Repurposing: Another Tool to address Alberta’s Backlog of inactive and abandoned oil and gas sites?

Written by David McGillivary, Lorne Rollheiser, and Natasha Tames, Gowling WLG

The current path to land use reclamation of legacy oil and gas sites in Alberta is often a long one, imposing specific requirements on regulatees during the suspension, abandonment, remediation and reclamation stages of the process.   Companies often hold wells in abandonment status to avoid or delay clean-up costs and many such companies are struggling financially.  Despite having undergone reform, this regime has resulted in approximately 97,000 inactive wells, 71,000 abandoned wells, and 2950 orphan wells.

However, there are potential land uses that should be considered in respect of assessing (or reassessing) the status of these wells and associated infrastructure within the reclamation process.  These new and emerging land uses may represent alternative solutions with a number of environmental and economic benefits.  Some potential land uses that may result from repurposing include:

  1. Geothermal power generation:

Thousands of the inactive and orphan wells in Alberta have been identified as having appropriate proximity to existing infrastructure and having heat properties that could be used in electricity generation, industrial heat, or as direct heat sources.  Progress in this industry continues to be made and momentum appears to be increasing with Alberta’s 7 October 2020 announcement of its intention to “clear hurdles to the development of clean geothermal energy”[1].

  1. Exploration and extraction of other substances (such as hydrogen, helium or lithium) using legacy oil and gas infrastructure:

Another alternative that may transform old wells from liabilities to productive assets is the combination of existing technologies in oil extraction that have been altered and applied to extract hydrogen in a near zero-emissions process.  As an example, Proton Technologies continues to develop its process for hydrogen production[2], a two-step process of heating the reservoir to create free hydrogen and extracting pure hydrogen gas.  Proton continues to test and refine its technologies and has described its patented combination of heating reservoirs with Oxinjection wells and harvesting the hydrogen with Hygeneration wells. Both types of wells adapt existing equipment to a new purpose.

Subject to the growth of the hydrogen economy, these technologies have the possibility of being quickly implemented utilizing existing infrastructure, minimizing land use burdens.

  1. Carbon Capture and Storage (“CCS”):

Inactive or abandoned wells and associated infrastructure may also be repurposed to assist with carbon emission reductions through the application of CCS technology. The use of wellsites (with the appropriate technical alterations) for CCS is appealing as another tool to assist in confronting climate change. However, repurposing wellsites for CCS presents certain risks and repurposing activities are likely to be carefully scrutinized on a case-by-case basis to minimize risks and to ensure the integrity of a potential storage reservoir.

The increased use of CCS in Alberta also gives rise to potential spinoff commercial opportunities for the use and marketing of carbon dioxide as a commodity.  Carbon dioxide has some potential for use and marketability in support of climate change goals including through the displacing of products with higher life cycle emissions or in connection with products that have a permanent carbon retention component. [3]

  1. Production of biogas/upgrading into renewable natural gas for distribution through existing pipeline networks or for power generation:

The production of biogas, which may then be modified to produce renewable natural gas (“RNG”), represents a further opportunity for the repurposing of inactive or abandoned oil and gas sites and associated infrastructure.  Biogas primarily consists of methane (~60%) and carbon dioxide (~29%) and arises from the breakdown of organic matter generated from agriculture, forestry, landfill, or wastewater operations in an oxygen starved environment. This process is often done through use of an anaerobic digestor or by thermochemical means such as gasification. Biogas has a number of practical and commercial uses, including as a fuel source for farming operations and as a feedstock for power generation.  Upgrading biogas to RNG (i.e. increasing the methane content to 95-99%) results in a renewable equivalent to conventional natural gas.  RNG produced from biogas can be comingled with conventional natural gas, shipped, and stored using existing conventional natural gas infrastructure, often requiring few to no alterations.

Conclusion

The above options for land repurposing each give rise to potential environmental and economic benefits. From an environmental perspective, each is consistent with public policy objectives for the reduction of GHGs, advancing energy transition and decarbonization, and reducing the need to utilize undisturbed or valuable agricultural land for future development while awaiting regulatory closure on legacy oil and gas sites with uncertain timelines. Economically, repurposing turns a long-standing liability into an asset, supports economic diversification, and creates opportunity for collaboration and growth across a number of different industries and sectors.

However, each of the land uses discussed for site repurposing also entails certain risks from the application of new or emerging technologies to existing, aging infrastructure. Furthermore, the use of sites that are not fully reclaimed brings the prospect of unknown or lingering environmental issues.  Broad acceptance and investment in repurposing as an alternative to standard reclamation processes likely requires further dialogue among industry (across multiple sectors), government, and thought leaders to determine how repurposing initiatives may proceed as an additional option for handling Alberta`s backlog of inactive and abandoned wellsites and associated infrastructure to environmental and economic advantage for the province and the country. Some issues that warrant additional consideration include:

  • With reforms to Alberta`s liability management framework underway, is there a willingness on the part of government and regulators to accept repurposing as an alternative to full fledged reclamation? If so, what requirements apply for a site to be considered eligible for repurposing? How is liability in such cases to be managed and allocated?
  • What, if any, legislative modernizations or reforms are warranted to facilitate repurposing of sites for the land uses discussed above? Considerations may include streamlining of regulatory requirements and oversight, site access issues, and development of royalty and rental regimes.
  • What, if any, financial incentives or funding opportunities are needed to make repurposing projects economical?

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

This article was republished with the permission of Gowling WLG.  It was originally posted on the JWN Energy website.

About the Authors

David McGillivary is an associate in Gowling WLG’s Advocacy Group. He focuses his practice on multiple facets of administrative law, with an emphasis on energy and environmental regulation, as well as Indigenous law.
Lorne Rollheiser is a partner at Gowling WLG and the head of the firm’s Oil and Gas Industry Group in Calgary, Alberta.
Natasha Tames is an associate in the Advocacy Department in Gowling WLG’s Calgary office. She practises in the areas of commercial litigation, insurance and professional liability.