Alberta’s Abandoned Wells Quadrupled in Last 12 Months. Who Will Clean Them Up?

The Alberta government titled its 2016 budget “The Alberta Jobs Plan” but there’s one group in the province that’s disappointed it will not see its jobs proposal funded.
 
The reclamation and clean-up of abandoned oil sites was proposed as a potential job creator by the Petroleum Services Association of Canada (PSAC). With over 37,000 orphaned and inactive wells across the province and thousands of unemployed, highly-skilled workers, PSAC said the provincial government should dedicated funds to well clean-up and reclamation.
 
It’s a proposal similar to Saskatchewan Premier Brad Wall’s ask for federal funding to clean up his province’s orphaned oil wells. His request for $156 million went unanswered in the federal budget. Wall argued the funding would have put 1,200 people back to work.
 
Alberta’s economic downturn has seen 40,000 jobs lost in the energy sector. PSAC argued putting money into decommissioning oil sites could reclaim some oil and gas sector jobs and get companies back to work. 
 
“We are losing tens of thousands of workers from the oil and gas services sector and, along with them, the intellectual capital and expertise we need when the economy turns around,” Mark Salkeld, president and CEO of PSAC, said.
 
PSAC has advocated for several months that $500 million in funds, whether from the province or federal government, be put into a decommissioning program for orphaned and inactive wells.
 
But on budget day in Alberta the only funding dedicated to this issue was a $30.5 million injection into the Orphan Well Association, a group funded predominantly by industry (they received a one-time boost of $30 million from Alberta a few years ago) that cleans up sites abandoned by bankrupted companies.
 
The cost of reclaiming a single well starts around $10,000 but can become millions in some cases. Since its inception just over two decades ago the Orphan Well Association has reclaimed over 650 wells. Over 540 wells have been abandoned in Alberta in the last 12 months, up four times from previous years as especially junior and intermediate companies have struggled with record-low oil prices. An estimated 700 orphaned wells are the result of bankruptcy.
 
Brad Herald, vice president of Western Canadian Operations with the Canadian Association of Petroleum Producers and director of the Orphan Well Association, said the group is on its way to reclaiming 160 abandonments a year, which is up from 40 to 50 per year previously.
 
“We’ve effectively quadrupled the wells we’re going to put to bed in just a couple years,” Herald said.
 
A lack of fresh funds to handle the growing number of abandoned sites means the Alberta government hopes sticking with a polluter-pays model will pan out in the long run.
 
“Many Albertans and Canadians alike don’t want their tax dollars going to cleaning up after someone else,” Alberta Energy Minister Marg McQuiag Boyd said in a statement to DeSmog Canada.
 
Don Bester, president of the Alberta Surface Rights Group, agrees. Tax-dollar subsidized reclamation creates the expectation government will simply pay for industry’s abandoned projects, which, according to Bester, removes any incentive for companies to carry out costly clean-up.
 
“Oil and gas companies that are not in trouble are going to just say ‘well, why not just leave them? Somewhere down the road the government will clean them up.’”
 
In the meantime, however, thousands of inactive wells dot the provincial landscape on at times valuable farmland, like environmental potholes left for future generations.

Barry Robinson, lawyer and National Program Director with Ecojustice, said if there was ever a time for government to step in with funds for orphaned wells, it would be now during the economic downturn when costs are low and people need jobs.
 
“The sooner you clean up the really old wells the less environmental risk you have,” he said.
 
Robinson said government investment could get clean up going in the short term while a longer-term repayment program could be put in place through royalties.
 
“Ultimately polluter-pays is the way to do it,” Robinson said. “We’d like to see companies post security for the abandonment and reclamation right at the time the well was drilled.”
 
It would avoid the current situation of companies going bankrupt and disappearing, leaving their wells to be handled by the province. For Robinson, it’s a long-term solution, which, when it comes to Alberta’s orphaned wells, have been in short supply.
 
Robinson says a big issue is the absence of timeline rules in oil and gas regulations. Without meaningful time limits regulators have nothing to enforce.
 
“Companies are not doing anything wrong or illegal by simply leaving wells inactive,” Robinson said, adding there are at times “good reasons for wells to be inactive.”  
 
But he said there are orphaned wells dating back to the 50s and 60s that still have not been dealt with.
 
The longer a well sits abandoned, the higher the risk of accidental release or groundwater contamination.
 
For the landowners Bester works with, these legacy wells mean they’re stuck with inoperable and potentially hazardous land. 

During a major review of Alberta’s royalty structure last year, the Alberta Surface Rights Group recommended the government integrate clean up payments directly into the oil and gas regulatory structure.
 
Bester said he also recommended the government require companies to clean up old well before building new sites. Ultimately his group’s recommendations went nowhere.
 
Bester’s group has met with Environment Minister Shannon Phillips and Minister McQuiag-Boyd on the issue and is hopeful a regulatory change will come this spring during the legislative session.

Image: Chris & Lara Pawluk/Flickr.