Question
For a purpose of insurance, we would like to know that how long an operator and partners have responsibility for the abandoned wells drilled in a relinquished area or after surrender of a production license. In case a newly awarded production license has several abandoned exploration and production wells, who should responsible for them?
I went through petroleum act, pollution and waste act and related regulations, but I could not get any specific descriptions.
Answer
The consequences of revocation, surrender of rights or lapse for other reasons are dealt with in the petroleum Act section 10-14. The provision reads as follows:
"Revocation of a licence, surrender of rights or lapse of rights for other reasons do not entail release from the financial obligations which follow from this Act, regulations issued pursuant hereto or specific conditions. If a work obligation or other obligation has not been fulfilled, the Ministry may demand payment, in full or in part, of the amount which fulfilment of the obligation would have cost. The amount shall be stipulated by the Ministry with binding effect."
This provision implies, inter alia, that the duty of securing the wells in accordance with the activities regulations section 88 on securing of wells, and - if applicable - the liability for, for example, pollution damage that may arise from an abandoned well in a surrendered or relinquished area, lie with the party/parties who was/were the licensee(s) for that area. The liability is unlimited with respect to time (no time limit is specified).
This liability is also reflected, albeit indirectly, in the information duty regulations section 4 on retention period and discarding litera c, which imposes an unlimited time duty ("for the period of time necessary in the interest of prudent petroleum activities") on the operator of retaining material and information on permanent plugging of wells.
In addition, liability for pollution damage is specifically regulated in the petroleum Act chapter 7. It follows, inter alia, from section 7-3 on the liable party and the extent of liability that the licensee is liable for pollution damage without regard to fault, cf. the petroleum Act section 7-3.
Where abandonment is comprised by a decision relating to disposal as mentioned in the petroleum Act section 5-3, the petroleum Act section 5-4 on liability states specifically that the licensee (possibly the party who was licensee prior to a possible relinquishment of the area) and, if applicable, the owner, shall be liable for damage or inconvenience caused wilfully or inadvertently in connection with abandoned facilities. This liability is not limited with respect to time unless otherwise decided by the Ministry.