Shuttered junior gas company simply walked away from 4,700 wells, says Alberta Energy Regulator
Calgary-based company says abandonment and reclamation obligations estimated at $329 million
The Alberta Energy Regulator says junior gas company Trident Exploration Corp. shut down abruptly Tuesday without responding to an order to properly manage its 4,700 wells — adding to the more than 3,000 orphan wells already awaiting remediation in the province.
Trident terminated 33 employees and 61 contractors on Tuesday, the company said in a news release.
The privately held Calgary-based company said its abandonment and reclamation obligations are estimated to be $329 million and it doesn't expect any financial recovery for shareholders or unsecured creditors.
Regulator was working with company for weeks
The Alberta Energy Regulator said it's been working with Trident for weeks to ensure the company's assets end up with "responsible operators" and that end-of-life obligations for wells are addressed.
On Monday, Trident told the regulator it would be closing, so the AER ordered the company to decommission sites, post financial security or transfer the sites to other energy companies
But on Tuesday, the AER said Trident's directors ceased operations, terminated employees and then resigned — without responding to the order or addressing any regulatory obligations.
"Trident does not have the funds to operate its infrastructure or enter into creditor protection. As a result, they have decided to walk away, leaving more than 4,400 licensed sites, many of them active, without an operator," the regulator said in an emailed release.
AER spokesperson Cara Tobin said most companies they work with are able to come to an outcome that works for all parties, but this was not one of those situations.
"We are still working on our options," said Tobin. "Generally speaking, yes, a situation like this is concerning."
The company blamed its demise on low natural gas prices and high lease and property tax bills, along with capacity constraints on TransCanada Corp.'s NGTL gas pipeline system in the release.
The AER acknowledged natural gas has experienced weak prices, but said that doesn't erase the company's obligations.
"While we are aware of the difficult market conditions Trident has endured, we also have a responsibility to ensure that safety and environmental requirements are being met," the AER said.
Trident also said a restructuring and sales process with its lenders failed due to issues it linked to January's Supreme Court of Canada decision on insolvent Redwater Energy.
The high court ruled energy companies must fulfil environmental obligations before paying back creditors in the case of insolvency or bankruptcy, overturning lower court decisions that had favoured bankruptcy law over provincial environmental responsibilities.
"As many have speculated and we have now unfortunately proven, the Redwater decision has had the unintended consequence of intensifying Trident's financial distress and accelerating unfunded abandoned well obligations," the company stated.
"Without regulatory collaboration and clarity, Trident is unable to address its near-term liquidity needs and has no financial ability to continue operating. We fear that many other companies may falter without clear, sound policy making post-Redwater."
The AER said it has a responsibility to uphold the Supreme Court's "ruling that financial matters do not have priority over environmental responsibilities."
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The regulator said it will assess high-risk sites to ensure they don't pose immediate hazards and will make sure both the public and the environment are protected from Trident's sites.
Transferring wells to the Orphan Well Association will be a "last resort," the AER said, adding that it will aim to transfer many of the wells to other companies to keep them working and contributing royalties to Alberta's economy.
At the end of 2018, nearly 90,000 wells were sitting idle in Alberta and under current rules, they can continue to do so as long as lease payments are being made to the landowner.
The AER said any member of the public who has a safety concern about the Trident sites should call the 24-hour complaint and emergency response line at 1-800-222-6514.
With files from The Canadian Press