Critics and industry clash over accuracy of Alberta well cleanup cost estimates

Critics and industry clash over accuracy of Alberta well cleanup cost estimates

CALGARY — An Alberta coalition that says oil and gas producers are lowballing how much it will cost to clean up their wellsites is being accused by the head of the Alberta Orphan Well Association of overstating those numbers.

The Alberta Liabilities Disclosure Project, a coalition of landowners, environmentalists and others, on Thursday published a list of producer companies with estimates of how much it would cost each to remediate its Alberta oil and gas properties if the job had to be done immediately.

Those costs are much higher than the companies estimates because they are assuming they will have decades of cleanup time, the coalition said, while calling on the province to release independently verified estimates of liabilities.

“When companies report their liabilities at discounted rates, without also reporting what it would cost to do the cleanup today, it makes them look — on paper — healthier than they are,” said Regan Boychuk, the ALDP’s lead researcher.

“But their numbers assume the companies have decades they may not actually have.”

The cost estimates from the coalition seem much higher than actual costs his organization incurred to clean up 800 inactive oil and gas wells last year, said Lars DePauw, executive director of the OWA, an organization funded by industry that steps in to clean up wells when their owners either can’t or won’t.

“With all the work we did last year, the average cost on the abandonment side, or decommissioning, as we call it, was $34,000 per well and $27,000 to reclaim a site,” he said.

“I don’t know how they came up with their numbers.”

Boychuk said in an interview his group’s assumed average cleanup cost per well is $229,000, a number based on an internal Alberta Energy Regulator study obtained through freedom of information law.

The numbers given by DePauw may be accurate but they are for cleaning up “cheap, easy, quick wells,” such as shallow gas wells with no associated hazardous gases, he said.

DePauw, in response, said OWA’s job list last year included a mixture of both simple and complex wells, pointing out that the OWA did as many cleanups in one year as it has in the past 20 years.

Cleanup costs were far below targets set by the Alberta Energy Regulator, he said, thanks to growing expertise and the use of area-based programs that allow for greater efficiency.

Calgary-based Canadian Natural Resources Ltd. was singled out by the coalition as facing by far the largest bill at $11.9 billion to clean up 73,000 oil, gas and bitumen wells in Alberta.

In its news release, the coalition adds that is “more than double the $5.3 billion in worldwide asset retirement obligations reported in CNRL’s audited financial statements.”

However, in its Annual Information Form submitted to Canadian regulators in March, CNRL reports its undiscounted worldwide ARO is $12.3 billion.

When asked about that, Boychuk said the coalition worked with a U.S. specialist who consulted American regulatory filings, which didn’t include the undiscounted amount. He said many companies reduce their apparent liability by spreading it out over decades.

He said CNRL should be “applauded” for reporting the undiscounted estimate as many companies do not, but noted the number for all of the company’s assets in Africa, the North Sea and oilsands mining almost matches his group’s estimate for its Alberta wells alone.

Other companies on the coalition’s top 10 list include Husky Energy Inc. (second highest at $2.17 billion), IPC Alberta Ltd., Imperial Oil Ltd., Torxen Energy Ltd., Obsidian Energy Ltd., Cenovus Energy Ltd., Canlin Energy Corp., Paramount Resources Ltd. and Taqa North Ltd.

Husky spokesman Mel Duvall says the company used accepted industry practices to estimate its worldwide abandonment liabilities as of the end of 2018 at $2.4 billion, with the majority of those costs related to properties in Alberta and Saskatchewan.

“We take our asset retirement obligations seriously and abandon and reclaim in excess of 1,000 wells a year,” he said.

In April, the coalition estimated the total cost to clean up all of Alberta’s oil and gas wells was $40 billion to $70 billion.

In an email, the AER said its official energy cleanup estimate of $58.65 billion is split into $28.35 billion for coal and oilsands mines and $30.2 billion for oil and gas wells, facilities and pipelines.

It says the total security held for mining as of June 2018 is approximately $1.46 billion and the total for oil and gas is about $224 million.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The central zone experienced a spike in the number of COVID-19 cases Thursday, rising from 454 to 508 active cases over the past 24 hours, with 10 people in hospital. (THE CANADIAN PRESS/Darryl Dyck)
Alberta government makes request to Canadian Red Cross for field hospitals

The Alberta Government has examined the possibility of needing help from the… Continue reading

Workers were busy getting a tall crane in place Thursday morning for the construction of the new courthouse in downtown Red Deer. The facility will include modern technology and replace the existing courthouse upon completion expected in spring 2023. Photo by Paul Cowley/Advocate staff
Work on Red Deer Justice Centre progressing

Construction of the new courthouse in downtown Red Deer was visible Thursday… Continue reading

The City of Red Deer is including $1 million in its 2021 operating budget, just in case Westerner Park’s pandemic cancellations continue and it needs more support next year. (Advocate file photo)
Chief of Defence Staff Gen. Jonathan Vance responds to a question during a news conference Friday, June 26, 2020 in Ottawa. Vance is ordering his troops to be ready to pick up COVID-19 vaccines in the U.S. and Europe on short notice, and prepare to help distribute the doses while responding to floods and other emergencies. THE CANADIAN PRESS/Adrian Wyld
Defence chief says CAF will be ready after ordering COVID-19 vaccine prep last week

OTTAWA — The Canadian Armed Forces received formal orders last week to… Continue reading

Geoff Neville poses for a photo with his sons Casey, 3, left, and Ryder, 6, in this undated handout photo. Geoff Neville is a rotational worker in Newfoundland and Labrador who works in a mine in Nunavut for 14 days in a row and then gets 14 days off to come home and see his family. THE CANADIAN PRESS/HO, Geoff Neville
‘I’d love to be home:’ N.L. rotational workers facing bullying online

ST. JOHN’S, N.L. — As Geoff Neville waited this week in a… Continue reading

Dan Cochrane, senior pastor at CrossRoads Church. Contributed photo
CrossRoads Church closes its doors for two weeks after staff member tests positive for COVID-19

CrossRoads Church made the decision to cancel in-house services for two weeks… Continue reading

Signage for the Distress Centre in Calgary, Alta., is shown on Wednesday, Dec. 2, 2020. Distress Centre Calgary says suicide-related calls, texts and chats were up 66 per cent in October compared with the same month in 2019. THE CANADIAN PRESS/Jeff McIntosh
‘Dealing with a lot:’ Suicide crisis calls mount during COVID-19 pandemic

CALGARY — Hannah Storrs has needed to take more breaks than usual… Continue reading

Nancy McInerney, Kevin Martin, Olds Mayor Michael Muzychka, Chelsea Carey and MLA Nathan Cooper pose for a photo during the ticket launch for the Grand Slam of Curling Champions Cup in Olds from April 29 to May 3 in October. The event has been rescheduled for 2022. (Photo by BYRON HACKETT/Advocate Staff)
Olds misses out on Champions Cup again, event penciled in to return in 2022

They say waiting is the hardest part for curling fans in Central… Continue reading

File Photo
Sylvan Lake Town Council squashes mask bylaw

The bylaw did not make it past first reading, after a 4-3 vote defeated the motion

Mikael Kingsbury, of Canada, trains during the FIS Freestyle World Cup skiing competition Thursday, Feb. 6, 2020, in Park City, Utah. Kingsbury will miss moguls races for the first time in his World Cup career after suffering a back injury in training on Sunday. THE CANADIAN PRESS/AP-Jeff Swinger
Canadian moguls star Mikael Kingsbury out four to six weeks with back injury

MONTREAL — Canada’s Mikael Kingsbury will miss moguls races for the first… Continue reading

Detail of James Wilson Morrice's "LaPlage."
James Wilson Morrice canvas outperforms at auction with more than million-dollar sale

A canvas by Montreal-born artist James Wilson Morrice exceeded expectations with a… Continue reading

Bank buildings are photographed in Toronto's financial district on Wednesday, June 27, 2018. International comparisons suggest Canadian financiers are oiling the wheels of the fossil fuel industry at a far greater rate than their peers. THE CANADIAN PRESS/ Tijana Martin
‘Canada really sticks out:’ Studies show banks not so green on climate change

International analyses suggest Canadian financiers are oiling the wheels of the fossil… Continue reading

Goals galore for Ronaldo, Giroud, Neymar in Champions League

Goals galore for Ronaldo, Giroud, Neymar in Champions League

Most Read