Oil and gas well cleanup B.C. Garth Lenz The Narwhal

B.C. finally has rules to enforce clean up of oil and gas wells. But will they be enough to protect taxpayers?

Energy minister Bruce Ralston is confident his government’s new timelines and penalties will address the growing problem of inactive oil and gas wells, but critics say taxpayers are still not protected as the province readies for a fracking boom to supply the LNG Canada project

The numbers tell the story. Northeast B.C. is home to 25,000 oil and gas wells, mainly in the boreal forest — North America’s songbird nursery — and on farmland in the provincial Agricultural Land Reserve. 

More than 7,700 wells are dormant, meaning they have been inactive for at least five years and are unlikely to produce another drop of oil or gas — yet companies have not decommissioned the wells or restored the land, as required. 

Another 348 wells are orphans whose owners have gone bankrupt or can’t be found. That figure is poised to double this year, according to the BC Oil and Gas Commission, which is tasked with cleaning up orphan wells and associated pits of contaminated wastewater. 

On top of that, B.C. is on the cusp of a fracking boom to supply the LNG Canada project, which will ship gas to Asia — with 60 per cent of the gas coming from new wells, according to the provincial government.  

Bruce Ralston, B.C.’s new Minister of Energy, Mines and Petroleum Resources, says the NDP government is taking steps to ensure taxpayers and the environment are protected from liabilities associated with dormant and orphan wells. 

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“We want to distinguish ourselves from what was done in the past,” Ralston told The Narwhal. “What we’re endeavouring to bring about methodically is a different culture.” 

But industry observers question if the new culture will be much different, noting long timelines for most newly announced dormant well clean ups, insufficient securities collected from oil and gas companies, and a growing number of bankruptcies as gas prices reach record lows.

“When I look at B.C. it’s like déjà vu,” said Regan Boychuk of the Alberta Liabilities Disclosure Project, a non-partisan initiative advocating for accurate and transparent data about Alberta’s oil and gas liabilities.

“The issues that are starting to come about, the steps that regulators are starting to take, is very reminiscent of Alberta in the 1990s and the first efforts to tackle this problem.” 

Alberta now has 163,000 oil and gas wells that are no longer in use, and about 6,000 orphan sites that are waiting for some degree of plugging or cleanup.

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In an interview, Ralston spoke about the steps his government is taking to deal with inactive oil and gas wells, referred to last month by Premier John Horgan as “an environmental stain on British Columbia.” 

A new $100 million program, funded by the federal government as part of a stimulus package to create jobs during the COVID-19 pandemic, aims to decommission and restore about 2,000 dormant wells in B.C. that could pose environmental hazards such as methane leaks or groundwater contamination. 

The first application for the program was received 15 minutes after opening on May 25, according to the energy ministry. By the end of the day, the program was fully subscribed — with 1,100 applications, worth $132 million, vying for an initial $50 million funding tranche. 

“There certainly were some skeptics, partly because I think there’s a feeling that perhaps there’s not the financial capacity in the sector at the moment,” Ralston said, calling the unanticipated level of interest “gratifying.” 

The minister also spoke about new administrative penalties of up to $500,000 for permit holders who fail to decommission wells and restore sites within new legal time limits. 

Energy Minister Bruce Ralston

Energy minister Bruce Ralston announcing a plan to clean-up more than 2,000 oil and gas wells and create 1,200 jobs in northern B.C. in May 2020. Photo: Province of B.C. / Flickr

The penalties, introduced on May 11 through an order in council, start at no more than $50,000 for transgressions such as failing to submit an annual work plan to the B.C. Oil and Gas Commission for decommissioning and restoring dormant well sites.

“It’s our view that the industry should be accountable for the restoration of these sites,” said Ralston, who took over in January from former energy minister Michelle Mungall.  “These are important steps to ensure industry accountability.”

Restoring oil and gas wells is a multi-year process. First, wells need to be decommissioned, or sealed with cement. Full reclamation involves cleaning up contamination and restoring the land to pre-drilling conditions. 

Bankrupt companies will ‘walk away scott free’

Prior to the introduction of B.C.’s new regulations, there were no timelines or penalties for restoring well sites, meaning some sites have been dormant for decades. 

Ecojustice lawyer Barry Robinson welcomed the new timelines as a step in the right direction.

“Even if they’re long timelines, they’re better than no timelines, which is where B.C. was  — and where Alberta still is,” said Robinson, who is based in Calgary and has spent almost a decade working on issues related to inactive oil and gas wells. 

“When there’s no timeline, companies just continue to pay their surface lease and don’t bother cleaning up.” 

Under the new B.C. regulations, permit holders for well sites that have been dormant since 2018 or earlier must decommission at least one site by the end of next year. They have until 2031 to decommission all their sites and until the end of 2036 to restore all their sites before facing penalties, a timeline Boychuk called “too long.” 

“The penalties are unlikely to ever be imposed,” Boychuk said in an interview. “If they go bankrupt they will walk away scott free, so allowing them decades is a step in the wrong direction … If you wait until then to try to collect some money, you’re going to be looking for a long time.”

Ralston said permit holders for older wells have longer timelines “just to allow them time to address the historic backlog.”

“It’s a phasing in of the policy,” he said. 

Permit holders for wells drilled between 2019 and 2024 now have 13 years to restore sites once they become dormant, before facing penalties of up to $500,000.

And permit holders for sites drilled from 2024 onward — the year the contested LNG Canada project will come on-line — will have 10 calendar years to restore a site, meaning they will be given 15 years to complete the work once they finish extracting gas from a well. 

LNG Canada project, Kitimat B.C. 2017

The site of the LNG Canada project in Kitimat B.C. in 2017. Photo: Garth Lenz / The Narwhal

The federal funds will deal with about one-quarter of B.C.’s dormant well sites, leaving 5,700 more sites requiring clean-up even as new ones are added to the list, Boychuk pointed out. 

Other observers have criticized the B.C. government’s decision to spend most of the $120 million from the federal government on dormant wells, saying taxpayers are once again picking up the tab for the oil and gas industry, which is already heavily subsidized

Ralston noted that oil and gas companies still have to pay either $100,000 or 50 per cent of the clean-up costs for dormant wells.

“We thought that was an effort to balance company responsibility and a need — it is a federal program, it’s federal money — [along with] their wish to have a program that stimulated jobs and economic activity,” he said.

According to a 2019 report by former B.C. auditor general Carol Bellringer, it costs an average $370,000 to seal a well and restore a site. 

Of the federal money earmarked for B.C., $15 million is slated for orphan well clean-up, while another $5 million is for a new “legacy” fund to address the historic impacts of oil and gas operations. 

The BC Oil and Gas Commission had planned to clean up just 15 orphan well sites this year with funds collected from industry. 

The commission previously told The Narwhal that the new federal funding for orphan wells will be used for the abandonment (proper closure and sealing) of 22 wells, the decommissioning of 65 equipment sites, remediation of 21 contaminated sites and reclamation of 36 sites, along with associated roads and other disturbances.

That will still leave 600 to 700 orphan well sites on the list for clean-up, once up to 400 sites from bankrupt Ranch Energy are added this year. 

Ralston said some of the legacy fund could be used to restore seismic lines in endangered caribou habitat.

“Revegetating those corridors is good for wildlife because those corridors basically are highways for predators,” he said. “In particular, it will support caribou populations as well.”

B.C.’s herds of woodland, or southern mountain caribou, are highly endangered, largely due to habitat loss and fragmentation. Seismic lines and other human disturbances make it easier for wolves, who follow moose into caribou habitat, to prey on at-risk herds. 

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Boychuk said many of B.C.’s fracked wells, which are drilled horizontally, are deep, long and will be “exponentially more expensive and complicated to clean up” than conventional wells. 

“There’re very few horizontal wells that have been cleaned up, so we don’t have a very good understanding of the costs and the risks involved.”

The BC Oil and Gas Commission has said its Comprehensive Liability Management Plan ensures the full cost of reclaiming oil and gas sites in B.C. is covered by industry. 

Ralston said security requirements are under review and will consider both the financial capacity and the environmental record of a company. Securities will be adjusted, he said, to “protect citizens and the environment in the long run.” 

But Robinson and Boychuk said B.C.’s liability ratings program, modelled on Alberta’s program, underestimates liabilities and overestimates company assets.

Robinson, who sat on a 2017 Alberta government task force that examined how to improve the province’s liability management system, called the estimates “two fictitious numbers that mean nothing.” 

“Neither assets nor liabilities are anything that a chartered accountant would call an asset or a liability, they’re just calculations,” he said. 

The solution is to oblige companies to post full security for clean up costs on the day they drill a well, so taxpayers are not dinged for clean up costs if companies go bankrupt, Robinson said. 

“You do the cleanup work, you get your $370,000 back. And if you think that number’s too high, well that’s a great incentive. Do your clean up for $250,000 and get $370,000 back.”

If B.C. does not collect full security from oil and gas companies, Boychuk said the public is at “enormous risk of inheriting these liabilities.” 

“The most important thing is to get money out of industry before it disappears. And by B.C. waiting, [with] dormant wells today being left to sit idle for decades more, it sounds nice, it looks good on paper, but good luck even finding an address, let alone money in 2036 for any company that is sitting with dormant wells in B.C. today.” 

Sarah Cox is an award-winning author and journalist based in Victoria, B.C. She got her start in journalism at UBC’s…

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