Ranch Energy bankruptcy finalized, 401 orphan wells dumped on B.C. for cleanup

For Arthur Hadland, the news that the BC Oil and Gas Commission has assumed responsibility for 401 orphan wells left by a bankrupt oil and gas company is both a blessing and a curse. 

The blessing is that Hadland’s 99-year-old father — one of three dozen Peace region landowners with inactive wells on their properties following the bankruptcy of Ranch Energy — will finally receive almost $25,000 in overdue rent for two wells on the family’s grain and seed farm in northeast B.C.

“He was very pleased,” said Hadland, who can’t visit his father in a Fort St. John senior’s home because of the COVID-19 pandemic, but speaks to him regularly on the phone. 

“His speech is somewhat disassembled because he had that stroke, but he’s fully intelligent. Those oil wells have just stuck in his craw his whole life. It’s always on his mind. So when he heard that, he said ‘very good, very good.’ I’m pleased that he was able to hear that towards the end of his life.”

But the curse is that Hadland and his father Austin, in a small but symbolic way as federal taxpayers, could wind up paying to decommission and restore some of the 401 orphan well sites and three facilities left by Calgary-based Ranch Energy, whose court-approved bankruptcy transaction closed on June 12.

That’s because $15 million in funding for B.C.’s orphan site reclamation fund comes from federal taxpayers, as part of a $1.7 billion economic stimulus package announced by the Trudeau government in April to clean up orphan and inactive oil and gas wells in Alberta, Saskatchewan and B.C. 

The orphan fund, managed by the BC Oil and Gas Commission, is responsible for decommissioning and rehabilitating well sites whose owners have gone bankrupt or can’t be found.

The addition of 401 Ranch orphan wells and three facilities, announced on June 17, more than doubles B.C.’s orphan well tally, bringing it to 770.

That compares to 220 orphan wells in March 2017 — an increase of 250 per cent.

Nine wells from Fort Nelson-based Norcan Energy were also designated as orphans this month and are included in the new total, according to the commission. 

Hadland said he’s happy the restoration work on his father’s wells and other Ranch wells will finally take place. “But it shouldn’t be on our backs as individual taxpayers,” he told The Narwhal. “It should be on the backs of industry. And it’s not.” 

“The process is absolutely wrong. There should have been a fund set aside on every well so that when it came to the end of its term it would be totally rehabilitated by the industry that benefited. But there was no planning like that done at all.” 

“Now we’re going to pay for the remediation, and that bothers me.”

‘A limbo situation’: B.C. landowners owed more than half a million dollars after oil and gas company goes bankrupt

Money to reimburse landowners like Austin Hadland for Ranch back rents — a sum The Narwhal earlier calculated to be in excess of $520,000 — will come from the orphan fund, but not from the federal $15 million, according to an email from the BC Oil and Gas Commission. 

The orphan fund compensates landowners for missed rental payments on designated orphan sites. 

The federal funding will be “strictly used for decommissioning and/or restoration activities,” the commission said. 

Out of $120 million in federal funding to clean up inactive wells in B.C., $100 million has been earmarked to decommission and restore about 2,000 dormant wells that could pose environmental hazards such as methane leaks or groundwater contamination. Dormant wells, which still have owners, have been inactive for at least five consecutive years and are unlikely to return to service.

Another $5 million is for a new “legacy” fund to address the historic impacts of oil and gas operations. 

The orphan site reclamation fund is fully funded by industry contributions, according to the oil and gas commission. 

But critics have said the budget falls considerably short of what is needed for the timely restoration of B.C.’s growing number of orphan oil and gas well sites, noting that taxpayers could ultimately be on the hook for clean-up costs. 

Restoring oil and gas wells is a multi-year process. First, wells need to be decommissioned, or sealed with cement. Full reclamation involves cleaning up contamination and restoring the land to pre-drilling conditions. 

Last year, B.C.’s former Auditor General Carol Bellringer reported that it costs an average of $370,000 to seal a well and restore a site.

At that price tag, the bill for decommissioning and reclamation Ranch’s 401 orphan well sites and three facilities would be almost $150 million. 

But the company left only a $15.6 million security, according to previous reporting by The Narwhal, meaning that other industry operators — or, critics predict, taxpayers — will have to make up any difference. 

Prior to the infusion of federal cash, the BC Oil and Gas Commission planned to clean up 15 orphan well sites this year with funds collected from industry. 

The federal funding for orphan wells will be used for the abandonment (proper closure and sealing) of 22 wells, the decommissioning of 65 equipment sites, remediation of 21 contaminated sites and reclamation of 36 sites, along with associated roads and other disturbances, the commission previously told The Narwhal.

As B.C. readies for a fracking boom to supply the LNG Canada export project — which will ship fracked gas from the northeast to Kitimat through the Coastal GasLink pipeline — the provincial government recently took steps to help insulate taxpayers and the environment from liabilities associated with dormant and orphan wells.

‘A massive liability’: B.C.’s orphan fracking wells set to double this year

But industry observers question if the new culture will be much different, noting long timelines for most newly announced dormant well clean ups, insufficient securities collected from oil and gas companies, and a growing number of bankruptcies as gas prices reach record lows. 

Asked about the financial implications of paying Peace region landowners more than $520,000 for missed rental payments on Ranch wells, the BC Oil and Gas Commission said it is currently in discussions with landowners to collect information.

Hadland said he received a call from the commission early this week.

“They said the Ranch issue had been resolved and that Dad’s two wells had been declared orphan wells and that they would be doing a full decommissioning.”

Hadland said he’s eager for the work to begin on the two well sites, known on the family farm as “the boneyard.” His father refused to allow access to the company that drilled the sites, so access was obtained through a court order, Hadland said.  

“There’s all kinds of iron in there and other junk … They’ve destroyed the soil.” 

When Ranch Energy went into receivership in 2018, the company left behind 700 wells, a sea of debt and a large leaking fracking wastewater pit 400 kilometres north of Fort St. John. 

More than 400 of Ranch’s oil and gas wells, along with the wastewater pit, were transferred to Erikson Energy in the court-approved transaction, the BC Oil and Gas Commission said.

The pond held 113,000 cubic metres of sludge and water, according to The Narwhal’s review of Ranch’s receivership documents. 

The oil and gas commission subsequently spent $470,000 from Ranch’s security deposit to remove and dispose of less than one-tenth of the wastewater in the fracking pit, suspected of contaminating soil and groundwater through a leak in the outer lining.