AER shuts down Lexin Resources’ oil and gas operations

Regulator says the company owes $1 million in levies to the Orphan Well Association, $70 million in security for reclamation obligations.

CALGARY — The Alberta Energy Regulator is taking the unusual step of shutting down all Lexin Resources operations, accusing the Calgary-based oil and gas producer of ignoring orders and regulations for months.

Lexin was ordered Feb. 15 to shut down its estimated 1,660 sites, including 1,380 wells and 201 pipelines across the province.

“The AER has very little confidence in Lexin’s ability to conduct their operations safely and we’re taking measures to prevent any increase in public safety, environmental or financial risk,” said Mark Taylor, senior vice-president of the AER’s closure and liability branch.

Lexin officials did not respond to requests for comment.

Taylor said AER field inspectors are paying special attention to 16 sour gas wells Lexin was operating just south of Calgary because of their proximity to the city. He said there is no present danger to the public.

Sour gas contains hydrogen sulfide, a poisonous, corrosive and flammable colourless gas that smells of rotten eggs.

Taylor said the AER doesn’t know how much oil and gas Lexin is producing because the company’s last reliable reports were filed nine months ago.

According to the regulator, Lexin owes more than $1 million in levies to the Orphan Well Association, which reclaims wells left by owners who can’t or won’t clean up depleted sites. The AER said the company also owes more than $70 million in security for its reclamation obligations.

The AER said it has asked other operators with working interests in Lexin’s licensed operations to secure and shut down those sites. The Orphan Well Association has been asked to shut down the sites where Lexin has no partner.

An environmental protection order was also issued to Lexin on Wednesday requiring it to address issues at its Mazeppa sour gas plant 65 kilometres south of Calgary.

The regulator said Lexin only partly complied with an order to shut the plant down last August after it laid off all but six of its staff. The AER said all wells feeding the facility are no longer operational.

Andrew Read, a senior analyst for the Pembina Institute, said he applauds the AER’s order but added that it should move more quickly and administer financial penalties.

“I would like to see faster enforcement of breaches of these licence conditions because it does have an impact to, ultimately, what the liability is to the public,” he said.

Taylor said Lexin asked the AER in January to allow it to designate its sour gas wells as “orphans” because of its poor financial condition but allow it continue to operate its other assets, a suggestion that was rejected.

News from © Canadian Press Enterprises Inc. 2016

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