When an Abandoned Gas Well is Discovered?
The home purchased had an additional back piece of vacant land attached to the property. On viewing the home before buying, the buyer did not inspect the back parcel. On searching title, the buyer’s lawyer obtained a copy of an old survey that indicated an abandoned oil well on a corner of the attached back parcel. With its discovery, the buyer inspected the back parcel found the well, visible from the surface and took a picture. He noted the smell of gas in and around the well.
Disclosure of a Gas Well Should be Made
He was somewhat upset as he felt the gas well’s existence should have been disclosed. He discussed his concern with both his lawyer and real estate agent. His lawyer asked for a price reduction through the seller’s lawyer and some three days later still hadn’t received a response. The buyer now turned to his brokerage. He wanted the property but also wanted some resolution. Recognizing this as a problem, brokerage did some research and made some of the following discoveries.
According to the Niagara Peninsula Conservation Authority,
“An abandoned oil and gas well on your property is a hazard to the environment and your health and safety.”
They can also be obstacles to new development and “can be a financial liability to the landowner.”
So it’s important to report and plug abandoned wells.
Information from the Ministry of Natural Resources
We learned that the Ministry of Natural Resources and Forestry has what’s called the Abandoned Works Program to help “Ontarians properly plug wells on their property.” They will:
Establish as to whether a well qualifies for the program,
Rank the well according to its “risk to public safety and potential for environmental damage to determine when it should be plugged…,
“Arrange for a certified well contractor to plug the well.’
If there is no gas well operator to be found, the landowner is responsible for plugging the well. In our search, we thought we located the well in the Oil, Gas & Salt Resources Library and reported our findings to the Ministry. As they could not find it in their database, they recommended the buyer hire a consultant. Apparently unlicensed and abandoned gas wells, not properly decommissioned, abound in southwestern Ontario.
Cost to Plug the Well
The cost of plugging a well can range from as little as $2,500 to thousands. In one reported case the landowner ended up being on the hook for $20,000. By now some days had gone by and the closing date was fast approaching. The buyer hired a contractor who estimated a cost of $28,500 to properly plug the well. Armed with this quote, the parties negotiated a reduction in purchase price of $25,000, with the buyer agreeing to take responsibility to plug the well after closing.
More Pre-Listing Research by REALTORS Needed
This should have been disclosed before the buyer made an offer. Luckily it was discovered before the deal closed. REALTORS would be wise to walk the property prior to listing and have the seller fill out the “OREA Property Information Checklist" to uproot any required disclosures.