Drilling to the Bottom of the Orphan Well Problem: Suggestions for a Better Regulatory Framework for Preventing and Remediating Orphaned Oil Wells in British Columbia

• Author: Holly Stewart
• Position: Recently completed her JD at the University of Victoria
• Pages: 71-96

APPEAL VOLUME 26  71

* Holly Stewart recently completed her JD at the University of Victoria. She is grateful for the support

and advice of Rachel De Graaf and the editorial board of Appeal. This paper was written prior to the

commencement of the author’s judicial clerkship at the Supreme Court of British Columbia and re-

ects her views alone.

ARTICLE

DRILLING TO THE BOTTOM OF THE ORPHAN

WELL PROBLEM: SUGGESTIONS FOR A

BETTER REGULATORY FRAMEWORK FOR

PREVENTING AND REMEDIATING ORPHANED

OIL WELLS IN BRITISH COLUMBIA

Holly Stewart *

CITED: (2021) 26 Appeal 71

ABSTRACT

When an oil rm goes bankrupt, its non-productive oil wells are classied as “orphans”

and must be plugged and remediated by provincial regulatory bodies. e number of orphan

oil wells has increased signicantly in the western oil-producing provinces in the past several

years. is paper examines the scope of the orphan well problem in British Columbia,

policy tools used to address orphan wells in other jurisdictions, and shortcomings of British

Columbia’s current regulatory framework. It considers the intersection of bankruptcy law

and orphan well remediation recently addressed by the Supreme Court of Canada in Orphan

Well Association v Grant ornton Ltd, 2019 SCC 5, and makes the argument for upfront

environmental bonds despite the strong environmental stance taken in that decision.

APPEAL VOLUME 26  72

TABLE OF CONTENTS

INTRODUCTION ................................................................................................................................. 73

I. THE SCOPE OF THE ORPHAN WE LL PROBLEM IN

BRITISH COLUMBIA ..................................................................................................................75

A. HOW O IL WELLS BECOME ORPHANS ........................................................................ 75

B. THE SCALE OF THE ORPHAN WEL L PROBLEM IN

BRITISH COLUMBIA ............................................................................................................76

II. SOME POLICY TOO LS FOR ADDRESSING THE PROBLEM O F

ORPHAN WELLS ......................................................................................................................... 78

A. ENV IRONMENTAL BONDS: SECURITY DEPOSITS AGA INST FUTURE

ENVIRONMENTAL LIABILITIES ...................................................................................... 78

B. RECOVERY DURING BANKRUPTCY PR OCEEDINGS: UNIQUELY CANADIAN

CHALLENGES ....................................................................................................................... 82

III. BRITISH COLUMBIA’S REGULATORY FRAMEWO RK: PREVENTING AND

REMEDIATING ORPHAN SITES .............................................................................................86

A. TH E LIABILITY MANAGEMENT RATING PROG RAM .............................................86

B. THE ORPHAN SITE RECLAM ATION FUND................................................................. 89

IV. A LBER TA’S R EGUL ATOR Y FRA MEW ORK ..........................................................................90

V. THE COMMISSION’S ABILITY TO R ECOVER COSTS DURING BANKRUPTCY

PROCEEDINGS AND TH E SUPREME COURT OF CANADA DECISION IN

RED WATE R .................................................................................................................................... 92

VI. ANALYSIS: WHY BRITISH COLUMBIA S HOULD REQUIRE UPFRONT

ENVIRONMENTAL BONDS POSTREDWAT ER .................................................................. 95

CONCLUSION ......................................................................................................................................96