Oil and gas well cleanup costs could hit $65 billion, says industry watchdog

Alberta government urged to undertake detailed review of cleanup costs

Cleaning up Alberta’s abandoned oil wells will cost much more than companies have prepared for, says a group that studied the situation.

The Alberta Liabilities Disclosure Project estimates it will cost 1,500 companies nearly $65 billion to meet all of their oil and gas well obligations.

Making matters worse, is that recent oilpatch bankruptcies by Sequoia and Trident have added thousands more wells without viable owners to the list of wells that need reclamation.

The group, which says it is a non-partisan coalition of former regulators, researchers and landowners affected by aging oil and gas wells, calls on the province to undertake a detailed company-by-company analysis of their liabilities and provide leadership on tackling the problem.

Rural Municipalities of Alberta president Al Kemmere said the companies that own the wells were able to profit off of them, but many have been able to avoid their obligations by declaring bankruptcy or simply walking away, leaving someone else to clean up.

“I don’t think that that is a good approach. I think they need to be held responsible for what they’ve left on the landscape.”

The scale and cost of the cleanup is a concern to member municipalities, said Kemmere.

“This is not a quick fix.”

The industry-funded orphan well cleanup program will be seeing more wells added as oilpatch companies continue to struggle, he predicted.

“Unfortunately, when they leave those (wells) in the orphan well program, industry is not going to be funding it adequately, so it ends up on the back of taxpayers, and I don’t think that was the intent years ago when this took place.”

Kemmere said he hopes there are some “financial models that can come forward that can entice the cleanup.”

In a joint statement, Environment and Parks Minister Jason Nixon and Energy Minister Sonja Savage said the Alberta Liabilities Disclosure Project is an “advocacy group that includes several anti-development member organizations.

“Well liabilities is an important issue in Alberta and in all oil- and gas-producing jurisdictions, and we will provide further comment on their findings once we have had the opportunity to review the report,” they say.

Mark Dorin, a Red Deer member of the disclosure project, said the Alberta Energy Regulator is not collecting the money it is supposed to from the oil and gas industry to cover the costs of the wells that were added to the program the previous year.

“They must do it by law, but they don’t,” he said. “The government doesn’t want to act according to law because they’re afraid to trigger oil companies into bankruptcy.”

Alberta has the best oil and gas regulations in the world and this should not be happening, he said.

“They’ve ignored the best oil and gas laws in the world and now we have a crisis because they have not followed them.

“We need to start following the law and we need to come up with new solutions.”

Dorin said the bankruptcies of Sequoia and Trident are only the “tip of the iceberg” and Alberta’s well cleanup problem is only going to get worse without action being taken.

The disclosure project said when Trident went under, it left behind 3,200 wells and an unpaid cleanup bill of nearly $330 million.

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.

The executive director of the Orphan Well Association said the disclosure project’s cost estimates seem much higher than actual costs his organization incurred to clean up 800 inactive oil and gas wells last year.

“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,” said Lars DePauw.

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

With files from The Canadian Press



pcowley@reddeeradvocate.com

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