has been earmarked for the next fiscal year to carry out decommissioning and restoration activities on orphan sites, according to the oil and gas commission’s budget documents.

And Ranch’s 300 to 500 potential orphan wells are not included in the designated orphan sites because the commission is waiting to see how many of the company’s 700 B.C. wells will be sold by the receiver, the commission said.

At the average clean-up cost cited by Hanley, Ranch’s potential orphan sites could add another $111 million to $185 million to reclamation costs — considerably higher than the figure cited by the commission in its service plan.

“The orphan well fund is a drop in the bucket compared to the liability out there and what needs to be fixed,” Werring pointed out.

Pace of orphan site restorations very slow

The oil and gas commission’s service plan also reveals the glacial pace of orphan site restorations in B.C. even as the number of sites rapidly increases.

In 2017-18, the commission restored six orphan well sites. In 2018-19, it forecasts that it will restore just three, noting that other sites have work underway.

The number of certified restorations is expected to increase over the next few years, with a target of 25 sites restored in 2021-22.

The oil and gas commission confirmed in an email that there have been no designations of orphan wells due to Ranch’s insolvency as of yet, because the company’s receiver has “undertaken a process to facilitate sales of Ranch’s assets.”

“The Commission will continue to regulate all assets owned by the company and take steps as required to protect public safety and the environment,” it said.

The commission also pointed out that it is changing how funds are collected for the orphan site reclamation fund. In the past, the commission has collected funds from industry permit holders for the orphan fund to deal with the costs of abandonment, remediation and reclamation of sites.

The system differs from Alberta’s, where those costs are managed by the Orphan Well Association, not by the province’s oil and gas regulator.

“We are continuing our work to enhance our comprehensive liability management plan to address ongoing environmental and financial liabilities associated with oil and gas sites, including the timely restoration of orphan oil and gas sites in B.C.,” the commission said in an email.

Starting this spring, the orphan tax will be eliminated and replaced by a new liability levy that will be phased in over three years.

The levy will provide “the entire estimated $15 million per year required to sustain the orphan fund” by 2021-22, the commission said.

But Werring said the liability levy won’t fix the problem any more than the orphan fund did, due to the sheer volume of the wells that needs to be managed.

“It’s a massive liability all around, it doesn’t matter how you look at it,” he said. “Somebody at the end has to pay for this.”

Fracking pond order still outstanding

There is no record that the fracking pond leak has been stopped or the site assessed for soil and groundwater contamination and remediated.

Asked if the order regarding the leaking fracking pond has been followed, the oil and gas commission responded only that it is engaged in the receivership proceedings of Ranch Energy and that a sales process — which will result in some assets being purchased by another party — is not complete.

“The Commission will continue to review any potential sale to ensure attention is given to the obligations for the assets, as well as minimize risk to public safety, the environment, and orphan fund,” it wrote.

“This includes existing obligations for the storage of frac waters. The Commission continues to monitor conditions on the ground to ensure the protection of public safety and the environment.”

Asked about estimated clean-up costs for Ranch’s fracking pond, the commission said the bill for decommissioning the storage pond will vary “depending on the method used to dispose of waters.”

“If the Commission is required to take action to complete any works, including actions on any of the assets to protect public safety and the environment, cost estimates will be gathered and reviewed prior to executing any required works.”

Werring pointed out that inactive oil and gas wells and fracking storage ponds operate on Crown land, with permits from the province.

“Somebody went bankrupt and there’s an environmental liability out there. Who’s going to pay for it? In the end it will probably be the taxpayers.”