Sequoia failure leaves thousands of oil and gas wells orphaned
March 9, 2018
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A massive number of oil and gas wells, facilities and pipeline segments stand to be added to the already bulging files of the Alberta Orphan Well Association in the wake of the likely failure of Sequoia Resources Corp.
All of the Calgary-based company’s operating licences were ordered suspended after the privately-held oil and gas company warned the Alberta Energy Regulator late last month it was ceasing operations “imminently” and, as a result of “defaults in municipal tax payments,” would not be able to afford to reclaim all of its properties.
The AER said Sequoia owns licences for 2,300 wells, almost 200 facilities and nearly 700 pipeline segments.
That list doesn’t include 700 to 800 Sequoia wells where production has been stopped and the wellbore has been cleaned up but the surface hasn’t been restored, Lars De Pauw, executive director of the Orphan Well Association, told Canadian Press.
And that means the list may rise to almost 4,000 properties.
“We’re going to get a fairly sizable chunk of those sites when this is all done but none of them have been designated an orphan (yet),” he told Canadian Press Thursday. “We’re anticipating around 75 per cent of those sites are going to come to us.”
Last spring, the province announced it would lend $235 million to the association to speed up remediation of about 700 orphan wells over the next three years.
Through an annual industry levy, petroleum producers are to pay the principal back over 10 years, while $30 million provided to the province by the federal government will be used to pay interest.
The association listed nearly 2,900 orphan wells awaiting abandonment or reclamation as of as of February 28, along with 2,350 pipeline segments set for abandonment.
“With the funding we had received, the surge loan that came from the government that’s being repaid by industry, we were in a good place to deal with our current inventory over the next three years,” De Pauw told Canadian Press. “But this is… basically going to negate that.”
PricewaterhouseCoopers Inc. said on its website it has been named trustee for Sequoia after the company filed a notice of intention in court last week to make a proposal under the Bankruptcy and Insolvency Act.
In the AER order, addressed to Sequoia director Wentao Yang and director and president Hao Wang, the regulator warns that Sequoia is responsible for its licensed properties even if it is insolvent.
“So basically, it means the company still has to address their (oil and gas well) end-of-life obligations, post security or transfer the site to appropriate parties,” AER spokesman Ryan Bartlett told Canadian Press. “Currently all the licences are suspended, the company has to ensure the sites are in a safe state, shutting them down or closing them, and they have 30 days to come into compliance with the order.”
The AER also warned Sequoia’s partners could be invited to bid to take over licences in which they hold an interest.