Two recent insolvencies have resulted in the number of orphaned wells and facilities in Saskatchewan ballooning to over 4,000. To reduce the burden on the Saskatchewan orphan fund, The Oil and Gas Tenure Registry Regulations have recently been amended to authorize the Administrator of Oil and Gas Tenure in the Lands and Mineral Tenure Branch of the Ministry (the Administrator) to assign or convey a lease that is currently held by a holder that is insolvent, bankrupt, defunct or cannot be located. These amendments follow the consultation period to The Oil and Gas Tenure Registry Regulations that concluded on August 26, 2022, and came into force on February 16, 2023.
Prior to the amendments, the Saskatchewan Ministry of Energy and Resources could only transfer the lease of an orphan well or facility if there was a party with authority to execute the transfer or after the lease expired and the rights to the lease had been posted for sale. With the increased number of insolvencies, a backlog was created for the Administrator. These amendments should increase the timeliness in which assets can be obtained from the orphan fund and provide an opportunity to obtain interests outside of an insolvency process. However, while the process is designed to provide access to licenses and mineral lease interests, at this time it does not appear that the legislation will provide clear title to the associated infrastructure.
Under the new process, the Ministry will review requests on a first-come first-served basis. Where there are multiple parties interested in the same assets, the Ministry may carry out a competitive bid process.
The impacts of these amendments will depend on how the Administrator chooses to exercise its new authority and transfer leases accordingly. Bennett Jones has a robust understanding of energy development and energy infrastructure, as well as extensive experience dealing with orphan wells. If you have any questions regarding the above, please contact the authors of this post.
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