Canada: Industry Success (So Far) Under The Inactive Well Compliance Program

Alberta's oil and gas industry has exceeded the first year's target for bringing inactive oil and gas wells into compliance with regulatory requirements under the Alberta Energy Regulator's (AER) Inactive Well Compliance (IWC) Program.

No production for 12 months or more

Wells are commonly shut in and made inactive when oil and gas prices are low.

The AER's Directive 013: Suspension Requirements for Wells sets out the regulatory and technical requirements for wells that have not been produced for 12 or more months. Depending if an inactive well is categorized as low, medium or high risk, Directive 013 may require licensees to undertake downhole technical work to install a packer and plugs and formally suspend the well where it can be safely left indefinitely. Licensees must maintain, inspect and report on all inactive wells.

The purpose of Directive 013 is to reduce the potential for impacts to the public and the environment posed by an inactive well. However, historically industry has failed to fully comply with Directive 013 and by July 2014 approximately 37,000 of Alberta's 80,000 inactive wells were in non-compliance. In the past, the AER apparently lacked the resources to measure and enforce industry's compliance with Directive 013.

The IWC Program was implemented on April 1, 2015, to bring into compliance inactive wells that did not meet the requirements in Directive 013. Compliance can be achieved by reactivating, properly suspending or abandoning an inactive well.

The IWC Program is a five-year program. It essentially requires licensees to bring into compliance 20 percent of their non-compliant inactive wells each year, with the licensees able to choose which wells in their non-compliant wells inventory they bring into compliance each year.

Drop in non-compliant wells

In a July 2016 report on the IWC Program's first year, the AER noted that from April 1, 2015, to March 31, 2016, the number of non-compliant inactive wells in the province dropped from 25,792 to 17,470. Overall, licensees brought 10,799 or 35 percent of the non-compliant inactive wells in the IWC Program into compliance with AER requirements. Further, 2,312 other wells that were compliant as of April 1, 2015, but would have become non-compliant over the year were successfully brought into compliance, resulting in a total of 13,111 inactive wells becoming compliant. The first- year target under the IWC Program was 5,941 wells, so the industry overall greatly exceeded the program's first-year target.

Exceeding the first-year target is not surprising. That is because it is believed many inactive wells were not compliant due to the licensees failing to inspect and report on their inactive wells. Compliance could therefore be easily achieved by sending personnel to look at the well and file a report with the AER. Additionally, in some cases licensees submitted new data showing that the wells were no longer inactive or the wells were reclassified for other uses.

As licensees can choose which wells in their non-compliant inventory they want to deal with each year, it is believed many licensees in the first year of the program chose to pick the low-hanging fruit by dealing with the wells that were the easiest to be brought into compliance. As some non-compliant inactive wells require technical work in the wellbore using a service rig, and therefore will be more costly to bring into compliance, it is expected many licensees will leave such wells until near the end of the IWC Program and it will be more difficult for industry to meet or exceed its yearly targets in the last few years of the IWC Program.

Notwithstanding the overall success of the IWC Program in its first year, approximately 155, or 24 percent, of licensees did not meet their targets. The AER has said it is investigating these companies and, where appropriate, will take enforcement action against these non-compliant licensees.

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