Reimbursement of Defunct Working Interest Participant Costs

Overview

The Saskatchewan Ministry of Energy and Resources has the ability, under The Financial Security and Site Closure Regulations, to use the Saskatchewan Oil and Gas Orphan Fund (SOGOF) to provide reimbursement for a defunct working interest participants’ (WIP) share of costs incurred for abandonment, decommissioning or reclamation of a well, facility, associated flowline and their respective site.

Note: Reimbursement will not be considered for any costs related to pipeline abandonment and/or reclamation work.

For the purposes of reimbursement consideration, a WIP is considered defunct when they:

• do not exist;
• cannot be located;
• insolvent or bankrupt;
• do not have the financial means to contribute to the costs of meeting the obligations pursuant to The Oil and Gas Conservation Act; or
• As a result of any of the above, the defunct WIP has been deemed an orphan by the Ministry of Energy and Resources.

Note: A company is not considered defunct for non-payment of invoices.

Guidance

Industry may apply to the ministry for reimbursement of the defunct WIP’s proportionate share of abandonment, decommissioning or reclamation costs incurred on behalf of a defunct licensee.

Note: The submission of an application does not guarantee that the defunct WIP’s share in the costs will be reimbursed. The ministry reserves the right to approve or deny the request based on the evidence provided in the application as to whether the costs are, in the opinion of the minister, reasonable and necessary to the work incurred.

Eligibility

For industry to qualify for reimbursement of a defunct WIP’s cost, you must:

• Prior to commencing any abandonment, decommissioning or reclamation activities at the site:
  • Have expressed interest to the ministry for reimbursement consideration and received confirmation that the defunct WIP costs are eligible for reimbursement from the orphan fund;
  • Have establish the timing of the closure work and reimbursement schedule with the ministry;
• Have completed the abandonment, decommissioning and/or reclamation work in accordance with the ministry's requirements. Note that:
  • Abandonment is considered complete when the well is cut and capped or the facility has been decommissioned and IRIS has been updated to reflect this.
  • Reclamation is considered complete when the well or facility site has received an Acknowledgement of Reclamation approval from the ministry.
• Have fully paid the costs incurred;
• Have completed any salvage sales associated with the licensed well or facility.

How to Apply

1. Express Interest to the Ministry for Reimbursement Consideration

Parties seeking reimbursement for a defunct WIP’s costs must notify the ministry of their intent, prior to commencing any closure activity for the given licence to ensure the ministry agrees the reimbursement is warranted.

1. Prepare the following documentation for submission:

• Working Interest Package, combined as a single pdf consisting of the following:
  • Completed Working Interest Summary Form;
  • Corporate Registry Profile Report, from ISC (or provincial equivalent), showing proof of defunct WIP’s status (“Dissolved,” “Struck” or “Cancelled”) and list of directors and officers;
  • Copy of Dissolution Certificate, where applicable.
  • Note: The application should provide sufficient evidence that the party in question is in fact defunct, there is no parent or subsidiary that have survived, and confirm that the defunct WIP has no relation to the WIP who is applying for reimbursement (i.e. no common directors or officers).
• Notice of Abandonment for the licence for which reimbursement is being requested along with signed Notice of Abandonments from all WIPs (with the exception of the defunct WIP) in the licences electing to participate in the abandonment. The Notices should be combined into a single PDF for submission.
• Authorization For Expenditure (AFE) detailing the breakdown of the total costs anticipated for the closure work along with the defunct WIP’s reimbursement cost being requested.
• A detailing of any potential salvage revenue, or alternately, an explanation detailing why no salvage is anticipated.

2. Submit the notification via email to ER.Servicedesk@gov.sk.ca with subject line "Licence #: Reimbursement Consideration of a Defunct WIP’s Costs" with the required documents (identified above) attached as separate PDFs (with no security applied and pages orientated to be read on a computer screen).

The applicant will be notified via email whether the Defunct WIP’s costs would be eligible for reimbursement.

2. Establish Timing of the Closure Work and Reimbursement Schedule with the Ministry

Once the ministry has established that the defunct WIP costs are eligible for reimbursement from the orphan fund, a ministry representative from the orphan group will reach out to the applicant to come to an agreement on the timing of the work and reimbursement.

Note: Due to budgeting constraints the reimbursement may not occur in the same year the work was completed.

3. Submit Invoice Package for Reimbursement

1. Ensure all eligibility criteria are met.
2. Prepare an Invoice Package, which includes the following supporting documents:

• Completed Invoice Summary Form;
• A detailed breakdown of the total costs incurred to complete the abandonment, decommissioning or reclamation work for the given licence;
• All associated invoices, which clearly identify the following:
  • Invoice date, number and total amount (must show GST exempt);
  • Company name and address the invoice was issued to;
  • Licence # (well, facility or associated flowline) and description of work performed.
• A detailed breakdown of any salvage revenue. Please note that the salvage value given is expected to be market value, even if the tubing or equipment has not yet been sold at the time of the application.

3. Submit the Invoice Package to the ER.Servicedesk@gov.sk.ca with subject line "Licence #: Reimbursement of Defunct WIP Costs."

The applicant will be notified via email the amount and timing of reimbursement.

Further Information

WIPs associated with licensees that have been deemed orphans in Saskatchewan

When a licensee is deemed an orphan by the ministry, the Orphan Inventory list is updated to reflect the associated well and facility licences. In addition, the lists will identify any known/viable WIPs associated with the orphaned licences.

At this point, the WIPs would be responsible for carrying out the abandonment and/or reclamation work required under the orphan program. The orphan group will reach out to the known WIPs to establish the timing for the work and reimbursement of the orphaned licensee’s WIP share of the closure costs.

Once the required work has been completed, the WIP may apply to the ministry for reimbursement of the defunct licensee's proportionate share of abandonment, decommissioning or reclamation cost incurred.

Note: WIPs should review the Orphan Inventory and confirm they have been correctly identified as a WIP, where applicable, to ensure the orphan procurement group is not scheduling work to be carried out at those sites and duplicating efforts. If the ministry does not have your company name identified as a WIP on the Orphan Inventory list where it should, you must notify the ministry via email to ER.Servicedesk@gov.sk.ca with the subject line "Deemed Orphan WIP Notification" and provide a list of the licence numbers and the associated working interest participants (name and percentage) for each licence.

Apply

Complete and attach the application.

Submit your application now