The BC Oil and Gas Commission says it is developing a comprehensive liability management plan to address the province’s growing number of orphan oil and gas sites.
Drilling activity in B.C. has increased in recent years, and so has the number of inactive sites and producers with financial challenges, the regulator says.
Lawyers with Norton Rose Fulbright noted on Friday that the number of designated orphan sites in B.C. recently leaped over one year from 45 to 307 due to operator insolvencies.
“The costs to abandon and restore these orphaned sites are estimated to be $40 to $60 million. However, as of March 31, 2017, the [Orphan Site Reclamation Fund] held only $5.3 million in funds,” Alan Harvie, Max Collett and Matthew D. Keen wrote in a blog post.
Under the proposed amendments, the restoration tax on all producers that funds the OSRF would be replaced by a liability-based levy based upon forecasted annual abandonment and restoration costs, they said. The updated regulation would also set a period of time after which a site’s permit would be cancelled, triggering abandonment and restoration requirements.
The amendments will allow the BC OGC to refuse to issue a permit or to suspend, cancel or amend a permit if the permit holder’s directors, officers, shareholders or agents have previously contravened the legislation, been convicted of an offence or are felt to be unfit to hold a permit.
“It is believed that banishing from B.C.’s oil and gas industry operators with personnel who have previously worked with companies that have gone insolvent and who have a poor compliance history will lessen the likelihood of future orphan site designations,” according to Norton Rose Fulbright.
The amendments would also allow a site’s permit to be transferred to a new operator without the signature of the permit holder, if that permit holder can’t be located or no longer exists.
“This change will enable the OGC to transfer a permit to a willing working interest holder. Currently, the OGC is restricted on what it can do with a permit once a permit holder becomes insolvent or ceases to exist,” the lawyers wrote.