The AER reports that Albertan O&G producers have plugged half of the wells drilled in Alberta. But 70% of the sites taken to drill or operate wells have not been cleaned up and use of the land that comprises these sites and related access roads has not been returned to the registered landowner. The UCP government is trying to force Albertan taxpayers to cover the cost of this cleanup.
Why? Click to read more.
The Alberta Energy Regulator (the “AER” or the “Regulator”) is charged with administering most Alberta laws pertaining to the exploration for and production of minerals such as coal and petroleum (oil and natural gas). The AER also administers related environmental laws governing land contamination, land decontamination called “remediation”, land use, and land restoration at the end of the productive life of an oil or natural gas activity. The AER is tasked with ensuring only well licensees or industry pay for end of life costs of retiring oil and gas wells and related site cleanup and restoration, the cost of which the Alberta Auditor General confirmed has been estimated at $66 billion by the AER (wells only).
Wells Drilled in Alberta and Their Status
According to the AER, as at 2024 there are 469,526 wellbores in Alberta that produce oil and/or natural gas (or are re-injection wells for by products such as produced water or gas). These wells and related well sites have been categorized as per various status as shown by the following AER graphic:
Alberta Energy Regulator (n.d.). Well Status. www.aer.ca. Retrieved July 16, 2024, from https://www.aer.ca/providing-information/data-and-reports/data-hub/well-status
AER data indicate that industry has plugged half of the wells drilled in the province of Alberta (“dry holes” and spent wells are plugged), which plugging process is called well “abandonment” (abandonment in this context does not mean the person or company responsible for the well has abandoned its responsibilities to operate or close the well - please see AER Directive 020, "Well Abandonment".)
However, 70% of the sites taken to drill or operate wells have not been cleaned up and use of the land that comprises these sites and related access roads has not been returned to the registered landowner. Use of the land reverts back to the landowner upon government certification of a site as having been reclaimed to government standards. The AER issues reclamation certificates for oil and gas land usage.
Wells to be plugged in future: 236,172 (50.3% of total wells)
Sites to be reclaimed in future: 328,668 (70.0% of total wells)
AER records also indicate that the cost to complete the plug and reclamation processes will cost approximately $66 billion.
Who is responsible for plugging and reclamation? Oil & gas companies.
Because companies can fail financially or otherwise fail to carry out their obligations at law, the AER has the broad discretion and legal powers necessary to require well licensees to post security against certain (but not all) costs in the three categories below:
- well plugging (called “abandonment” or decommissioning);
- decontaminating those sites where spills and releases of substances of concern have occurred (called “remediation”); and,
- site restoration to a state where it can have a future use other than for oil and gas (usually agricultural or forest use, although some sites are urban and will have residential, commercial, or industrial future uses), called “reclamation”.
(Collectively referred by various parties as closure costs, end of life obligation costs, or asset retirement obligations (“ARO”)).
Citizen Safety Net – the Legislated Orphan Fund
However, because of deals made in the last century between industry on one hand, and government and regulators on the other hand, security is rarely collected, even when financially viable companies transfer wells and their related licenses and mineral rights to smaller companies with questionable finances and ability to cover end of life closure costs. The alternative to lax licence transfer, lax security rules and related lax enforcement of same, is legislated and is called the “orphan fund”. If the licensee fails to cover the cost of well and site closure, such costs are to be covered by the orphan fund, which is to be properly capitalized by industry via a levy. The AER’s unfulfilled mandate is to levy a sufficient amount each year to cover closure costs of wells (and facilities) designated as “orphans” by the AER.
The author discusses the orphan fund in a YouTube video.
Alberta’s oil and gas laws related to closure are based on the “polluter pay” principle, and the orphan fund concept that is unique to the province.
However, the powerful industry lobby seeks change to a citizen pay model.
Unless Albertans or Canadians want to pay for some $66 billion in well closure costs, as well as an additional $200 billion in pipeline, facilities, and oil sands cleanup, it is imperative that existing laws are observed and strengthened and that the Alberta Energy Regulator be required to fulfill its mandate.
Ask yourself: why is the UCP forcing Alberta taxpayers to cover the expenses of decommissioning & reclamation?
Shouldn't their O&G cronies clean up their own messes?