Official (Alberta) Oil Discussion Thread

[PsYcNeT]

Originally Posted by Weitz

As someone who does a lot business with the OWA you couldn't be more wrong.

I'll let you go to their website and educate yourself.

http://www.orphanwell.ca/

So do I, and their office is literally inside the AER. This is despite their board having some industry figures.

[Weitz]

Originally Posted by PsYcNeT

So do I, and their office is literally inside the AER. This is despite their board having some industry figures.

If you did work for them or knew anything you would know they lease office and computer support through the AER.

As I said, visit their website and educate yourself.

[Fighting Banana Slug]

Redwater was heading to appeal, no matter what the decision. As an industry guy, I do think for public policy reasons, this is a bad outcome. However, the counter argument is that if you force receivers to deal with it on the AER's terms, nothing will get sold and even more wells will end up orphaned. Either way, I suspect there will be some policy changes, including potentially having upfront security deposits paid to AER when applying for a licence.

[Flash Walken]

Originally Posted by Weitz

The Orphan Well association would be on the hook which is industry funded.

If anything this will make the responsible producers upset and could force some changes.

This is the concern though, from the article:

The provincial government has several lines of defence against paying well clean-up costs. Healthy companies are required to keep enough assets on hand to cover the cost of decommissioning. Even if that contingency fails, industry funds an Orphan Well Association to do the work.

However, the current recession in the oilpatch has meant a quickly mounting caseload for the OWA. This ruling, allowing the separation of producing assets from those that are not economic, threatens to unleash a wave of costs that could overwhelm the OWA's budget.

The OWA argued in the case that its funding would have to be substantially increased if it had to take on all the bad wells in the province.

[Resolute 14]

Originally Posted by IliketoPuck

No, certainly not. They represent a special, yet highly talented demographic of keyboard facerollers.

I generally avoid the comments section as it is inevitably a train wreck, but I just couldn't look away.

I can't wait until CBC's real name policy comes into effect. Because my toooooooootally real alternate Facebook account is already ready to go.

[Ashartus]

Originally Posted by PsYcNeT

The OWA runs out of the AER. It's going to be at least partially, and likely majority, subsidized with Public funding.

The OWA is mainly funded through a levy applied to oil and gas companies. However they did get at least one $30 million top-up from government a few years ago, and another was at least being considered from what I've heard.

[Bootsy]

Originally Posted by PsYcNeT

The OWA runs out of the AER. It's going to be at least partially, and likely majority, subsidized with Public funding.

No it's fully industry funded just as the AER is :

http://www.orphanwell.ca/pg_faq.html

https://www.aer.ca/about-aer/governance

[Weitz]

Originally Posted by Ashartus

The OWA is mainly funded through a levy applied to oil and gas companies. However they did get at least one $30 million top-up from government a few years ago, and another was at least being considered from what I've heard.

That was in 2008 as a stimulus in Alberta to promote jobs and work.

[Husky]

Originally Posted by BigNumbers

You have some terrible wells you should have never drilled if prop taxes and surface rentals are killing economics!

Wells become marginal after ten years.

[Mr.Coffee]

A huge decision and agreed likely headed to appeal. But this would have been a really tough call by the judge. Let's see, destroy capital investment in the BS shell game in Canadian energy or give banks a free pass on ####ty investments? Not really too fair really, oh well probably the right decision ultimately.

[Kavvy]

Originally Posted by Mr.Coffee

A huge decision and agreed likely headed to appeal. But this would have been a really tough call by the judge. Let's see, destroy capital investment in the BS shell game in Canadian energy or give banks a free pass on ####ty investments? Not really too fair really, oh well probably the right decision ultimately.

There must be precedent for this in other industry's, no?

[Fighting Banana Slug]

Originally Posted by Kavvy

There must be precedent for this in other industry's, no?

Not sure. I know in the UK, abandonment liabilities are dealt with by posting a letter of credit which is adjusted as the anticipated costs grow. Not a perfect solution, as there is still so much guess work involved in budgeting for costs far into the future. I think they are facing a similar problem over there as well, as those costs are now becoming more certain and more current, there is no way a company will be able to sell the assets and that industry goes down the tubes.

[Barnes]

Redwater had a LMR of .7 and no security on hand.

Hopefully the price of oil continues to rise or else this case will only be the tip of the iceberg and all these companies bellow a LMR of 1.0 start to take a look at abandoning and reclaiming assets while the times are good and they can afford to.

A tough decision to have to pick between forcing polluter pays and killing M&A activity in AB or putting abd. and reclamation costs on the OWA/crown and remaining friendly to M&A.

Licensees need to start cleaning up their ####.

[Husky]

Originally Posted by Barnes

Redwater had a LMR of .7 and no security on hand.

Hopefully the price of oil continues to rise or else this case will only be the tip of the iceberg and all these companies bellow a LMR of 1.0 start to take a look at abandoning and reclaiming assets while the times are good and they can afford to.

A tough decision to have to pick between forcing polluter pays and killing M&A activity in AB or putting abd. and reclamation costs on the OWA/crown and remaining friendly to M&A.

Licensees need to start cleaning up their ####.

The llr calculation has some massive flaws. One is thatcosts havent veen revised to account for reduced service costs in todays market.

[Fighting Banana Slug]

Originally Posted by Barnes

Redwater had a LMR of .7 and no security on hand.

Hopefully the price of oil continues to rise or else this case will only be the tip of the iceberg and all these companies bellow a LMR of 1.0 start to take a look at abandoning and reclaiming assets while the times are good and they can afford to.

A tough decision to have to pick between forcing polluter pays and killing M&A activity in AB or putting abd. and reclamation costs on the OWA/crown and remaining friendly to M&A.

Licensees need to start cleaning up their ####.

I think that is correct.

The decision was based on the doctrine of paramountcy, which basically states that if valid federal and provincial legislation are at odds with each other, the federal legislation prevails. At that level, the decision makes sense. The judge all but admits that this is likely to cause major issues, but to deal with those issues, the Feds will need to revise the Bankruptcy and Insolvency Act. In my view, that is likely to happen.

Also relevant, is the fact that the AER has other powers to help discourage the potential "cherry picking" of good assets, leaving the dregs to industry/public to clean up. It will be very interesting how this all unfolds.

[Fuzz]

I wonder if the OWA, in the future, could become a creditor such that the cleanup costs are listed as a loan to any company that dills in Alberta, so they become a creditor able to recoup at least some costs. Company balance sheets would have to reflect this as a liability, but I don't think that is unreasonable. Any chance that would work? Note that I know nothing about bankruptcies or accounting.

[calf]

Originally Posted by Fuzz

I wonder if the OWA, in the future, could become a creditor such that the cleanup costs are listed as a loan to any company that dills in Alberta, so they become a creditor able to recoup at least some costs. Company balance sheets would have to reflect this as a liability, but I don't think that is unreasonable. Any chance that would work? Note that I know nothing about bankruptcies or accounting.

Companies (at least public ones/those that follow good accounting practices) do have a liability set up on their books to show what they'll have to pay down the road. The problem being, as we're seeing here, is while there is a legal obligation, others are at the front of the line. And typically the reclamation activities are way down the road, companies can be short sighted and not have the cash set aside to pay for it.

[Barnes]

Originally Posted by Husky

The llr calculation has some massive flaws. One is thatcosts havent veen revised to account for reduced service costs in todays market.

Costs are based on actual abandonment and reclamation costs collected and calculated by an independent body. Deemed assets are based on a 3 year rolling average netback so those are too high as well. Can't complain that DL are calculated too high if DA are as well.

[stampsx2]

Myth or truth?

Anybody else think american oil companies might be funding environmental groups to act out against canadian oil sands? It kind of doesn't make sense when alberta oil sands are responsible for 0.15% of the worlds carbon emmissions and the placerita oil fields in california alone have twice the carbon footprint?

Environental groups are concerned about Canada producing 2% of the worlds carbon but the u.s. is responsible for 17% and china 24%. Weird.

Have the people of Canada researched the real criminals of the environment or are they just going by word of mouth? Do they know something the rest of us don't.

I find it strange that environmentalists are very concerned about the around 5,000 annual bird deaths in tailing ponds but have little to say about the 23,000 that die in canada annually from wind turbines. Then there's also solar that causes bird deaths. Oil prices are low which increases air travel which I would also assume increases bird deaths but no word on that.

To me something doesn't add up here and am hoping someone has some insight.

It's all a bit frustrating because environmentalism is suppose to be synonymous with protection for the planet but to me it looks like they just want changes that affect everybody but themselves.

[Kavvy]

Originally Posted by stampsx2

Myth or truth?

Anybody else think american oil companies might be funding environmental groups to act out against canadian oil sands? It kind of doesn't make sense when alberta oil sands are responsible for 0.15% of the worlds carbon emmissions and the placerita oil fields in california alone have twice the carbon footprint?

Environental groups are concerned about Canada producing 2% of the worlds carbon but the u.s. is responsible for 17% and china 24%. Weird.

Have the people of Canada researched the real criminals of the environment or are they just going by word of mouth? Do they know something the rest of us don't.

I find it strange that environmentalists are very concerned about the around 5,000 annual bird deaths in tailing ponds but have little to say about the 23,000 that die in canada annually from wind turbines. Then there's also solar that causes bird deaths. Oil prices are low which increases air travel which I would also assume increases bird deaths but no word on that.

To me something doesn't add up here and am hoping someone has some insight.

It's all a bit frustrating because environmentalism is suppose to be synonymous with protection for the planet but to me it looks like they just want changes that affect everybody but themselves.

Many, many, many, many, many people believe what you posted.

Edit - i should add, I have never seen any proof.