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“The OWA wasn’t set up to handle a so-to-speak orphaned oilsands project but, in the modern oilsands era, this would be a first,” according to Andrew Leach, University of Alberta business and economics professor.

“The alarm bell here is that this is an oilsands lease with a physical plant and everything else that is effectively a stranded physical asset that has no financial value,” Leach said.

Leach also said that if the McKay project were orphaned, the size of liabilities the OWA manages would swell and further increase the levy that other oil and gas producers pay into the Orphan Well Fund.

The AER sets a levy amount every year that oil and gas companies are required to pay into the orphan fund, and that levy has risen and is expected to rise further as more oil and gas sites have been orphaned.

The number of new orphan wells in the OWA’s inventory increased 125 per cent from 768 wells in March 2016 to 1,733 wells in Sept. 2017 as a result of insolvencies amid low oil and gas prices. The entirety of that increase has been from conventional oil and gas wells, though there have also been small oilsands companies enter receivership, including Connacher Oil and Gas Ltd.

“We are concerned about companies disclaiming assets and the increasing number of sites going to the OWA,” AER spokesperson Cara Tobin said.

Tobin said the McKay oilsands project is not considered a “large facility” and so it could be managed by the OWA. There is currently no similar organization set up in Alberta to take over the reclamation liabilities of a larger oilsands project, like a mine, if a larger project were orphaned.