Alberta Energy Regulator denies transfer of Shell’s Foothill assets to Pieridae Energy

Shell’s Foothills assets will not be transferred to Pieridae Energy Ltd. as planned based on denial of application by the Alberta Energy Regulator (AER). Closure of the acquisition was announced in October 2019, but on May 14, 2020, the regulator refused to transfer licenses for 284 wells, 66 facilities, and 82 pipelines in the southern Alberta foothills, most involving sour gas, from Shell to Pieridae (OGJ Online, June 27, 2019).

Regulators cited environmental concerns for the rejection and specifically cited how transfer of the licenses would result in unclear split of liability for cleaning up the sites. ‎This issue only applies to Waterton and Jumping Pound gas plants. The license transfer would make Shell responsible for historical Sulfinol™ and certain other substance contamination and Pieridae responsible for all other remediation and reclamation liability. AER stated that “it is unclear how Shell will be able to identify, and subsequently remediate only historic Sulfinol™, and how all other substances on the same site, including subsequent Sulfinol™ contamination, will be identified and remediated by Pieridae.”

There is no precedent for splitting a license and no ability under the current legislation to do so. Until the licenses are transferred, the liabilities remain with Shell.

The wholesale rejection of the transfers beyond the Waterston and Jumping Pound plant were because the applications were submitted as a bundle. Both companies are evaluating options on the transfer applications and will seek clarity from the regulator to define an appropriate path forward.