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A Calgary-based startup company will announce on Thursday it is picking up a collection of oil and gas wells in Saskatchewan that will never again produce anything.

Skye Asset Retirement is acquiring the aging and idled assets from an unnamed producer, taking cash, along with ownership of all of the licences, in exchange for assuming the liabilities associated with the wells. The acquisition is an industry first, the company says, with the aim of acquiring the assets to shut them down properly and reclaim the land to regulatory standards, using a self-funding model.

It is one possible solution to deal with a multibillion-dollar problem that governments, regulators and financial markets are struggling with. Companies have left thousands of wells idle as production has petered out, or low prices made them uneconomical, and cleanup liabilities have grown into a bill that hangs over their finances.

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Weaker players have been forced into bankruptcy as oil and gas prices cratered, boosting the number of orphan sites, or those with no solvent owner. Just last month, Houston Oil & Gas Ltd. became the latest company to leave a legacy of old assets that a receiver must now sort through, the result of a failed business strategy.

“You can rattle off the names in the last 18 months. There’s 10 of them of note. Hopefully there’s not too many more but we know there might be a few more," said Ryan Smith, Skye’s chief executive.

Mr. Smith and his partners, Mark Ashton and Bryce Watson, already conduct cleanup assessment, strategy and operations for producing companies through Skye’s for-hire sister firm, 360 Energy Liability Management. The acquisition idea is unique, as its success does not rely on oil and gas prices or production. Indeed, Skye will produce nothing, even though it is acquiring the wells as in any traditional deal between oil companies.

“The problem becomes ours. Because we’re experts in that space, we understand it better than most, we feel that there’s an opportunity there," said Mr. Smith, who besides being a veteran of the energy service and equipment sector is a former member of Canada’s national rugby team.

The partners will develop a road map for cleaning up the sites through to regulatory approval, with the business opportunity lying in the ability to do the work for less than the cash it receives. For any unforeseen problems, the partners have helped to develop an insurance product specific to that work.

Skye won’t deal directly with the orphan well problem.

Privately held Houston’s 1,400 wells could end up on the inventory of Alberta’s already-overburdened Orphan Well Association (OWA). Houston’s assets carry cleanup liabilities estimated at $81.5-million.

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The industry-funded OWA already has 3,406 wells requiring abandonment. At last count, Saskatchewan had 815 such wells on its orphan list. The numbers have ballooned in the past five years because of a slew of corporate bankruptcies.

Skye aims to deal with the wells by acquiring the liabilities from the books of financially healthy producers before they get sold to weaker operators.

The liabilities are creating problems as companies seek financing in an already-tightfisted environment. In a decision early this year known as Redwater, the Supreme Court of Canada ruled that in bankruptcies, environmental cleanup gets priority over secured creditors. As a result, lenders have zeroed in on companies’ environmental liabilities as they consider how much credit to extend.

Mr. Smith said the industry’s overall lack of access to capital is its biggest current problem. Companies dealing with the sticking point of liabilities will help the cause, he said.

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