Established in the 1990s, the Orphan Well Association (OWA) manages the closure of orphaned oil and gas wells, pipelines, and facilities, and the reclamation of associated sites, across Alberta. Every year, we issue an orphan fund levy to energy companies in our Licensee Liability Rating (LLR) and Oilfield Waste Liability (OWL) programs and transfer the funds to the OWA’s operating budget.
The levy is used to pay for project closure costs, including suspension, abandonment, remediation and reclamation, if an energy company cannot meet its obligations to safely and responsibly close its energy project. The funds help prevent closure costs from being borne by Albertans.
Our formula for calculating this orphan fund levy is provided in Bulletin 2021-09: 2021/22 Orphan Fund Levy - LLR and OWL Programs.
What “Orphan” Means
When an energy company ceases its operations without having properly closed its infrastructure, we will order anyone with a legal or beneficial interest in that infrastructure to close it. These companies are known as working interest participants.
If there are no working interest participants, we may designate the well, facility, or pipeline as an orphan to the OWA’s care to be suspended, abandoned, remediated, and reclaimed.
How the Orphan Levy Is Calculated
The annual orphan levy amount, which is approved by the Government of Alberta, is set by the AER in consultation with the OWA, Canadian Association of Petroleum Producers (CAPP), and the Explorers and Producers Association of Canada (EPAC). The assessed amount is based on
- estimated costs for the fiscal year for carrying out suspension, abandonment, remediation, and reclamation;
- anticipated claims from defaulting working interest participants;
- payment of any debts arising from the previous year’s operations; and
- any surplus for emergency and nonbudgeted expenditures the AER deems necessary.
Each year, a company receives an invoice from the AER for its share of the total levy. A company’s annual levy is based on its share of the industry’s estimated liability, as determined by our Licensee Liability Rating Program and the Oilfield Waste Liability Program.
Orphan Fund Levy for Large Facilities
In years when there are costs to close facilities under our Large Facility Liability Management Program (LFP) licensed to defunct companies, we can issue a separate levy to cover these costs. Examples of large facilities under the LFP include sour gas plants, straddle plants, and in situ oil sands plants.
We issued an orphan fund levy for large facilities for the first time in fiscal year 2021/22. The amount invoiced to a company was based on its share of the total liabilities in the LFP.
Bulletin 2021-032: 2021/22 Orphan Fund Levy for Large Facilities provides the formula we used to calculate the levy, which is similar to that used for calculating the annual levy for the OWL and LLR programs.
Any company that does not pay the orphan levy may face consequences. Learn about our compliance and enforcement tools.
Expanding the mandate of the OWA
Bill 12: The Liabilities Management Statutes Amendment Act, which came into effect on June 15, 2020, enables the OWA to better manage and accelerate the clean-up of sites that do not have a responsible owner. The most notable changes include the following:
- The OWA may provide care for sites when a licensee is unable to provide ongoing reasonable care and implement measures to prevent impairment or damage to their assets.
- The OWA may manage, maintain, operate (for a limited time), and sell assets for potential transition to a new responsible party. A list of OWA managed assets can be found on the OWA website.
- Where a licensee has ceased operations, the OWA may apply to appoint a receiver to assist in transitioning assets to new responsible parties, who will assume the associated regulatory and liability obligations. This will reduce the remaining end-of-life obligations for the insolvent licensee.
- The OWA may now enter into agreements to conduct work on behalf of remaining working interest participants when directed by the AER.
Please visit the OWA website for more information.
Where can I find previous levy amounts?
Historical levy assessments, including which wells and facilities were assessed, are available on our Digital Data Submission (DDS) system.
When are orphan levies collected?
Dates for when the orphan levies are collected can vary based on the timeliness of budget approvals from the AER, Government of Alberta, OWA, CAPP, and EPAC.
Can a third party pay the levy invoice on behalf of another company?
Yes, we will accept third-party payment; however, it must be submitted with a copy of the invoice and must not be combined with any other payments.