An Alberta company has lost the right to manage its own well sites after the provincial regulator ruled the operations pose a safety risk and must be abandoned by the operator.
The Orphan Well Association has assumed control of Revitalize Energy Inc.’s operations, weeks after the Calgary-based company was formally ordered by the Alberta Energy Regulator to suspend operations.
Due to the company’s ongoing financial distress and failure to comply with a string of previous orders, the regulator has ruled the operator can not be relied on to safely maintain its wells.
Staff from OWA — the industry-funded agency tasked with cleaning up wells in Alberta that have been abandoned or no longer have a responsible owner — will now ensure pipelines and more than 200 wells are shut down.
When a licensee is unable to provide ongoing reasonable care over assets, the regulator can place it under the association’s care.
“At the end of the day, Revitalize did not do this work, whether they chose not to do the work or could not pay to have the work done,” OWA president Lars De Pauw said in an interview with CBC News.
“That’s why we’re coming in to make sure it’s put into safe condition.”
CBC was unable to reach the company for comment.
This is how inactive and orphaned oil and gas wells in northern B.C. are cleaned and dismantled.
An AER order dated Nov. 14 said the company failed to safely suspend wells and pipelines and doesn’t have the cash flow needed to operate properly.
“[Due to] outstanding non-compliances, compliance history, lack of timely and meaningful communication with the AER, and with the additional risks of freezing during the upcoming winter season, the manager is of the opinion that Revitalize is not capable of providing reasonable care,” the order says.
The drilling company operates across Alberta and Saskatchewan with the majority of its sites concentrated around the cross-border city of Lloydminster.
The operator has been the subject of a string of AER orders.
The company has been on a sanction status since last November when the AER flagged the company as unable or unwilling to comply with regulatory requirements.
Last month the company was ordered to cease operations and abandon all infrastructure, including wells, operational sites and pipelines, following repeated failures to comply with the regulator.
The company has mounting debts to the regulator, outstanding municipal tax arrears and has faced infractions for unsubmitted financial paperwork, failed environmental inspections and unpaid levees, including mandated yearly payments to the OWA.
Contraventions discovered during failed field inspections include missed inspections, unclean conditions, wells operating without a license and fire safety failures.
According to AER, the company can not provide proof of valid insurance. Emergency phone lines on its well sites had gone dead.
‘Not technically abandoned’
De Pauw said the case is just one in a growing portfolio of sites requiring care from OWA.
The association is responsible for more than 1,651 wells across more than 2,462 orphan sites, and 7,395 sites in need of reclamation.
Under the most recent AER order, the association has been given unfettered access to company sites to ensure they are made safe for winter. Revitalize staff are forbidden from access without permission.
Recent field inspections found 21 of 24 of the company’s well sites were in an unsafe condition and that was before temperatures plunged across the Prairies.
“A lot of the stuff is getting frozen already and it has been for awhile,” De Pauw said.
“Still, we have to undertake this work, so we are shutting in the wells, suspending them and trying to remove as much fluids as we can to mitigate the risk.”
Just because a site isn’t being cared for, it does not mean it’s an orphan.– Lars De Pauw
The association is often called in when a company goes bankrupt and left with the tab for clean-up. In this case, the company remains active and is expected to reimburse the association.
“These sites are not technically abandoned,” De Pauw said. “The company still exists.
“The company and the regulator need to figure out what is next for Revitalize.”
While efforts to reach company officials were unsuccessful, its record with AER details an operation in turmoil.
Money woes
The order issued against the company last month shows the company has been strapped, struggling to raise capital.
In July, the company told AER that $5.5 million was incoming to “recapitalize” the company — money that was urgently needed to convince staff to return to work.
Company officials were hoping upwards of $10 million more in capital could be raised to satisfy debts.
Months passed, but the money never materialized. Last month, a field operator for Revitalize contacted the regulator and reported operators had not been paid for months and were owed in excess of $50,000 each.
According to the regulator, on Oct. 18, Revitalize reported that financing to keep operations afloat was “no longer available.”
De Pauw said it can take years after a company collapses for bankruptcy proceedings to conclude and neglected sites to become officially abandoned.
“Just because a site isn’t being cared for, it does not mean it’s an orphan.”
Alberta is facing a growing number of orphan oil wells without owners to clean them up. The province’s auditor general is set to investigate how regulations meant to prevent this from happening have come up so short.