Canada: Notable Regulatory Updates March 2017

During the last quarter the AER announced a number of regulatory changes which may be of interest to our readers.

Modified AER Suspension Requirements for Wells

The purpose of AER Directive 13: Suspension Requirements for Wells1 is to maintain the long-term integrity of a well in order to protect public safety and the environment. This directive sets out suspension requirements and reactivation requirements for wells as required under section 3.020 of the Oil and Gas Conservation Rules (OGCR).2 This directive was updated as at December 20, 2016 to include changes for calculating compliance deadlines and reactivation criteria.

Compliance Deadlines

The suspension deadline date is now 12 months after the inactive status date.3 All low-risk wells must meet suspension requirements for medium-risk wells after being inactive for 10 consecutive years after the first year of inactivity. Additionally, if the well has never produced or has no volumetric activity reported on Petrinex, a final drill date is used as a last volumetric activity date when calculating the inactive status date. The inactive well is required to be suspended and reported on the Digital Data Submission system (DDS) by the suspension deadline. For example, if the well becomes inactive on January 15, 2017, then the suspension deadline date for completing the suspension work and reporting it in DDS is January 15, 2018.

The inspection deadline will be calculated based on the inspection due date in DDS and moved from a specific date to the end of that calendar year. For example, if the medium-risk well is suspended on April 1, 2015, using a packer and tubing plug, the inspection frequency is three years and the inspection due date would be April 1, 2018. The inspection deadline date will now be December 31, 2018.

Reactivation Criteria

The reactivation criteria were updated to align with operational practices for low productivity producing wells and for intermittently used injection wells.4 For a well to attain active status and to be reactivated on DDS, it must report volumetric activity for at least one hour per month for three consecutive months. A well that cannot meet this requirement retains an inactive status. Pressure testing casing or tubing for the reactivation of a well is not required if the initial well suspension was completed less than 12 months prior to reactivation.

New Application Requirements for SAGD Projects in the Athabasca Oil Sands Area

AER Directive 86: Reservoir Containment Application Requirements for Steam-Assisted Gravity Drainage Projects in the Shallow Athabasca Oil Sands Area became effective on December 16, 2016. It provides application requirements for new scheme approvals and amendments to existing scheme approvals for steam-assisted gravity drainage (SAGD) projects within a specific area of shallow bitumen deposits of the Athabasca Oil Sands Area

of Alberta.5 The shallow area is defined as where the net bitumen pay in the Wabiskaw-McMurray deposit is greater than zero and the Lower Clearwater shale is either shallower than 150m at its base or is completely eroded. The directive aims to protect caprock integrity by providing requirements around maximum operating pressure and caprock criteria. The intent is to ensure caprock integrity throughout the lifetime of SAGD operations.

Approval Requirements

If a party wants to get approval for SAGD in the defined area, the applicant must demonstrate that the Clearwater caprock meets the following criteria:

  1. be a minimum of 10 m thick;
  2. be composed of clay-rich bedrock, with a gamma-ray value greater than 75 API units; and
  3. be laterally continuous across the project area.

The Lower Clearwater shale is the deepest caprock overlying the Wabiskaw-McMurray deposit that meets the above criteria. The AER will consider applications for small-scale pilot projects for limited duration to facilitate the demonstration of equivalent caprocks. Requests to calculate the maximum operating pressure at the base of other geological units will be considered by the AER at the project application stage provided one of the following conditions are met:

  1. the Lower Clearwater shale is present and meets the above criteria; or
  2. the applicant demonstrates that an equivalent caprock is present that will contain injected steam and heated reservoir fluids as effectively as the Clearwater caprock that meets the above criteria.

The Grand Rapids Formation and Quaternary strata have not been demonstrated to be effective caprocks in the shallow area.

Other Requirements

Applicants for SAGD projects within the shallow area must provide a monitoring program that will determine whether operations are within the expected operating parameters. Applicants must also submit geological data, hydrogeology data, a risk assessment and a risk management plan, and details of the proposed monitoring system to the AER in its application.

AER Enhances the Licensee Liability Rating Program

The AER has enhanced the Licensee Liability Rating (LLR) program by requiring additional well information throughout the lifecycle of a well, specifically tubing and artificial lift information. This information will improve the categorization of wells for the purposes of calculating abandonment liability.

Directive 011: Licensee Liability Rating (LLR) Program, Updated Industry Parameters and Liability Costs, suggests the AER categorizes well abandonment based on the presence of tubing and artificial lift.6 The AER does not currently mandate collecting information specific to artificial lift and tubing; however, beginning January 13, 2017, licensees can submit artificial lift and tubing information to the AER via Form 025. Submissions need to be received by the AER before February 2, 2017, for the liability assessments to be recalculated and considered in the February Liability Management Rating (LMR). After this date, licensees may continue to make submissions that will be used in subsequent LMR recalculations. The AER will use the submitted information to properly categorize wells and recalculate abandonment liabilities. Licensees must retain and provide to the AER, on request, information that verifies the accuracy of tubing and artificial lift information provided in the declaration. Should the wells be altered to include or remove tubing or artificial lift, the licensee is required to resubmit Form 025 to the AER within 30 days of the change.

Footnotes

1 AER Directive 013: Suspension Requirements for Wells, online at: http://www.aer.ca/rules-and-regulations/directives/directive-013 [Directive]

2 Alta Reg 151/1971.

3 Directive 013 s 2.1.

4 Directive 013 s 4.

5 AER Directive 086: Reservoir Containment Application Requirements for Steam- Assisted Gravity Drainage Projects in the Shallow Athabasca Oil Sands Area, online at: http://www.aer.ca/rules-and-regulations/directives/directive-086.

6 AER Directive 011: Licensee Liability Rating (LLR) Program, Updated Industry Parameters and Liability Costs, online: http://www.aer.ca/rules-and-regulations/ directives/directive-011.

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