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Rural municipalities frustrated at energy regulator’s slow response

Rural Municipalities of Association said struggling oil company should have been dealt with sooner

Rural Municipalities of Alberta president Paul McLauchlin has a question for the province’s energy regulator which moved this week to transfer all the assets of a financially troubled Calgary company to the Orphan Well Association.

“What took them so long,” said McLauchlin on Friday.

In an order issued Wednesday, the Alberta Energy Regulator told the Orphan Well Association that it would be responsible for the care and operation of more than 3,000 oil and gas wells, 2,700 pipeline segments and 350 facilities owned by AlphaBow Energy.

McLauchlin said that for years RMA has been highlighting the financial burden that rural municipalities have been shouldering because of unpaid oil and gas taxes. The results of a survey of member municipalities released in March showed they were owed $268 million in back taxes, in many cases by operating companies.

The Alberta Energy Regulator’s documents state AlphaBow’s entire environmental liability is $154 million.

AlphaBow also owes taxes to municipalities. In Ponoka County, where McLauchlin is reeve, the unpaid tax bill is $2.6 million.

He doubts the municipality will ever see that money and will likely be adding it to the $5 million in oil and gas company taxes Ponoka County has already written off in recent years.

“It effectively means that we will probably not recoup any of our taxes if it goes to the Orphan Well Fund.”

Money will become available if AlphaBow’s profitable assets are sold off to other companies. However, municipalities are not at the front of the line of creditors and would probably be out of luck.

McLauchlin questions why regulators let a financially struggling company to continue operating and piling up unpaid tax bills for years before finally taking action. If assets had been transferred to another viable company, it presumably would have paid its annual tax bill.

RMA members who have oil and gas companies operating in their jurisdiction are “extremely frustrated” with the AER, he added.

“The issue we have is discretionary lenience has been applied by the regulator even though we’ve continually told them we have unpaid taxes. They’ve allowed this to drag on and as it has dragged on more taxes are due to rural municipalities throughout the province.”

Rural municipalities want a company’s ability to pay off its taxes considered a requirement to show that it’s viable and is eligible for a licence to operate.

The province tightened the rules, requiring taxes be paid prior to the transfer or sale of assets. But AlphaBow was doing neither.

AlphaBow, privately held, was created after the 2018 collapse of Sequoia Resources, another Calgary-based energy company, said Drew Yewchuk, a lawyer formerly with the University of Calgary Public Interest Law Clinic, who has followed the case.

“This company was supposed to operate longer … holding the aging infrastructure,” he said. “From the time it was created, it looks like the company was probably doomed.”

AlphaBow has a long history of regulatory problems.

In June 2022, the regulator rated it as an “unreasonable risk” after not spending enough on cleanup and outstanding debt, including municipal taxes. That October, AlphaBow failed to tell the regulator about a pipeline leak.

By February 2023, it was being cited for not fulfilling its remediation plans. In March, it told the regulator it wasn’t monitoring groundwater at contaminated sites. The company faces non-compliance orders for 296 wells inadequately abandoned after their leases expired.

In August, inspectors found an AlphaBow gas plant had been shut down with fluids in its tanks and pipelines unpurged. Power had been shut off to systems that protect those lines from corrosion.

AER says other sites had been improperly suspended and spills not cleaned up. In August, only 42 per cent of field inspections to AlphaBow sites were rated “satisfactory.”

— With files from The Canadian Press

Paul Cowley

About the Author: Paul Cowley

Paul grew up in Brampton, Ont. and began his journalism career in 1990 at the Alaska Highway News in Fort. St. John, B.C.
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