The cost of looking after hundreds of wells, pipelines and other oilfield gear left behind by bankrupt Lexin Resources Ltd. has exceeded $2 million and the bills continue to roll in, says Alberta’s Orphan Well Association.

The association was handed responsibility for nearly 1,100 wells plus associated equipment after the Alberta Energy Regulator took the unusual step last February of shutting down all Lexin operations.

The AER accused the Calgary-based oil and gas producer of ignoring orders and regulations and forced it into receivership, claiming it owed more than $1 million in levies to the OWA and another $70 million in security for its reclamation obligations.

At the time, OWA chairman Brad Herald estimated it would cost about $1 million to administer the assets for six months until the ones with value are sold to new owners — but he said the actual costs have more than doubled as the process enters its ninth month.

“It’s taking longer than we thought,” he said Thursday.

“We’re still sitting with all that inventory and the carrying costs until the sales process is over, then we’ll have a view as to what the (final) liability might be. Not all of that Lexin property will move in the sales process so, oh yeah, it will be certainly north of that ($2 million).”

Property that isn’t sold will likely revert to the OWA, an industry-funded body assigned the task of cleaning up oil and gas wellsites for owners who can’t or won’t do so.

Executive director Lars de Pauw said OWA is spending about $100,000 every month to maintain the Lexin properties.

He said OWA had spent a total of about $1.2 million as of last month, with about two-thirds from hiring contract staff to complete well inspections, replace Lexin signs with OWA signs, talk to landowners and perform routine maintenance.

The accumulated …read more

Source:: Calgary Herald

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