Taken from IV web site (energy investing)
Canadian Oilpatch Agog Over Orphan Well Controversy
I'm sure this will be the only company effected and the Canadian government will support it's hurting O&G industry by not passing anymore laws that will cost them more money .
The oil patch was agog as the Alberta Energy Regulator (AER) took the rare step of publicly rebuking a wayward producer, the private Lexin Resources Ltd., and ordering Lexin to halt all production. "The AER has very little confidence in Lexin's ability to conduct their operations safely," was the blunt assessment of Mark Taylor, the AER's vice-president of closure and liability, speaking to the media about the suspension. The order is unusual because of Lexin's large size. The company has 1,380 wells, 81 facilities and 201 pipelines, all of which have now been suspended.
According to numerous notices on the AER's website, Lexin first ran afoul of the regulator almost a year ago, when it failed to pay its first 2016 orphan fund levy. Orphan fund levies are payments made to the Orphan Well Association, an industry-bankrolled organization that cleans up wells left behind by failed companies. Lexin was invoiced for the first 2016 levy in March, 2016. It soon received a penalty notice for failing to pay. The second 2016 levy also went unpaid, as did the 2016 AER administration fee. The total levies, fees and penalty payments exceed $1-million.
Even nastier problems began in June, when Lexin told the AER that it had laid off all but six of its workers and no longer had a functioning leak-detection system. The AER discovered a spill at one of Lexin's facilities in July. It ordered Lexin to clean it up, but the company did not, or rather a third party contractor did not because Lexin did not pay the contractor, as the AER learned in September. In November, the AER warned Lexin's three directors, Michael J. Smith, Jasmina Cezek and Rob Jennings, that they were facing a declaration pursuant to the Oil and Gas Conservation Act, setting out Lexin's misdeeds. The declaration was officially issued on Jan. 19. On Jan. 31, the AER received a letter from Mr. Smith indicating, "... because of the dispute and your actions, we are not sure that we will be able to continue to provide proper health and safety overview and measures ... particularly beyond Feb. 15." All of this led to yesterday's issuance of the regulatory enforcement and closure order for the suspension of Lexin's operations.
The Orphan Well Association (OWA) now has custody of Lexin's sites. This is an unusual situation for the OWA, which normally sees wells enter its custody through a bankruptcy or receivership process. The OWA currently has nearly 1,600 other orphan wells in Alberta, and Lexin's additions will boost that number toward 3,000. It seems likely, though, that not all of Lexin's wells will need to be cleaned up. Some of the wells -- admittedly a minority -- are held with joint venturers, such as Canadian Natural Resources Ltd. (CNQ: $39.69), Crescent Point Energy Corp. (CPG: $15.07), Bonavista Energy Corp. (BNP: $4.44), Penn West Petroleum Ltd. (PWT: $2.26) and others. They might be interested in buying out Lexin's interests. For now, however, all of the wells need to be shut down so that the OWA can ensure that they do not pose any safety risks. It is unclear how much production will be affected, as Lexin has not reported its production for months