A pumpjack works at a well head on an oil and gas installation near Cremona, Alta., Saturday, Oct. 29, 2016. Alberta’s Orphan Well Association is warning that the financial failure of Calgary junior producer Houston Oil and Gas Ltd. leaves more than 1,400 wells without a responsible owner. THE CANADIAN PRESS/Jeff McIntosh

A pumpjack works at a well head on an oil and gas installation near Cremona, Alta., Saturday, Oct. 29, 2016. Alberta’s Orphan Well Association is warning that the financial failure of Calgary junior producer Houston Oil and Gas Ltd. leaves more than 1,400 wells without a responsible owner. THE CANADIAN PRESS/Jeff McIntosh

Failure of Houston Oil & Gas threatens to create up to 1,400 orphan wells

There is a growing backlog of abandoned wells

The latest failure of a Calgary-based junior oil and gas producer could add more than 1,400 wells to a provincial inventory of orphaned petroleum assets, warns the Alberta Orphan Well Association.

The total estimated abandonment and reclamation bill associated with wells, pipeline segments and other assets owned by Houston Oil & Gas Ltd. is $81.5 million, says the industry-funded organization that steps in when operators of oil and gas facilities can’t or won’t meet their obligations.

The OWA intervened to ask the Court of Queen’s Bench to appoint a receiver for Houston Oil after the company told the Alberta Energy Regulator its precarious financial status meant it could no longer look after its wells.

The court’s decision to appoint Hardie & Kelly Inc. as receiver means there’s hope that at least some of the assets will be sold to responsible new owners, said OWA executive director Lars De Pauw in an interview.

“Ideally, they’d all go to somebody else from an operational standpoint and that’s what the role of a receiver would be,” he said.

A growing backlog of abandoned wells prompted the Alberta government to loan the association $235 million in 2017 to hasten cleanup but De Pauw said that while the money helps, OWA still hasn’t been able to keep up.

“When the loan was announced, there were 1,400 wells to be decommissioned. Since that time, we’ve done 1,200. And now we have 3,400 left to do,” he said.

Industry levies are expected to continue to rise to pay for cleanup and to repay the loan, he said.

The annual levy has climbed from $15 million a few years ago to $60 million in the current fiscal year and is expected to be $65 million next year.

In May, the association asked the court to appoint a receiver for private Trident Exploration after it abruptly stopped operations and laid off all its staff.

The receiver has since sold about one quarter of its 4,400 wells, pipelines and other assets, De Pauw said.

There have been 10 insolvencies declared by Canadian oil and gas companies so far this year, said Alan Tambosso, president of Sayer Energy Advisors in Calgary.

“Although the numbers are all over the map, we generally state that in a typical year there are roughly eight to 10 oil and natural gas producers which become insolvent,” he said in an email.

“We don’t necessarily catch the ones which quietly slip away, so the numbers could be higher for any particular year.”

Sayer statistics show that insolvencies jumped to 20 in 2015 as global oil prices fell, then spiked to 28 in 2016 as American benchmark oil prices tumbled as low as US$27 per barrel. They moderated to 17 in 2017 and six in 2018.

The Alberta Energy Regulator suspended all of Houston’s licences for wells producing natural gas containing toxic hydrogen sulphide on Aug. 30 after the company warned it would have to shut down all of its oil and gas operations due to its financial distress.

Last month, the AER ordered all of Houston’s licences suspended and noted it hadn’t paid $1.34 million in levies it owed to the orphan well fund.

It said Houston had advised it no longer had any employees.

The company’s production is about 95 per cent natural gas, mainly from wells in southeastern Alberta.

Dan Healing, The Canadian Press

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Education Minister Adriana LaGrange. (File photo)
Wolf Creek and Wetaskiwin school boards ‘reassured’ by letter from LaGrange

Boards urge the Alberta government to honour commitments to Indigenous peoples

Loki’s Car Club hosting its first annual holiday toy drive. File photo.
Loki’s Car Club hosting its first annual holiday toy drive

Local Wetaskiwin businesses set up as toy drive drop off locations.

SARS-CoV-2 virus particles, which causes COVID-19, emerge from the surface of cells isolated from a patient in the U.S. and cultured in a lab in a 2020 electron microscope image. THE CANADIAN PRESS/AP-HO, National Institute of Allergy and Infectious Diseases - Rocky Mountain Laboratories
Alberta now has 17,743 active cases of COVID-19

Province now has 17,743 active cases

A home on Montana First Nation was damaged by fire in the early hours on Dec. 2, 2020. (Chevi Rabbit/Submitted)
House fires on Montana Cree Nation under investigation

Two separate fires took place in the early hours of Dec. 2

Longtime central Alberta politician Judy Gordon has passed away. Photo courtesy of the City of Lacombe
Former Lacombe Mayor Judy Gordon passes away

Gordon also served as MLA for Lacombe-Stettler before retiring from politics in 2010

Melissa David, of Parachutes for Pets and her dogs Hudson and Charlie are trying to raise money for a homeless shelter that will allow pets and are seen in Calgary, Alta., Thursday, Feb. 6, 2020.THE CANADIAN PRESS/Jeff McIntosh
‘My only wish:’ Children asking pet charity to help their furry friends at Christmas

Parachutes for Pets says it has received 14 letters from children in the last week t

Melissa Velden and her chef-husband Chris Velden, stand in their dining room at the Flying Apron Inn and Cookery in Summerville, N.S. on Friday, Nov. 20, 2020. The couple is hosting holiday parties with appropriate distancing and other COVID-19 health protocols in place at their restaurant. THE CANADIAN PRESS/Andrew Vaughan
Celebrities, Santa and Zoom part of office holiday parties being held amid COVID-19

Many will send tokens of appreciation to workers or offer time off or cash

Ten-month-old Aidan Deschamps poses for a photo with his parents Amanda Sully and Adam Deschamps in this undated handout photo. Ten-month-old Aidan Deschamps was the first baby in Canada to be diagnosed with spinal muscular atrophy through Ontario’s newborn screening program. The test was added to the program six days before he was born. THE CANADIAN PRESS/HO, Children’s Hospital Eastern Ontario *MANDATORY CREDIT*
First newborn tested for spinal muscular atrophy in Canada hits new milestones

‘If Aidan had been born any earlier or anywhere else our story would be quite different’

People line up at a COVID-19 assessment centre during the COVID-19 pandemic in Scarborough, Ont., on Wednesday, December 2, 2020. Toronto and Peel region continue to be in lockdown. THE CANADIAN PRESS/Nathan Denette
COVID-19 vaccine approval could be days away as pressures mount on health-care system

Many health officials in regions across the country have reported increasing pressures on hospitals

File Photo
Sylvan Lake Town Council squashes mask bylaw

The bylaw did not make it past first reading, after a 4-3 vote defeated the motion

A logo for Netflix on a remote control is seen in Portland, Ore.,Aug. 13, 2020. Experts in taxation and media say a plan announced Monday by the government will ultimately add to the cost of digital services and goods sold by foreign companies. THE CANADIAN PRESS/AP-Jenny Kane
‘Netflix tax’ for digital media likely to raise prices for consumers, experts say

The government says Canadian companies already collect those taxes when they make digital sales

Most Read