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The collapse of an Alberta natural gas producer threatens to more than double the inventory of orphan oil and gas wells in a province already struggling with a spike in unfunded cleanup costs.

Calgary-based Trident Exploration Corp. said in a statement it ceased operations effective April 30, leaving behind a $329-million bill to clean up 4,700 wells it says are being transferred to the Alberta Energy Regulator (AER). Cleanup of those wells could ultimately be paid for by an industry fund that is already struggling to deal with orphan wells.

The company blamed weak natural gas prices, high municipal taxes, inflated lease payments and a recent Supreme Court decision that prioritizes environmental cleanup over the creditors’ interests in bankruptcies. Privately held Trident, which has focused on coalbed methane and shallow gas, had struggled through years of corporate restructurings and bankruptcy proceedings.

It said it failed to secure AER support to restructure its operations in a timely fashion and does not expect any recovery for shareholders and unsecured creditors. A source familiar with the situation said Trident’s bank, ATB Financial, was “constructive” in seeking a solution that would allow Trident to keep operating but it, Trident and the regulator failed to come to terms.

The AER said it had ordered the company to manage its well licences by decommissioning the sites, posting financial security or transferring the wells to “responsible energy companies.”

Rather than complying, the AER said Trident’s directors shut down the operations, terminated all the employees and contractors and then resigned.

“Addressing end-of-life obligations is essential to responsible energy development,” the regulator said in a statement. “We have a responsibility to uphold the Supreme Court of Canada’s Redwater decision that financial matters do not have priority over environmental responsibilities.”

The AER said it would assess all options for enforcement.

Trident’s shutting of operations exacerbates a costly problem of unfunded liabilities in the oil patch as weak companies that are unable to secure financing and keep operating heap more economic burden on a fund that has already required the provincial government to step in and backstop it.

The case is the first major one after a Supreme Court decision earlier this year that said energy companies cannot walk away from their obligations to clean up oil and gas wells in bankruptcy cases, and that environmental responsibility supersedes the interests of secured creditors.

In the case of insolvent Redwater Energy Corp., the Supreme Court overturned lower-court rulings that essentially allowed creditors to hive off and sell the most profitable wells and dump the remainder on the rest of the industry, which contributes to a fund that is used to clean up spent wells managed by the Orphan Well Association.

Environmental advocates cheered the decision, but some oil-industry officials and analysts had warned it would create a chill over investment in the hard-hit sector when capital is needed most, especially among smaller companies carrying hefty environmental liabilities on their balance sheets.

Trident, which produces about 67.5 million cubic feet a day of gas equivalent in northern and central Alberta, said the decision and lack of pipeline capacity had created a “treacherous” environment for energy investors.

Since the industry downturn that began in 2014, the number of oil and gas sites that no longer have solvent owners has ballooned to 4,349 from 545, forcing the previous NDP government in Alberta to extend $235-million in loans to the Orphan Well Association.

Still unknown is the fate of nearly 3,300 wells stemming from the March, 2018, bankruptcy of Sequoia Resources Corp. The company left the AER with a cleanup bill of $225-million, and the trustee in the case has sued Perpetual Energy Corp. and its chief executive officer Sue Riddell Rose, seeking a judge’s order to either unwind Perpetual’s 2016 sale of assets to Sequoia, or award $217-million in damages.

Perpetual and Ms. Riddell Rose are seeking to have the case tossed out, arguing they were not responsible for Sequoia’s failure. A judge’s decision is pending.

A Globe and Mail investigation into the problem of unfunded environmental liabilities in the oil patch, published in November, found the numbers of orphan wells could swell across Western Canada due to regulations that allow companies to idle unprofitable ones indefinitely – or transfer them to thinly financed rivals.

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