When an energy company becomes insolvent, defunct, or unable to meet its obligations to safely and responsibly close its site, we may designate the well, facility, or pipeline as an orphan to the Orphan Well Association (OWA) under the Oil and Gas Conservation Act.
Orphan Well Association
Established in 2002, the OWA manages the closure of orphan oil and gas wells, pipelines, and facilities and the reclamation of associated sites across Alberta.
The OWA’s inventory of orphaned sites continues to grow, as shown in the figure below. Since 2019, the average number of orphan wells sent to the OWA for safe closure each year has increased, necessitating a larger operating budget for the OWA to complete the required closure work.
For more information and a list of OWA-managed assets, see the OWA website.
Orphan Fund Levy
The OWA is funded by an annual industry levy called the orphan fund levy (OFL).
The OFL is intended to ensure that the costs of infrastructure cleanup and the reclamation of associated land remain the responsibility of industry and are not passed on to Albertans.
Each year, we recommend a levy amount to the Government of Alberta for the upcoming year. This amount is intended to support a reduction of orphan liabilities over time and is informed by
- the current volume of the orphan inventory,
- the volume of potential orphan energy sites, and
- the closure rate of orphan sites.
Once the government reviews the AER’s recommendation on the OFL amount, it publishes a final amount for the OWA as part of the provincial budget. We then, under section 73 of the Oil and Gas Conservation Act, issue the OFL to energy companies for their proportionate share of the levy to fund the OWA’s operations for the coming year.
We also publish an OFL payment compliance list on the Insights on Liability Management webpage.
OFL Amounts
The OFL for fiscal year 2026/27 is $154.56 million. The figure below shows the annual OFL amounts since 2014.
The Government of Alberta includes projected OFL amounts for the next two years in its ministry business plans; however, these projected amounts are subject to change. The final OFL amount appears in the Ministry of Energy and Mineral's annual budget.
Information about the orphan inventory and closure progress is available on the OWA’s website.
How a Licensee’s Share of the Orphan Fund Levy Is Calculated
A licensee is responsible for its proportionate share of any orphan fund levy or orphan fund levy for large facilities as prescribed by the AER. The levy is calculated as the sum of the licensee’s estimated liability of its licences relative to the total industry estimated liability of all eligible licences, in accordance with the formulas in Part 16.5 of the Oil and Gas Conservation Rules.
Levy invoices are issued annually, typically in April. Payments are due within 30 days of the issuance of the invoice. A penalty of 20% of the levy amount may be applied if payment is not received by the stated deadline.
Orphan Fund Levy for Large Facilities
When there are costs to close large facilities licensed to a defunct company, we can issue a separate orphan fund levy for large facilities to cover these costs. The levy is paid by licensees with large facility licences. Examples of large facilities include sour gas plants, straddle plants, and in situ oil sands plants.
The first orphan fund levy for large facilities was issued in fiscal year 2021/22. The amount invoiced to a company was based on its share of the total estimated liabilities for large facilities.
Additional Information
How does a company find the levy amount it must pay?
A licensee or approval holder can review its licences and estimated liability included in the OFL calculation through the OneStop Liability Assessment Report.
The OFL invoice is emailed to the licensee’s or approval holder’s chief financial officer on file with the AER. To update corporate email or mailing addresses, contact Directive067@aer.ca.
If the licensee or approval holder does not receive an OFL invoice, contact OrphanLevy@aer.ca to request a copy.
Can a third party pay the levy invoice on behalf of another company?
Yes, we accept third-party payments; however, they must be submitted with a copy of the invoice and cannot combined with other payments.
What happens if a licensee does not pay the levy invoice?
The AER has compliance and enforcement tools that may be applied in the event of nonpayment. This includes applying a penalty equal to 20% of the levy amount. The AER may also consider nonpayment during a licence transfer application or when assessing a company’s eligibility to hold AER licences and approvals.
We publish a list showing whether a company has made a payment (i.e., compliant or noncompliant) on the Insights on Liability Management webpage.
How and who determines if there will be a large facility levy any given year?
We recommend to the Government of Alberta on the OFL for large facilities when it is required. The OFL for large facilities is only needed when there is required closure work in a given year, or to reimburse the costs incurred to close a large facility when the licensee becomes insolvent or defunct, and the closure work has been carried out by another party.
What is a working interest participant?
Anyone with a legal or beneficial interest in a site is known as a working interest participant (WIP). WIPs are responsible for paying their proportionate share of the costs incurred by the OWA to complete closure activities, as outlined in the Oil and Gas Conservation Act.
How do landowners know whether sites on their land are with the OWA?
The OWA tracks all orphan sites in Alberta. The inventory of orphan sites changes month-to-month as new sites are added and existing sites move through the closure process. You can search the inventory list or contact the OWA to find out whether a site on your land is in their custody.
If a site is under the care and control of a WIP, it will be listed on the Noncompliance and Enforcement Dashboard under the licensee’s name for closure orders.
What happens if a WIP does not pay their share of the costs to the OWA for orphan work?
The AER may issue an enforcement direction under section 30 of the Oil and Gas Conservation Act requiring payment by a set date. Failure to pay may result in a 25% penalty and the issuance of an AER order, which is posted to the Noncompliance and Enforcement Dashboard and registered with the Court of King’s Bench as a writ of enforcement to enable garnishment.
Unpaid amounts owing to the OWA may also be considered by the AER when assessing a company’s ongoing eligibility to hold AER licences and approvals.
