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Canada’s oil-rich Alberta province has just doubled the number of ‘orphaned’ oil wells by suspending the oil and gas licenses of Lexin Resources Ltd., bringing the number of orphan wells to nearly 3,000.
On Wednesday, Reuters reported, the Alberta Energy Regulator (AER) suspended all of Lexin’s oil and gas well facility and pipeline licenses, saying the private company must cease production after failing to comply with orders and demonstrating its inability to manage more than 1,600 sites.
With this suspension, the number of orphan wells in Alberta was increased from 1,590 to 2,970.
When well owners are unable to financially handle the abandonment and decommissioning of a well, the clean-up costs fall on Alberta’s Orphan Well Association (OWA).
"The AER has little confidence in Lexin's ability to conduct its operations safely and is taking measures to prevent increasing public safety, environmental, and financial risk," the regulator said in a statement carried by Reuters.
The OWA has now taken on responsibility for 1,380 of Lexin’s wells, while the company already owes the OWA CAD1 million.
Calgary-based Lexin also operated a sour gas plant in southern Alberta, 201 pipeline licences and 81 other facilities—all of which have been turned over to the OWA.
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"We have not issued an order like this to a company this size," said Allberta Energy Regulator's (AER) Cara Tobin. "We will be working with Lexin and with interested participants and the Orphan Well Association to shut in and secure the sites."
Lexin stopped producing last summer, and Alberta authorities had no estimate of how much crude the company had been producing prior to its shut-down.
The orphan well problem has reached such proportions that the Alberta government has in the past considered seeking help from the federal government to cover the costs of decommissioning and clean-up, the Globe & Mail reported.
By Damir Kaletovic for Oilprice.com
Damir Kaletovic is a veteran investigative journalist covering Europe and the Middle East, and a senior consultant for Divergente Research.