Established in 2001, 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 and transfer the funds to the OWA’s operating budget.
The levy is used to pay for providing reasonable care and measures and closure costs, including abandonment, remediation, and reclamation, if an energy company cannot meet its obligations to safely and responsibly close its sites . The funds help prevent closure costs from being passed onto Albertans.
Who are Working Interest Participants and What Does “Orphan” Mean?
When an energy company becomes insolvent, defunct, or cannot meet its obligations to close its site safely and responsibly, we may designate the well, facility, or pipeline as an orphan to the OWA’s care to be abandoned, remediated, and reclaimed.
Anyone with a legal or beneficial interest in that infrastructure site is known as a working interest participant. Working interest participants remain responsible to pay their proportionate share of costs incurred by the OWA to abandon, remediate, and reclaim a site.
How the Orphan Levy Is Calculated
The Government of Alberta approves the annual orphan levy amount. The amount is based on
- estimated costs of closure activities for the fiscal year,
- reimbursing working interest participant (WIP) claims, and
- payment of any debts.
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.
Our formula for calculating the orphan fund levy is provided in section 16.5 of the Oil and Gas Conservation Rules.
Orphan Fund Levy for Large Facilities
In years when there are costs to close large facilities that are licensed to a defunct company, we can issue a separate orphan fund levy for large facilities to cover these costs. Only licensees holding large facility licences are levied. Examples of large facilities 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 the fiscal year 2021/22. The amount invoiced to a company was based on its share of the total liabilities for large facilities.
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, became effective on June 15, 2020. The bill enables the OWA to manage better 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 cannot 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 is available on the OWA website.
- Where a licensee has ceased operations or cannot meet its obligations to close its sites safely and responsibly, 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 the remaining working interest participants when directed by the AER.
Please visit the OWA website for more information.
Additional Information
When are orphan levies collected?
Generally the levy is collected in April of each year; however, the date can vary based on timelines for provincial budget approvals.
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 not combined with other payments.
