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Orphan Well and Facility Program

by Dr. Franklin Foster, 2006
[note: this article made possible by support and funding from the Petroleum Society of CIM, Lloydminster Section]

     Saskatchewan is an active participant in the oil and gas industry.  In 2005, some 4,525 well licenses were issued, up from 4,030 licenses in 2004.  In fact, there are more than 62,000 oil and gas wells in Saskatchewan.  The province uses licensing as one of the means of regulating the oil and gas industry to promote sustainability, prevent waste of natural resources, and protect the environment. Of particular concern are the more than 20,000 inactive wells.  Some of these are termed "orphan wells".

     An "orphan well" is one without a legally responsible and/or financially capable owner.  All oil and gas wells, whether active or not, present some risk to the environment.  Some of this risk is underground where, depending on well depth, there may be danger of migration of oil and/or gas to other geologic zones.  Groundwater is just one element that may be at risk.  On the surface there may be soil contamination through seepage or spills, or their may be air quality impacts from venting gases.

     When you combine the environmental risks of a well with an unknown or incompetent well owner then the Province has to protect the public interest.  One of the ways of doing this is the recently revamped "Orphan Well and Facility Program".  The name indicates that in addition to the wells themselves, the program includes other oil and gas related facilities such as: oil satellites and batteries, gas plants, gas compressors, Enhanced Oil Recovery (EOR) facilities, water injection and disposal plants.  With the cost of properly abandoning a well and the associated reclamation expenses reaching as high as $150,000.00 per well, and the number of orphan wells and facilities in the 1,000's, a very significant financial liability exists.  In fact, the Saskatchewan Department of Industry and Resources has estimated this financial liability as in excess of $60 million.  [see graph below of Orphan Risks (in $ millions)]

     Should the taxpayers of Saskatchewan pick up the tap?  The Government of Saskatchewan has said, "No."  The Oil and Gas Industry will be required to augment an existing fund through such means as higher licensing fees and the requirement to license facilities as well.  In addition, licenses for oil and gas wells must have a detailed plan presented for the entire life of the well or facility; including a plan for abandonment, reclamation and restoration.  The Province will require assurance of financial capability to execute these plans.  Companies with poor financial positions will be required to post a deposit before they can acquire a new well license or purchase an existing well or facility.