cover image: 80,000 Inactive Oil Wells: a Blessing or a Curse? /

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80,000 Inactive Oil Wells: a Blessing or a Curse? /

7 Feb 2017

The media have pointed to the sharp increase in the number of orphan wells as a cause for concern; in the last 24 months, the number of orphan wells awaiting cleanup has increased from 162 to 768.3 However, this number is small when compared to the number of inactive wells in Alberta.4 Inactive wells are wells that have not had any volumetric activity in a year or more but have not yet been perman [...] These measures reduce the risk to the environment and the public, but also allow for easier well reactivation, so that the productive life of the well is not cut unnecessarily short. [...] I describe here the results of a previous paper on the likelihood that inactive wells in Alberta will be reactivated.11 The paper is the first attempt in the economics literature to decipher the true motivations behind well suspensions. [...] Thus, the regulatory requirement (or lack thereof) is introducing a high risk of potential future liability for both the industry and taxpayers as most of these suspended wells are not assets and the longer they are suspended, the longer the operator 7 This is a range of costs taken from the popular press and an annual report from Alberta’s Orphan Well Association. [...] Each choice and future value depends on the current state of nature (the age of the well, the wellhead price of oil or gas, the per-well remaining reserves, and the current operating state).
economics shale gas natural gas petroleum bankruptcy environmental degradation gas crude oil prices alberta oil reserves externality likelihood function likelihood alberta energy regulator university of calgary resources for the future sunk cost john rust
ISSN
25608320
Pages
16
Published in
Calgary, AB, CA

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