Abandoned wells put budget pressure on counties

Alberta’s oil and gas meltdown will hit rural municipalities hard, said a surface rights advocate on Friday.

Alberta’s oil and gas meltdown will hit rural municipalities hard, said a surface rights advocate on Friday.

Daryl Bennett said the Alberta Energy Regulator would like to see thousands of suspended wells reclassified as abandoned. As oil prices drop the number of suspended wells is expected to soar as companies struggle to pay their bills.

When wells are classified as abandoned “those wells come off the tax rolls,” said Bennett in an interview following a presentation at the Alberta Federation of Agriculture’s annual general meeting in Red Deer.

“That’s going to significantly affect the amount of property taxes municipalities and counties are getting from the oil companies.

“There are a lot of counties that vary from 6o to 95 per cent of their total budget comes from the oil and gas sector,” said Bennett, who is a member of the Alberta Surface Rights Federation, an umbrella organization for surface rights group across the province.

The Municipal District of Taber, where Bennett lives, relies on oil and gas income for 68 per cent of its budget. Some comes from linear taxes, applied to pipelines and similar infrastructure and local property taxes.

Adding to the fiscal crunch for municipalities are the growing numbers of oil companies going bankrupt while owing millions in back taxes.

“A lot of these counties are going to see some of their budget revenues clawed back or just lost because these bankrupt companies are no longer are paying what’s owed.”

Even those companies that are more financially stable are beginning to contribute less to municipalities.

“They are cutting and capping wells and reducing the amount of money paid in taxes,” he said.

Meanwhile, as more wells are abandoned by their cash-poor corporate owners, the organization that oversees their reclamation to farmland is facing a heavy burden.

The Orphan Well Association’s number of wells on its list to be reclaimed jumped to 705 at the end of March 31, 2015 from 162 a year earlier, according to the association’s last annual report. That number has since climbed and Bennett predicts thousands of suspended wells could be coming its way.

Despite doubling its funding to $30 million this year, there is nowhere near enough money to handle the numbers of orphan well reclamations required.

“Their budget is woefully inadequate,” he said.

And since funding comes mostly from a levy on oil and gas companies, solvent firms find themselves having to pay for the mess left by bankrupt companies.

“That’s not fair and it’s not sustainable, but that is what the system is. Certainly the system is broken and it never was intended to take care of the problem we’re now seeing with these low oil and gas rates.”

While an unfair burden is being placed on active companies and taxpayers, landowners are also seeing bankrupt companies trying to shift the liability for abandoned wells to them.

Just Posted

Alberta has made a more detailed framework for those looking to acquire an exemption to the mandatory indoor mask bylaw. (AP Photo/Eric Gay, File)
Alberta changes requirements for mask exemptions

Masks wearing has been recommended for almost a year and provincially mandated… Continue reading

Alberta’a chief medical officer of health Dr. Deena Hinshaw said Thursday that there are more than 328,000 vaccine appointments booked over the next seven days. (Photo by Chris Schwarz/Government of Alberta)
Alberta surpasses 2 million doses administered of COVID-19 vaccine

Red Deer down to 835 active cases of COVID-19

RCMP file photo (Photo by Jeff Stokoe/Advocate staff)
RCMP investigating shooting near Maskwacis

Maskwacis and Wetaskiwin RCMP are seeking public assistance after a shooting has… Continue reading

Rode
Smith among impressive group of RDC soccer Queens recruits

There have been a number of cases where younger girls have developed… Continue reading

Bo’s Bar and Grill owner Brennen Wowk said the hospitality industry is looking for more clarity from the province around what conditions must be met to allow for restaurants reopening. (Advocate file photo)
Frustated restaurant owners want to know government’s reopening plan

Restaurant owners feel they are in lockdown limbo

Opinion
Mental health: Gossiping, backbiting and forming factions is unhealthy

We all know of dysfunctional organizations, which can be as troublesome as… Continue reading

Family practice physician Christina Tuomi, D.O., (right) gets Homer's first dose of Pfizer's COVID-19 vaccine from Emergency Department nurse Steve Hughes (left) on Thursday, Dec. 17, 2020 at South Peninsula Hospital in Homer, Alaska. Tuomi has been the hospital's medical lead throughout the pandemic. (Photo courtesy Derotha Ferraro/South Peninsula Hospital)
Alberta physicians: Vaccines are our path forward

As the AMA representatives for Alberta’s family physicians, we were immensely relieved… Continue reading

Vancouver Canucks' Nils Hoglander, right, is checked by Calgary Flames goalie Jacob Markstrom during third-period NHL hockey action in Calgary, Thursday, May 13, 2021.THE CANADIAN PRESS/Jeff McIntosh
Lindholm, Tkachuk lead Calgary Flames in 4-1 win over Vancouver Canucks

Lindholm, Tkachuk lead Calgary Flames in 4-1 win over Vancouver Canucks

Chicago Bulls guard Zach LaVine, right, drives to the basket against Toronto Raptors center Khem Birch, left, and guard Jalen Harris during the first half of an NBA basketball game in Chicago, Thursday, May 13, 2021. (AP Photo/Nam Y. Huh)
LaVine, Markkanen lead Bulls past Raptors, 114-102

LaVine, Markkanen lead Bulls past Raptors, 114-102

NFL schedules get off to strong starts with Week 1 twinbills

NFL schedules get off to strong starts with Week 1 twinbills

The Saddledome, home of the Calgary Flames, is shown in Calgary, Thursday, March 12, 2020. The final three games of Canada's Secret Cup women's hockey tournament will be played in Calgary's NHL arena.THE CANADIAN PRESS/Jeff McIntosh
Secret Cup women’s tournament final games to be held in Calgary’s Saddledome

Secret Cup women’s tournament final games to be held in Calgary’s Saddledome

FILE - In this Thursday, July 18, 2019 file photo, Ron Francis talks to reporters in Seattle after he was introduced as the first general manager for Seattle's yet-to-be-named NHL hockey expansion team. Four years since George McPhee was a “puppet master” of the NHL leading up to the Vegas expansion draft, general managers approached this trade deadline with Seattle’s upcoming addition to the league in mind. While Kraken GM Ron Francis prepares – and maybe made a handshake deal or two already like McPhee did – Seattle was on his colleagues’ minds.(AP Photo/Ted S. Warren, File)
Kraken still plan to hire coach before expansion draft

Kraken still plan to hire coach before expansion draft

Alberta Premier Jason Kenney attends a news conference in Calgary on Tuesday, Sept. 15, 2020. Simmering internal discontent in his United Conservative caucus has boiled over into an open challenge to his leadership. THE CANADIAN PRESS/Todd Korol
Two Alberta UCP members kicked out of caucus after challenging Kenney’s leadership

Two Alberta UCP members kicked out of caucus after challenging Kenney’s leadership

Most Read