Alberta looks at different ways of making sure companies clean up old wells

As Alberta struggles with its abandoned well problem, the province's energy regulator is looking at different ways to ensure the inventory of old wells doesn't get much larger.

Earlier this spring, the Alberta Energy Regulator released a bulletin reminding the directors and most senior executives of energy companies they can be personally responsible for well clean-up if their company goes bankrupt.

The timing of that release probably wasn't a coincidence. There are nearly150,000 scattered across the province, some that have been dormant for 60 yearsor more. While the problem has been going on for as long as there has been energy development in Alberta, a recent court decision changed the game.

How do you punish someone for basicallya market downturn?- Ryan Zahara, Blakes, Cassels & Graydon

In the case ofRedwaterEnergy, the Alberta Court of Queen's Bench ruledthat when an energy company goes bankrupt,lenders need tobe paid back before wells are cleaned up. With more companies facing insolvency, there'sconcern on the part of landowners and regulators that the abandoned well problem in Alberta is about to get worse.

The AER bulletin in April was was not a new rule, but rather a well-timed prompt, said David Bish, a partner with law firmTorys.

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"There's that reminder to everyone that it can still look to directors and officers," said Bish. "And it has avariety of tools that it can deploy to do that."

Directors and officers includes the board of directors of a company, as well as the top executives, such as the chief executive officer and chief financial officer.

The AER has long had theability to formally name, or blacklistan officerordirector of an energy company, under the Oil and Gas Conservation Act, but ithas only done so in cases of malfeasance, said Ryan Zahara, a partner with Blakes, Casselsand Graydon in Calgary.

"Certain of the parties they've taken that step against have been viewed as egregious offenders," said Zahara.

Environmental protection orders are an option

The AER also has the ability to use an environmental protection order to impose personal liability.

EPOs have been usedin Ontario.In the case of Northstar Aerospace,a courtfound that directors and officers were personally responsible for the clean-up of a contaminated site because the contamination happened under their watch. Those directors were told to pay $15 million.

The question being asked in the energy industry is whether that will happen here, given that the recent run of insolvent companies is connected to the two-year long drop in energy prices.

"How do you punish someone for basicallya market downturn?Aspecific individual, when they may have been compliant with the rules," said Zahara.

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