Calling orphan and inactive wells an issue that has been “festering for years,” Prime Minister Justin Trudeau announced a federal investment of $1.7 billion into the cleanup of old oil and gas wells in Alberta, Saskatchewan and B.C. on Friday.

He estimated the cash infusion would create 5,200 jobs in Alberta alone, getting Albertans back to work “cleaning up their province.”

The program was developed in partnership with the Alberta government and municipalities, Trudeau said, adding the funding would help companies avoid bankruptcy.

Orphan and inactive wells, he said, can be “detrimental not only to our environment, but to people’s health.” 

He noted that farmers and landowners have long struggled to grow crops in areas where wells have contaminated the soil. 

“Just because we’re in a health crisis doesn’t mean we can abandon the environmental crisis,” he added.

While more money for cleanup is viewed as a win for landowners and the environment, it also raises questions about whether the “polluter pays” principle is being flouted. It was always the intention that companies that profited from wells would pay for their eventual cleanup — not the taxpayer.

As orphan wells become something of a go-to for politicians looking for ways to infuse cash into a struggling economy, we wanted to take a step back and look at what got us here. Hot tip: it wasn’t the pandemic. 

What is an orphan well anyway?

An orphan well is one that no longer has a legal or financial owner. 

Most often, an oil and gas company that has gone bankrupt has left behind a long list of wells that were never properly decommissioned or cleaned up — and someone has to pay for that. In the meantime, the well, or pipeline or other related facility, becomes an “orphan.” 

But even without an owner, it still needs to be properly plugged and reclaimed, according to provincial rules.

An orphaned well on a farmer’s property near Taber, Alta. Photo: Theresa Tayler / The Narwhal

Inactive, orphan, reclaimed, abandoned — what does it all mean?

An inactive well is any oil or gas well that is no longer producing but has not yet been permanently sealed off — a process with a terribly confusing name: abandoning.

In what is a rather significant terminology fail, an “abandoned well” is not the same as an “orphan well.”

In fact, “abandoning” a well or pipeline has literally nothing to do with whether it’s an orphan or not.

An “abandoned well” is one that has been properly plugged and is no longer producing oil or gas. Remember, an orphan well is one whose “parent” company has walked away, leaving it to others to clean it up. 

An orphan well could be abandoned, but not necessarily, to the confusion of pretty much everyone (apparently including Trudeau, in Friday’s press conference). So don’t be surprised if you see the term misused all the time, whether by journalists, politicians or anyone on social media with an opinion.

You can think of “abandoning” as essentially sealing a well to prevent it from releasing toxic gases or other substances. A well is often hundreds of metres deep, so a heavy concrete plug needs to be put in place to fully cap it off.

Then there’s the chance a well has leaked and contaminated the ground around it. Cleaning that up is called remediation.

But that’s not where the work stops. As part of drilling and operating, the footprint of a well can be significant. Forest may have been cut down or agricultural land dug up, soil has often been compacted and structures have been put in place on the surface.

All of that needs to be put back to something resembling the way it was before. That’s known as reclamation. And once that’s done, a reclamation certificate needs to be applied for.

Then, once the abandoning, the remediation, the reclamation and the certifying is done, the site is officially “closed.”

It takes years to fully close a well — and there are no required timelines for when any of the work has to be completed.

Report ‘buried’ by Alberta government reveals ‘mounting evidence’ that oil and gas wells aren’t reclaimed in the long run

How many orphan wells are there in Alberta?

As of the end of March, Alberta’s Orphan Well Association reported its inventory included 2,983 orphan wells that need to be abandoned, 3,284 orphan well sites that need to be reclaimed and another 935 orphan well sites that have had reclamation work done but are not yet certified.

These numbers have increased substantially in recent years. In 2013, the Orphan Well Association had just 387 orphan sites in its inventory of sites that needed to be reclaimed. That’s a 750 per cent increase in seven years.

But a lot of the concern about orphan wells comes not just from the current inventory, but from the potential for thousands more to be added to the list. 

According to the Government of Alberta, there are an estimated 343,000 oil and gas wells in the province. Approximately half of those are no longer producing, some of which have been properly abandoned, while others are sitting in a state of temporary suspension.

Either way, once a well is no longer active, it’s no longer making the company any money.

In fact, it does the opposite. Oil and gas companies have to pay costs associated with sites they’re no longer using. 

For example, they’re supposed to pay rent to the landowner where the well is located, as well as taxes to the local government. (Hint: it has been more and more common in recent years that companies don’t pay landowners or their tax bills)

All of this means an inactive well can be a costly burden to a company, especially one that’s already struggling financially.

This is where the concern comes in — as oil prices slump and Alberta is poised for major economic hurdles, will more and more companies walk away from all those inactive wells, leaving orphans behind?

Previous reporting from The Narwhal revealed the Alberta Energy Regulator has privately projected that the number of inactive wells in Alberta could double by 2030, to 180,000.

Regulator projects Alberta’s inactive well problem will double in size by 2030, documents reveal

Is the orphan well crisis unique to Alberta?

No.

The problem has been intensifying in oil and gas-producing jurisdictions across North America, from Alberta to Wyoming to Texas.

The Narwhal reported earlier this year that B.C., not traditionally thought of as a major player in the world of oil and gas drilling, was also anticipating a massive uptick in orphan wells as a result of an increase in fracking (hydraulic fracturing involves blasting huge quantities of freshwater, mixed with chemicals, underground to release oil and gas trapped in rock).  

The number of orphan wells in B.C., for example, has increased by 770 per cent since 2016. The latest stats indicate B.C. has 346 orphan wells. Saskatchewan also has hundreds of orphan wells in its inventory.

A report released in 2018 by Saskatchewan’s provincial auditor noted the number of inactive wells in the province increased by nearly 90 per cent between 2005 and 2017, to about 30,000.

What is the Orphan Well Association we keep hearing about?

Alberta’s Orphan Well Association is a not-for-profit organization that is theoretically — aside from government loans and grants — funded entirely by industry.

It takes over responsibility for cleanup when no company is legally or financially responsible for a well (or related pipeline or facility).

According to the association’s most recent annual report, it spent nearly $90 million on cleaning up and sealing orphan wells, pipelines and related facilities in the fiscal year that ended in 2019 — almost three times the amount spent the previous year.

The Orphan Well Association is overseen by a board of directors made up of industry representatives from the Canadian Association of Petroleum Producers, Cenovus, Canadian Natural Resources Limited (CNRL), and others, as well as one government official and one representative of the Alberta Energy Regulator.

Alberta issues 97% of reclamation certificates without ever visiting oil and gas sites

Who’s supposed to pay to clean up orphaned wells?

The short answer: industry.

The idea is that all companies pay into the orphan well fund, to make a “kitty” of sorts available for when companies go bankrupt, or otherwise walk away from their liabilities.

The idea is that “good neighbours” in the industry fund the cleanup for insolvent companies, according to the Orphan Well Association’s chair, Brad Herald, who is also a member of the executive of the Canadian Association of Petroleum Producers. 

In theory, this fund should be enough money to fund orphan well cleanup in the province.

In reality, it’s not.

Has the Orphan Well Association received government money before?

Just last month the Alberta government announced a $100 million loan to the Orphan Well Association. 

At the time, COVID-19 was only just beginning to make waves in North America, and Alberta Premier Jason Kenney was increasingly embittered about the trends he was seeing in the oil and gas industry.

“It frustrates me that I think we’re doing everything that we reasonably can to get this economy moving again,” he told reporters. 

“And yet we’re being sideswiped by global events that are beyond our control,” he added, referring to the pandemic and the global supply glut.

Kenney’s loan to the Orphan Well Association was not the first time public funds have been offered up.  

Since 2009, the Alberta government has given the Orphan Well Association more than $30 million in grants, and the province loaned the organization $235 million in 2017.  

In 2017, the federal government also allocated $30 million to the cleanup of Alberta’s orphan wells — much of this money was used to cover the interest on the $235 million loan from the provincial government.

The payback of those loans hinges on the ability of the association to get on top of its inventory. One day, it hopes to pay back loans with the money it brings in through industry levies.

It was not clear from the Prime Minister’s announcement exactly how the $1.7 billion to clean up orphan and inactive wells would be distributed, and how much would go toward the Orphan Well Association.

How much work has actually been done to clean up orphan wells?

In 2018, 93 well sites — of the thousands of orphan well sites in the association’s inventory —were “closed,” meaning they are no longer part of the association’s inventory, they have received a reclamation certificate or equivalent and rent is no longer due to landowners.

According to its most recent annual report, the Orphan Well Association had successfully decommissioned just over 2,000 orphan wells and reclaimed around 800 sites in its 17 years in operation.

Mike Smith, a retired reclamation inspector in Alberta, at a flooded oil lease site in Wainwright. Smith says on-the-ground inspections of abandoned and reclaimed well sites aren’t being done enough in the province. The pictured site has been suspended, according to the regulator. Smith lives nearby and drives by the site occasionally, to see if any reclamation work is being done. It isn’t. He’s seen plenty of contamination issues over his career. If no one checks, he worries about the long term recovery of sites. “Those problems are still there,” he told The Narwhal.  Photo: Amber Bracken / The Narwhal

How much does it cost to clean up old wells?

The Alberta Energy Regulator estimates it can cost $12,800 to $134,177 to plug a well, and $16,500 to $42,155 to reclaim the site.

As The Narwhal has previously reported, a researcher at the University of Calgary found that actual reclamation costs can easily be 60 per cent higher than the regulator’s estimates. 

Others have said the numbers may be far higher — in the hundreds of thousands of dollars.

Could orphan well cleanup follow public health guidelines during the pandemic?

Currently, Alberta’s public health rules restrict gatherings of more than 15 people, encourage physical distancing of two metres and restrict businesses to those considered to be essential services.

There is a long list of “petroleum, natural gas and coal” jobs that are considered to be essential services in Alberta. There’s little doubt that, at least for the time being, reclamation work could continue on orphan wells. “Environmental services for agriculture, mining, oil and gas,” are all currently considered to be essential services by the Government of Alberta.

Minister of Environment and Parks Jason Nixon said at a press conference that it was his government’s goal to “keep people working… in the oil and gas industry where safe and within the requirements the chief medical officer has set out.” 

“We believe we can do that on lots of projects,” he added.

Can farmers really not grow crops on fields where there are abandoned or orphan wells?

In his announcement Friday, Trudeau urged Canadians to “think of the farmer who can’t grow anything on his land because of the abandoned well a few steps away from his home.”

Indeed, there are a number of risks, and common complaints, that landowners experience when a well is left to sit on their property for years. 

Those include soil contamination, dust, invasive weeds and possible leaks if wells have not yet been properly plugged. 

The farmers growing this canola in Fairview, Alta., say oil and gas pipelines and infrastructure is stunting the growth of their crops. Photo: Amber Bracken / The Narwhal

The impact on a farmer’s ability to grow a crop depends on a myriad of factors — the maintenance record of the company operating the well and how much care was taken to not disturb soil during drilling, for example. Some farmers report still being able to farm very close to old wells.

Others aren’t so lucky. As one farmer told The Narwhal last year, an old well site on his property is known locally as “the spot where nothing grows.” 

But it’s not just wells that can pose problems for farmers. When The Narwhal visited farmers attempting to grow crops atop pipelines, there were numerous concerns about how the soil compaction and possibility of leaks made crops dramatically less productive when grown atop buried oil and gas infrastructure.

And earlier this year, The Narwhal reported that the Alberta government has also long had internal concerns about the legacy of oil and gas wells — even long after they’ve been reclaimed.

That leaves questions about whether the federal government’s $1.7 billion investment will be able to erase the legacy of the old oil and gas wells dotting the province, where there’s a well for approximately every square kilometre of land.

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Don and Marg Wieben have lived side-by-side with the oilpatch for 45 years. 

“We accepted it at the time as part of our public responsibility,” Don explains from his kitchen table when photographer Amber Bracken and I visited their family home near Fairview, Alta. 

“Like if you had a new highway go through, some people were going to have to give up land for the good of the community.”

Don Wieben talks about the pipelines crisscrossing his family’s farmland at home near Fairview, Alta. Photo: Amber Bracken / The Narwhal

The location of pipelines crossing under the Wiebens’ fields is often obvious because of crop degradation. Those pipelines are likely to remain there forever, and there is no timeframe on when companies need to obtain reclamation certificates. Photo: Amber Bracken / The Narwhal

That commitment to what they felt was the public interest came with some downsides — like the spills.

There was the time their daughter-in-law, Bev Wieben, found herself getting headaches from a strange smell in the air. She went out for a walk and found the source of the fumes was a pipeline break. Then there was the time Marg was out checking the cattle, and found another break. And the gas they saw bubbling up at the surface.

Bev Wieben stops to visit her cattle near Fairview, Alta. Photo: Amber Bracken / The Narwhal

And there have been what Don considers to be the small inconveniences. Sinkholes, where pipelines have been buried, that the farm equipment gets stuck in. The noise. The traffic.

“You can’t say it was all bad though,” Don says. “There were positives to it.”

As part of the arrangement, the family received annual payments for wells drilled on their property, and one-time payments when companies wanted to obtain a right-of-way to put a pipeline under the family’s land. 

Don and Marg Wieben look out over the Peace River from their family’s land near Fairview, Alta. Photo: Amber Bracken / The Narwhal

Little did they understand at the time, as they signed agreements with a landman who made regular trips to their kitchen table to broker deals, that those pipelines — and the company access to their land — could last “in perpetuity.”

That means the numerous pipelines buried under their land will likely remain there forever. 

“It’s junk,” Don says of the pipelines left behind. “It’s garbage. It’s like going on a picnic and leaving all your trash in the bush.”

Don Wieben surveys the family land near Fairview, Alta. “We had a real nice quiet corner of the world down here,” Don said. “The oil patch changed that somewhat.” Photo: Amber Bracken / The Narwhal

‘Indefinitely’

According to Natural Resources Canada, there are 840,000 kilometres of pipelines of various types buried in the ground across the country. 

In Alberta alone, there are more than 400,000 kilometres of oil and gas pipelines weaving under the surface of the province — a distance, as the Alberta Energy Regulator points out, greater than between the earth and the moon. The majority of those pipelines, nearly 60 per cent, carry natural gas.

Seldom are those pipelines certified as reclaimed, the process that marks the completion of environmental cleanup.

Alberta’s pipeline network as of 2016. According to the Alberta Energy Regulator, there are over 400,000 kilometres of pipelines criss-crossing under the province. Map: Brad Stelfox, Landscape Ecologist

Oil and gas infrastructure on the Wieben family land in Fairview, Alta. Farmers are provided annual compensation for well pads on their land, but are granted just one-time payments for pipelines installed under their fields. Photo: Amber Bracken / The Narwhal

Sharon J. Riley interviews Don Wieben and his daughter-in-law Bev on their land near Fairview, Alta. Photo: Amber Bracken / The Narwhal

A search of the Alberta Energy Regulator’s website revealed 807 reclamation certificates related to pipelines, dating back to 2014. 

Meanwhile, the regulator reports having approved approximately 12,000 new pipeline applications in 2018 alone.

The 807 reclamation certificates refer only to pipelines listed as part of a certificate for other facilities. Shawn Roth, a spokesperson for the Alberta Energy Regulator, told The Narwhal by email that there are more reclamation certificates that have been issued for pipelines alone, but that he could not say how many. “Due to ongoing data verification efforts, we are unable to provide that information,” Roth wrote. 

Because of this, he added, any information about pipeline reclamation from prior to July 2018 is “subject to change.” 

The regulator has, however, frequently advertised the numbers of new pipeline licences it issues.

A video produced by the regulator to introduce its online system, OneStop, boasted that automation of approvals enabled “25,000 pipeline applications processed annually — automatically.”

A company installing a pipeline has no legislated obligation to remove the pipeline, or to reclaim — the process of returning the land to an equivalent state — within any designated time frame. 

An abandoned pipeline on the Wieben family land in Fairview, Alta. In Alberta, there are no timelines when an abandoned pipeline needs to be reclaimed. Photo Amber Bracken / The Narwhal

Contracts, like the one the Wiebens signed, specify that companies “shall restore the said lands to the same condition, so far as may be practical to do so, as the said lands were prior [to the pipeline’s installation],” — but include no time frame for when that needs to be done. 

Landowners are typically granted a one-time payment when a pipeline is first constructed, but do not typically receive annual compensation like they would for oil and gas wells.

And once the pipeline is there, it will likely remain there forever.

Contracts include a clause about never removing the pipeline — “provided however that the grantee may, at its option, leave and abandon the said pipeline or pipelines in place.”

Signs denoting the presence of multiple gas pipelines on the Wieben farmland near Fairview, Alta. Photo: Amber Bracken / The Narwhal

The Farmers’ Advocate Office of the Government of Alberta makes it clear: “The default is for the pipeline to remain in the ground.”

“When a pipeline is abandoned, it is permanently deactivated and it is not intended to allow possible future use. A pipeline can remain … indefinitely.”

Don is concerned about this, and also that the company can retain the right-of-way on the land, meaning that the land needs to remain clear of buildings and faces other restrictions — restrictions he says are also unfair to pass along to future generations.

Revenue was ‘certainly helpful’

The Wiebens first moved to the Peace Country in northwestern Alberta in the early 1970s. They had fallen in love with the landscape: the huge, active skies, the snaking Peace River in the valley beside their farmland, the black bears feeding on saskatoon berries alongside their fields, the pairs of deer ears just visible in crops of canola.

A view of the Peace River from the Wieben family’s land near Fairview, Alta. Photo: Amber Bracken / The Narwhal

When Don, now retired at 76, used to go out to check the cattle in the night during spring calving season — around February — he remembers looking up at the sky and being awed by the vastness. On clear nights, he’d lie down in the snow and watch the colours of the northern lights dancing above him.

Don and Marg moved to Alberta from Ontario, in pursuit of a life in farming. “We didn’t know the difference between a steer and a heifer,” Marg jokes now. They took on a big mortgage to buy 10 quarters of land and move to a place they’d never been, along with their four kids.

The Wieben family farm near Fairview, Alta. Photo: Amber Bracken / The Narwhal

The land was beautiful, they thought, “an awful nice part of the world,” Don says, though it came peppered with a few gas wells and small pipelines to connect them. The Dunvegan gas field was just getting started. Together, their family now owns about 40 quarters of farmland in the area.

“We can’t say that the revenue from the wells and pipelines was not helpful,” Don says. “It certainly was.” Without it, their mortgage may have been impossible. 

Looking back, though, that money came with downsides. 

“We had a real nice quiet corner of the world down here,” Don says. “The oil patch changed that somewhat.”

Don Wieben stands next to canola that is close to oil and gas infrastructure — noticeably shorter than chest-height crops elsewhere on the farm — near Fairview, Alta. Photo: Amber Bracken / The Narwhal

Marg Wieben, Don Wieben, Greg Wieben and Bev Wieben gather next to oil and gas infrastructure in the middle of a canola field on their property near Fairview, Alta. Photo: Amber Bracken / The Narwhal

‘Lessening the yields of farmers across the country’

Farmers have experienced myriad concerns when it comes to crops grown above pipelines. 

Some farmers report that the friction of a substance moving through the pipes causes soil to warm up, meaning snow melts more quickly over pipelines, findings that have been supported by research in other parts of the world. That can make crops mature sooner in the warmer soil — so when it comes time to harvest, crops above pipelines are over-ripe.

Tom Baumann, an associate professor of agriculture at the University of the Fraser Valley in British Columbia, who is himself a farmer living with pipelines, has studied the effects of pipelines on crops. He says the effects are obvious. 

“All of the sudden, when you’re harvesting, you encounter a part of the crop that’s overripe — because there’s been heat.”

The presence of pipelines can be clearly seen from above farmers’ fields near Fairview, Alta, where crops are markedly less productive when growing in soil disturbed by a pipeline. Photo: Amber Bracken / The Narwhal

Photo: Amber Bracken / The Narwhal

Bev Wieben and her father-in-law Don Wieben survey their farmland, and the pipelines criss-crossing it. Photo: Amber Bracken / The Narwhal

Baumann is a member of the Collaborative Group of Landowners Affected by Pipelines — a group of farmers who describe themselves as not anti-pipeline, but who seek to be “full partners” in planning for development and lessening damage to valuable crops.

“That’s a major thing for us,” Baumann told The Narwhal.

Back in the 1980s, Agriculture Canada put out a report called “Impacts of installation of an oil pipeline on the productivity of Ontario cropland.” 

The study found that crop yields were reduced by 50 per cent in the years following the installation of a pipeline, and the effects on crop productivity continued to be felt for years.

There are other potential impacts as well — a 2014 study published in the International Journal of Environmental Research and Public Health noted “early warning signals about soil heavy metal pollution” that can occur in farmers’ fields when pipelines are constructed.

But most often, concerns about farming over pipelines are often linked to issues with soil. Soil that has been dug up to install a pipeline is likely to be more compacted than surrounding areas, and therefore less conducive to healthy crops. A 2015 study in the journal Soil Use and Management noted “severe compaction of the subsoil can be caused during the installation of pipelines.”

Baumann said that careful removal of different layers of soil during pipeline installation — for reuse once the pipe is in the ground — can help mitigate effects on crops, and that putting “public pressure” on companies has helped him and other members of the Collaborative Group of Landowners Affected by Pipelines lessen the impacts on their crops.

But the impacts on soil from installing the pipeline can go on for years — impacts that Baumann said are starkly visible in crops. “You can see the difference because of the disturbed soil — and that goes on for thousands of years.”

“For half a century, it’s been lessening the yields of farmers across the country.”

Don, Marg and Bev Wieben out for a drive around their family land near Fairview, Alta. Photo Amber Bracken / The Narwhal

Leaks

Baumann is also concerned about leaks. Once pipelines are no longer in use, they’re supposed to be washed and plugged — known in the industry as abandoning. But Baumann said he’s “absolutely still concerned” about leaks, even after pipes have been plugged. 

“There’s still residue,” he said. And, he added, that residue can leak into soil, especially as pipes age. 

Whether in ten years or 100 years, he said, the pipe “will eventually deteriorate.”

Of the more than 400 pipeline “incidents” reported in Alberta last year, roughly three quarters were the result of leaks or ruptures.

A shut-in well on the Wieben family land near Fairview, Alta. Shut-in wells may one day be reactivated. Photo: Amber Bracken / The Narwhal

Bev and Marg Wieben look over oil infrastructure on the family land. Photo: Amber Bracken / The Narwhal

Bev and Greg Wieben look over a field on their property, which is heavily trafficked by pipelines just beneath the surface near Fairview, Alta. Photo: Amber Bracken / The Narwhal

A video put out by the regulator notes that the top cause of incidents is internal corrosion, representing 38 per cent of reported incidents.

As a result of those pipeline incidents reported to the Alberta Energy Regulator, approximately 3.5 million litres of substances were released, the majority of which was “non-fresh water.” Non-fresh water can include highly saline water, which can be damaging to crops, natural vegetation and wetlands. 

Don is frustrated by leaks from faulty or aging pipes. “We as landowners should not bear the responsibility of the oil patch being sloppy in not putting in pipelines that would last long enough to do the job,” he told The Narwhal.

The Farmers’ Advocate Office notes that the regulator “generally does not recommend [pipe]line removal because it can cause an unnecessary and significant disturbance to soils and the environment.” 

That leaves a complicated conundrum — dig up the land again to remove the pipe, further disturbing the soil, or leave the pipe there forever? 

‘Hidden Danger’

The Farmers’ Advocate Office defines an abandoned pipeline as one that has been disconnected from operating facilities. Its open ends must be plugged or capped. The line must be cleaned, purged of any remaining oil or gas and “left in a safe condition.”

“To say that a pipeline isn’t going to hurt anything in the ground, that’s just not the case. … It’s a hidden danger, period,” Don says. “It’s the things you can’t see that are wrong.”

The Farmers’ Advocate Office in the Government of Alberta echoes that sentiment in a publication called “Pipelines in Alberta: What landowners need to know.”

The document encourages farmers to act as if any pipeline buried in the ground could be potentially dangerous, whether or not the company says it has been safely discontinued.

“To maintain safety, [farmers] should always treat a pipeline as if it is operating.”

The Farmers’ Advocate Office did not respond to The Narwhal’s requests for comment on landowner concerns with pipelines.

Shawn Roth, spokesperson for the Alberta Energy Regulator, wrote by email that “pipelines that are no longer needed are often left in the ground to ensure the land and soil are not disrupted further.”

“However, the [regulator] requires pipelines that are no longer needed to be taken out of service safely following the Pipeline Rules. This includes ensuring they are emptied, purged, isolated and left in a safe condition so there are no risks to the public or environment.”

Contracts landowners are asked to sign by energy companies make it clear that pipelines can remain in the ground indefinitely. Photo: Amber Bracken / The Narwhal

Don is adamant that potentially leaving behind a network of hundreds of thousands of kilometres of abandoned pipelines buried under the province is not the legacy he wants for his generation, nor does he want to pass along the headaches that can come along with them, like the limited farming activities one can do on the land over a pipeline right of way — or the sinkholes.

Farmers and landowners have long complained about sinkholes appearing on their land after pipelines are installed, from Alberta to Texas to Pennsylvania. In extreme cases, sinkholes may be large enough to stand in, in others, the disturbed soil may simply settle, leaving a depression where water can pool — and tractors can get stuck.

Don is adamant that with modern technology, companies should be able to pull out the pipe and restore the landscape.

“We don’t think our generation should leave junk pipe scattered over all our land for the next generation to deal with,” Don says. “I don’t think that’s correct and I don’t think that’s fair.”

Don Wieben shows a successful part of the family’s crop near Fairview, Alta. Photo: Amber Bracken / The Narwhal

This area of the crop is unaffected by the presence of pipelines or wells: Photo: Amber Bracken / The Narwhal

No choice

Knowing what they know now, Marg is regretful there’s oil and gas infrastructure on their family farm.

“I would have this back to its pristine state,” Marg says. “No wells, and no money coming in, if I could.”

Not that she necessarily had a choice. 

Many landowners have few options but to agree to a company wanting to build a pipeline under their land.

Marg Wieben looks over oil and gas infrastructure on the family land in Fairview, Alta. Marg “would have this back to its pristine state,” if she could, she told The Narwhal. Photo: Amber Bracken / The Narwhal

Landowners can try to put up a fight when a company proposes a pipeline under their land, and may have success in having it rerouted, but the company can also go to Alberta’s Surface Rights Board, a quasi-judicial tribunal, to obtain a right-of-entry order.

Don’s not so sure whether he regrets having oil and gas on their property altogether, but he is very concerned about what’s going to happen to all the pipelines left to rust in the ground — and who will pay if and when they do ever need to be removed. He wants government and companies to take action to ensure oil and gas infrastructure is truly cleaned up.

“Marg and I’s generation lived in an awful good period of time,” he says.

“It shouldn’t be some generation behind us that has to pick up the tab for taking this out.”

Don Wieben in front of oil and gas infrastructure on the family’s property near Fairview, Alta. Photo: Amber Bracken / The Narwhal

The Wieben family home near Fairview, Alta. Photo: Amber Bracken / The Narwhal

Criss-crossing lines of crop degradation

When we visit, Don takes us on a tour of his family’s land — we drive from well to well, through access roads cut through fields of canola as tall as his chest. 

He stops to check crops, point out birds and deer and to look at the signs marking the numerous pipelines cutting under the fields.

On our second day in Fairview, he offers to take us for a flight in a Cessna 172, a small four-seater plane owned by his family members. An aerial view, he says, will give us a better idea of the Peace River region, and let us really see the lay of the land.

Above the Wieben family farm in the family’s small Cessna. Photo: Amber Bracken / The Narwhal

Fairview, Alta. Photo: Amber Bracken / The Narwhal

Wieben family farm. Photo: Amber Bracken / The Narwhal

It’s thunderstorm season and thick, black clouds gather on the horizon as the sun rises early in the morning when we take off in the Cessna. We fly up above the town of Fairview and the meandering Peace River, cut deep into surrounding fields. 

Eventually, the Wieben farm comes into view, and we see everything we saw on our driving tour the day before, this time in miniature — tiny buildings and wells scattered across a vast landscape, under an even vaster sky.

Journalist Sharon J. Riley in the Wieben family Cessna above Fairview, Alta. Photo: Amber Bracken / The Narwhal

Pipelines can be seen where crops are less productive. Photo Amber Bracken / The Narwhal

As we fly, Don is taken aback. Criss-crossing fields are clear lines — green and brown where canola should be in its blooming yellow splendour. 

It’s undeniable where pipelines cross under a field, marked by the crystal-clear crop degradation.

Even Don is surprised. He didn’t think it would be quite so obvious.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Information obtained by The Narwhal reveals that oil and gas companies owe the Alberta government more than $20 million in unpaid land rents accumulated since 2010 — and annual payments by government on behalf of delinquent companies have increased 840 per cent between 2010 and 2017.

When oil and gas companies drill wells on private property, they enter into a contract with landowners to pay an annual fee — rent for the land.

However, when companies don’t pay, landowners can apply to a government tribunal — called the Surface Rights Board — that steps in and pays the rent using taxpayer money. The government is supposed to recoup that money from the companies, so taxpayers aren’t footing the bill.

“The vast majority of operators [whose rents are being paid by taxpayers] are in bankruptcy proceedings, receivership or insolvent,” Mike Hartfield, spokesperson for the Surface Rights Board, told The Narwhal.

The Narwhal reported in January that Alberta recouped less than two per cent of all money paid on behalf of delinquent oil and gas companies in 2017 .

The new data obtained through a freedom of information request spans eight years and shows that not only is this practice the norm, but the problem is getting steadily worse.

A bombshell of a piece from @sharonjriley. “If people are worried about 3,000 [current orphan wells] then they won’t know what hit them with 80,000 coming.” https://t.co/btj8RU1Sca #ableg #abpoli #cdnpoli #oilandgas

— The Narwhal (@thenarwhalca) February 12, 2019

Rent recovery applications up 580 per cent

The government documents reveal that of the money paid on behalf of delinquent oil and gas companies, less than two per cent has been recouped during the past decade.

The number of applications from landowners for what’s known as rent recovery has increased 580 per cent since 2010.

In 2016, less than half a per cent — just $15,000 — was recovered from companies. In 2007, just $312 was recouped.

In total, oil and gas companies currently owe the Alberta government more than $20 million in unpaid land rents accumulated since 2010.

The amount the Alberta government has paid in land rents on behalf of delinquent oil and gas companies has been steadily on the rise in recent years, with more than $20 million paid since 2010. Less than two per cent of that money has been recouped from companies.

Not (yet?) orphans

The wells in question are not orphans. These are wells owned by companies that are still in operation — but are just (way) behind on their bills. In these case, landowners apply to Alberta’s Surface Rights Board to be compensated for the rent they’re owed by delinquent companies.

Orphan wells are different. They’re wells left behind when a company formally declares bankruptcy, and are taken over by the Orphan Well Association.

Lars De Pauw, executive director of the Orphan Well Association, talked to The Narwhal about the influx of new orphan wells added to the association’s inventory.

“We are well funded,” he said in an interview in November, noting that the association is primarily funded by industry. “Industry to date has contributed over $314 million.”

“This is a substantial amount that companies have paid for other company’s missteps.”

Companies pay into the orphan fund based on a formula set by the Alberta Energy Regulator that’s based on their share of the estimated total cost of clean up in the province.

But it isn’t technically just industry funding the Orphan Well Association. The Alberta government has given the association at least $30 million in grants since 2009, and announced that it planned to loan the organization $235 million in 2017. Last year, the federal government also said it would allocate $30 million to the cause.

The association’s inventory currently includes more than 3,000 wells that need to be properly sealed and another 1,500 that are sealed but still need more reclamation work. The inventory doubled between 2015 and 2018, according to its annual report.

Many of the wells the Alberta government has been picking up the tab for aren’t orphans yet, but given that companies are defaulting on payments, they soon could be.

‘They won’t know what hit them’

Many of the wells the Alberta government is picking up the tab for are inactive — no longer producing any oil or gas.

“You hear newspaper articles with the alarm that we have 3,000 orphan wells and how this is such a big number,” Lucija Muehlenbachs, an associate professor of economics at the University of Calgary, told The Narwhal. “And of course it’s scary that it’s growing at a fast rate.”

“But in comparison to the number of inactive wells, this is, like, peanuts,” she said.

In a 2017 paper, Muehlenbachs reported there were 80,000 inactive wells in the province — wells that her research found were very unlikely to ever produce again, even if prices increased.

In its most recent annual report, the Orphan Well Association reported “the increase in orphan properties is expected to continue,” noting that dozens of companies in Alberta were insolvent at the time.

“If people are worried about 3,000 [current orphan wells],” Muehlenbachs added, “Then they won’t know what hit them with 80,000 coming,” noting that not all inactive wells will necessarily become orphans.

“If people are worried about 3,000 [current orphan wells] then they won’t know what hit them with 80,000 coming.” — Lucija Muehlenbachs, economics professor

If companies are struggling to pay the rent owed to landowners, there are valid questions about whether they can stay afloat — and pay for their environmental liabilities — in the long run.

And if they can’t, they’ll end up on the ever-growing list of the Orphan Well Association. In the meantime, the Alberta taxpayer foots their land rent bills.

“It speaks to how much liability is being accumulated in Alberta,” Muehlenbachs said.

More costs could ‘fall to the public or to the landowners’

Questions remain about whether the Orphan Well Association can handle any more increases in its inventory.

“We do know there is a potential for the fund to be depleted or underfunded and those costs… [could fall] to the public or to the landowners,” Lewis Manning, a lawyer for the Canadian Association of Petroleum Producers told the Supreme Court of Canada last year.

(De Pauw of the Orphan Well Association told The Narwhal he was optimistic the association is finding new ways to minimize costs and increase efficiencies, a sentiment the organization echoed in a recent press release).

Manning was in court as part of the Redwater case — which recently resulted in the decision that paying reclamation costs takes priority over repaying creditors.

The ruling applies only to companies that have declared bankruptcy — and only helps if the company has any assets left over.

The government data The Narwhal obtained shows that Alberta’s environmental liability problem is not limited to already bankrupt companies. Many more companies are apparently already in such a precarious financial situation that they aren’t paying even the most basic of expenses — including the compensation owed to landowners.

As Muehlenbachs noted, many people assume that the Orphan Well Association is paying the expenses of wells when companies can’t or won’t.

But, she added, “this is a clear case where Albertans at large are paying.”

Alberta taxpayers footing bill for delinquent oil and gas companies, investigation reveals

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Perry Nelson has been farming near Provost, Alta., for more than 50 years — since he took over from his dad in 1965. He runs mostly cattle, some grain.

In 2012, he bought some more land, for extra pasture for his cattle. As with so much land in Alberta, it came with oil and gas wells already drilled deep down below the surface.

“The wells were on it when I bought it,” Nelson told The Narwhal. “Abandoned wells.”

“I don’t think [the company] had any intention of paying,” he said of the company that owned the wells and owed him money in the form of annual rent for drilling a well on his land.

“That guy’s gone broke I don’t know how many times,” he told The Narwhal. “[The regulator] still lets him start over again.”

Sure enough, according to Nelson, the company was soon a year behind on the annual rent payments it owed.

Nelson, a director with the Alberta Surface Rights Federation — a group of landowners concerned about oil and gas activity on their land — wasn’t having it.

“They have a contract that says what they’re supposed to pay,” he told The Narwhal. “That’s the way they should be paying.”

So Nelson did what many farmers do in this situation — he filed an application to Alberta’s Surface Rights Board. The Surface Rights Board is a tribunal that uses taxpayer money to reimburse landowners what they are owed by oil and gas companies.

Nelson’s was just one of thousands of cases that have been brought forward in recent years.

The government is supposed to recoup the money it pays out to landowners  from companies so taxpayers aren’t footing the bill — but new data obtained by The Narwhal shows that’s simply not happening.

Less than two per cent of funds recovered

There are 450,000 oil and gas wells registered in Alberta. They’re dotted across the province — one for every 1.4 square kilometres — and are on both public and private land.

For many landowners, they have become an enormous burden: there’s the added difficulty of farming around a wellhead, the noxious weeds, the dust, the added traffic.

But it’s goes beyond that. For many farmers and landowners — who are not receiving the basic compensation owed to them by oil and gas companies — there’s a financial headache as well.

In Alberta, landowners are supposed to receive compensation in the form of annual rent, to reimburse them for lost productivity, nuisance and adverse effects.

Far too often, advocates say, the company simply doesn’t pay.

If a company fails to pay a landowner the annual rent they have agreed on, a landowner can apply for a “recovery of rentals” from the Surface Rights Board, as per the Surface Rights Act, and receive their compensation from Alberta’s general revenue fund — in other words, taxpayer money.

This is supposed to be a temporary fix, as the government is then meant to recoup taxpayers’ money by tracking down the company and collecting the funds.

The trouble is, the Crown basically never gets that money back.

Information obtained by The Narwhal shows that, in 2017, less than two per cent of all money paid by the Alberta government on behalf of delinquent oil and gas companies was recovered.

Graphic: Carol Linnitt / The Narwhal

That means that taxpayers are on the hook for the annual rent owed by these absentee oil and gas companies — millions of dollars annually. And the number of cases is only increasing.

“It’s getting worse all the time,” Nelson said of the situation with delinquent oil and gas companies.

“It’s just spiralling down.”

Influx of applications

In 2017, 1,934 cases were brought before the Surface Rights Board, which already had a backlog of 1,990 from previous years — something many landowners say leads to frustratingly long wait times.

“It’ll probably take a year and a half before you get paid,” Nelson said.

“It’ll probably take a year and a half before you get paid.” — Perry Nelson, farmer

“It’s almost suicide,” said John Alpin, another landowner who spoke to The Narwhal, of the long process of applying for compensation.

The Surface Rights Board declined a request from The Narwhal for a phone interview, but Mike Hartfield, a spokesperson for the board, acknowledged long wait times by e-mail.

“Considerable emphasis is placed on processing these applications in a timely manner,” he said. “However, the board has to balance that with having a fair and thorough review process to ensure landowners are entitled to the monies being paid — this does take time.”

“[T]imely decisions on these matters is very important to us,” Hartfield added, noting that the board has increased the number of staff it employs to deal with applications, and concluded that the board is, “now in a great position to manage this influx of applications.”

Reporter Sharon J. Riley inspects an abandoned well with Daryl Bennett, a director with Action Surface Rights, near Taber, Alta. Photo: Theresa Tayler / The Narwhal

‘I’m paying myself’

When an application is eventually addressed, the board will try to track down the company and order them to pay. If they can’t, the board directs the Minister of Environment and Parks to pay the landowner out of the government’s general revenue.

The board can also suspend a company’s access to the wellsite, but this is often little punishment when a well is inactive anyway.

The Narwhal found that the board issued 1,537 rental payment orders to the Minister of Environment and Parks in 2017. Those orders amounted to requests that more than $6 million  — roughly the amount the government has budgeted for the Stollery Children’s Hospital’s critical care program — be paid to landowners on behalf of delinquent oil and gas companies.

In theory, this shouldn’t end up being a taxpayer expense.

According to the board, “where the Minister pays an operator’s compensation owing, the amount paid and any expenses incurred constitute a debt owing by the operator to the Crown.”

In turn, the crown debt collections division — part of Service Alberta — is supposed to go after companies to recoup that money.

But the result of their efforts is measly. In 2017, with millions of dollars owed by oil and gas companies, just over $100,000 was recouped.

In the end, taxpayers are footing the vast majority of the bill to reimburse landowners who are owed money by delinquent oil and gas companies.

At a meeting of Alberta Surface Rights — a group of landowners from across the province who are concerned about oil and gas activities on their land — in Camrose, Alta., attended by The Narwhal last month one refrain came up over and over again: “I’m paying myself.”

‘Dire financial situation’

When Regan Boychuk, a founder of Reclaim Alberta — a group advocating for the cleanup of inactive wells in the province as a job creation program — tried to find more information about how much taxpayers were on the hook for when it comes to covering for oil and gas companies, he was told that many companies lack the resources to pay in the first place.

A Government of Alberta representative told him in an e-mail that “in the vast majority of cases, an operator fails to pay the landowner not because of willful negligence or non-compliance, but that the operator is in dire financial situation (i.e., in receivership or bankrupt) and is not able to pay, therefore the likelihood of [the government] recovering any amount is very limited.”

Hartfield, the spokesperson for the board told The Narwhal by e-mail that, “The vast majority of operators [whose rents are being paid by taxpayers] are in bankruptcy proceedings, receivership or insolvent.”

Financially unstable companies have long been able to obtain licences and to drill new wells through a flawed system liability rating system administered by the Alberta Energy Regulator — a system that allows companies to exaggerate their assets by assuming oil prices of more than $100 per barrel and underestimates the costs of safely sealing and cleaning up wells.

These financially shaky companies then negotiate contracts with landowners. At the Alberta Surface Rights general meeting in Camrose, landowners alleged that companies had failed to pay — or sent out notices saying their rent would be unilaterally reduced.

The Narwhal also heard complaints that companies threatened to not pay farmers anything at all — if they didn’t accept a 50 per cent reduction in annual rent.

“We encounter this type of concern regularly,” Peter Dobbie, the Farmers’ Advocate in Alberta, told The Narwhal by e-mail, when asked about the allegations.

Rent recovery applications up 283 per cent

Some companies reportedly tell landowners that times are too tough to keep paying the agreed-upon rent, hoping their woes will hit a chord with Albertans.

According to a presentation by Michele Delcolle, a representative of the Farmers’ Advocate Office, at the Alberta Surface Rights meeting in Camrose, “a landowner is under no obligation to accommodate the changing financial circumstances of a company.”

But, Delcolle’s presentation added, “companies are stating economic hardship and believe reducing annual surface lease rentals will contribute to a strong economic health of the company.”

Other companies just don’t pay at all.

“Companies are becoming defiant,” Delcolle told the room. “They know the process.”

Their thinking, she continued, is often “‘rents are the highest part of our expenses… the Surface Rights Board is behind, so [we] have a year.’” In other words, companies can defer — or avoid altogether — paying expensive rents by gaming the system. (Delcolle didn’t respond to The Narwhal’s questions by press time.)

Whatever the reason, it appears to be becoming more prevalent.

Landowner applications for rent recovery are up 283 per cent compared to 2014.

When companies stop paying annual rent, landowners can apply to the Alberta Surface Rights Board to recoup money they’re owed. In 2017 applications were up 283 per cent from 2014, according to information from the board. Graphic: Carol Linnitt / The Narwhal

“The board has experienced a substantial increase in the volume of rental recovery applications since 2016,” said Hartfield, the spokesperson for the board.

“We expect that trend to continue.”

Changing hands

Another common problem faced by landowners happens when a well changes hands — when it is sold off to another company, often as part of a package.

“As the landowner, you won’t be notified of that,” said Nelson. Too often, he said, landowners aren’t paid after a company changes hands.

“The first time you know is when you don’t get paid. You phone the company and they say the phone number is no longer in service.”

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“Every single wellsite failed.”

That’s what Keith Wilson, a lawyer who has worked on surface rights issues for 30 years, says he heard at a presentation by the Alberta government earlier this year.

Wilson was listening to a representative from Alberta Environment and Parks give a lecture entitled “An analysis of Alberta’s Conservation and Reclamation program — does the program work as intended?”

The answer, in short, was no.

Daryl Bennett, a director at a group called Action Surface Rights, was there too. What he heard about the ecological condition of former wellsites — which had been officially certified as reclaimed — was alarming.

The government’s own research studied wellsites where reclamation certificates had been issued — and found they were nowhere near back to normal.

Nor were they meeting the government’s own regulations about the condition of the land.

Daryl Bennett, director of Action Surface Rights, poses beside inactive oil and gas infrastructure near Taber, Alberta. Sites like these need to be plugged and reclaimed before they can get a reclamation certificate but research shows certificates have been handed out even when adequate reclamation work has not taken place. Photo: Theresa Tayler / The Narwhal

There are currently no legislated timelines requiring when an oil and gas company reclaims a wellsite. Last month, Alberta’s Minister of Energy said she is “looking at targets and timelines,” for when reclamation is cleaned up, but did not herself commit to a timeline to implement any new rules.

In the meantime, companies are faced with the same trade-off they’ve had for years — continue to pay annual rent to the landowner where the well is located, or pay to clean up the site.

But as the government study found, the ecological and agricultural effects of industrial activity may linger — seemingly indefinitely — even if a company chooses the latter.

This has left some to wonder if the regulator has been allowing industry to get away with sub-par reclamation efforts — for decades.

Automatic approvals

The Alberta Energy Regulator issues reclamation certificates to companies that apply for them. For the vast majority, no inspection by the regulator is necessary — just the required paperwork, signed off on by a certified practitioner. Most applications are approved by the regulator automatically.

Alberta has accumulated more than 100,000 wellsites that have received reclamation certificates — or that are exempt from reclamation based on their age — during the past 50 years. The liability for these sites eventually reverts back to the taxpayer.

And this doesn’t include the massive backlog of inactive wells in Alberta. Officials within the regulator tasked with ensuring oil and gas wellsites are cleaned up have privately pegged the bill at as high as $100 billion.

The presentation Wilson and Bennett saw was about a pilot project, conducted by Alberta Environment and Parks. It looked at 73 wellsites from across Alberta, representing forested, cultivated and grassland landscapes, that had been issued reclamation certificates.

Some sites had been certified as reclaimed as many as 54 years ago, others as recently as 2011.

The presentation warned that if reclamation hasn’t truly restored the landscape, the province could potentially face an even larger bill in the future. “Certified site liabilities will begin to transition from industry to public,” it concluded, adding, “public interest is not served as intended.”

The research examined whether the sites studied had met the regulated objective of returning a wellsite to “equivalent land capability” to ensure that the ecological, agricultural or other productive capacity of the land is restored.

In test after test, the sites were found to be in worse condition than nearby undisturbed areas assessed for the sake of comparison — even the sites that hadn’t seen any industrial activity for decades.

But when The Narwhal asked the Alberta Institute of Agrologists for permission to view video of the presentation, the Institute declined, adding, “the topic ended up being a bit of a contentious issue.”

“There was unwanted negativity towards [the] findings.”

A ‘reclaimed’ oil and gas well in Yellowhead County, 250 kilometres west of Edmonton, Alberta. The landscape has not been returned to its former state. Image: Screenshot / Google Maps

‘Gradual downward spiral’

Mike Smith, a retired reclamation inspector, knows about that kind of unwanted negativity.

The Narwhal met with Smith and his wife, at their home in Wainwright, to talk about his storied career.

Smith retired five years ago, after working for the Alberta government for over 36 years — in Hanna, Grande Prairie and Wainwright.

When a company applied for a reclamation certificate, Smith would head out into the field to see if the reclamation was up to snuff, and to see if the site was worthy of being certified.

“When I first started with them in 1976, they didn’t even issue us shovels,” he told The Narwhal. “We used the toe of our boot.”

Mike Smith looks through notes and records he collected during his career as an inspector for the Alberta government at his home in Wainwright, Alberta. Photo: Amber Bracken / The Narwhal

At that time, he said, he was tasked primarily with ensuring a company had cleaned up the debris leftover from drilling — metal casings from the well, caps, cables, random debris — and that they had leveled off the ground so farmers could plant new crops.

“We’d go out with the landowner and see if it was smooth enough for him to farm,” he explains. A second local inspector would accompany him, representing the county or municipal district.

It was a job Smith took seriously.

“I would have to look at it through my own eyes.” He’d ask himself, “if I owned this land, would it meet my standards?”

Smith loved his job, he told The Narwhal. “It felt like I was doing something worthwhile.”

But reclamation inspections have changed dramatically. At first, Smith thought things were improving — he was issued a shovel, for starters — and it seemed like reclamation was being taken seriously.

“There was lots that was happening that was good,” he said, “until Ralph Klein.”

Since the 1990s, according to Smith, Alberta’s reclamation program has been in a “gradual downward spiral.”

By 2003, Smith’s job changed dramatically. He would no longer go out to inspect a site before a reclamation certificate was issued.

Instead, the majority were expected to be done from his desk. He was tasked with auditing approximately 15 per cent of the applications.

“You didn’t see the soil anymore. You didn’t get to feel it, you didn’t get to look at it,” he told The Narwhal. “You were scrolling.”

“We weren’t happy, let’s put it that way,” he said, when asked about the morale of inspectors at the time.

Pressure to pass audits

When Smith did get to out to a site, he might find gas leaks or evidence of soil compaction — or that crops and other vegetation weren’t growing properly.

“That’s still lasting,” he said. “Those problems are still there.”

“Many of the applications that I audited failed,” he told The Narwhal. Still, he said, failing sites was often not encouraged by his employer.

“It was tremendous — the pressure you received,” he said, of feeling compelled to issue sites a passing grade. He wasn’t, as he put it, a “fan favourite,” among oil and gas companies seeking certificates.

At one point, he said, a company that owned a wellsite that he had failed complained to his director. He remembers one of his bosses telling him, “Mike, work with these people.”

For Smith, the message was clear: “Get these things through.”

Smith was not alone in the people The Narwhal spoke to who expressed similar concerns.

“The oil company has an agenda,” he said. “They want to get a reclamation certificate.” Once a reclamation certificate is issued, oil and gas companies no longer have to pay rent to the landowner where the well was located — and the liability is off their books.

“This has been a problem for me for many years.”

Mike Smith at a flooded oil lease site in Wainwright, Alberta. This site has been suspended, according to the regulator. Smith lives nearby and drives by the site occasionally, to see if any reclamation work is being done. It isn’t. He’s seen plenty of contamination issues over his career. If no one checks, he worries about the long term recovery of sites. “Those problems are still there,” he says. Photo: Amber Bracken / The Narwhal

Mike Smith pages through his records at his home. Photo: Amber Bracken / The Narwhal

“We have some of the best legislation on the environment,” Smith told The Narwhal. “But we don’t have the enforcement.” Photo: Amber Bracken / The Narwhal

In 2013, all inspection and enforcement was taken over by a newly created arms-length corporation — the Alberta Energy Regulator — and Smith had had enough. “I submitted my request to retire. I could see what was happening… I couldn’t put myself in that position, where I would be beholden to industry.”

“We have some of the best legislation on the environment,” he laments, acknowledging that reclamation criteria have improved over time. “But we don’t have the enforcement.”

‘Automated’ review process, no human regulator needed

Until 2003, reclamation certificates were only issued after a government inspector like Smith had gone out to a wellsite to review the application, collect data and interview landowners.

But by 2003, the government had accumulated a large backlog of pending approvals. And with only 15 government inspectors at the time, they decided the most efficient way to speed up the process was to rely, essentially, on industry self-regulation.

With a backlog of close to 30,000 wells that had applied for reclamation certificates — and another 18,000 pipelines — the government was bogged down. “We weren’t going to be able to keep up with the program with the demand we were anticipating,” a spokesperson told the Globe and Mail at the time.

Getting rid of government inspectors, a spokesperson said, would more than double the number of certificates that could be issued annually. In its place would be steeper fines, random audits and an increased liability period.

Five years later, the regulator began requiring “professional sign off,” by a contractor hired by companies, in order for an application to be submitted.

Fast forward to 2018, and the Alberta Energy Regulator — funded by industry and whose board was, until recently, helmed by chairperson Gerard Protti, formerly a founding president of the Canadian Association of Petroleum Producers (CAPP) — is still trying to speed up the process.

The regulator is responsible for reviewing tens of thousands of energy development proposals annually, conducting inspections to ensure industry is compliant with government standards, administering penalties for non-compliance and conducting hearings on proposals. In short, the corporation “oversee[s] all aspects of energy resource activities” — no small feat.

The regulator has introduced new procedures to speed things up.

Today, it requires only that companies submit the required paperwork using an online system called the “OneStop Reclamation Certificate and Onestop Application tool.”

Eighty percent of applications proceed with a standard, “automated review” of the application — no human regulator needed, and certainly no field visit.

A video released by the regulator last year lauded the “administratively friendly” automated online platform that would mean “low-risk applications processed in minutes.”

https://www.youtube.com/watch?v=U0rEss_BmSI&t=72s

“Not kidding,” the video added.

The video advertised $7 million in annual savings and advertised that it would enable “25,000 pipeline applications processed annually — automatically.”

The video celebrated how easy it would be for industry to apply for reclamation certificates.

“Hello easy drop-down menus,” it boasted.

The regulator, which declined The Narwhal’s request for a phone interview, defends its move to increased efficiency. “For Alberta to be competitive, we need to enable further development by removing unnecessary costs in our regulatory system, while still maintaining high standards for environmental protection and public safety,” Samantha Peck, a spokesperson for the Alberta Energy Regulator, said in an e-mail.

“To improve efficiency, the [regulator] is focused on improving application turnaround timelines, ensuring modern, effective requirements, and continuing to transform how we operate in order to keep up with market and technology changes that affect industry,” she added. (After two weeks of back and forth, this was the only question the regulator was able to answer by press time.)

It’s long been clear that the regulator takes much of its direction from industry.

“The private sector is placing increasing pressure on regulatory bodies to… simplify cumbersome regulatory processes,” the regulator’s former head told the industry magazine Daily Oil Bulletin last November.

Oil and gas companies, he continued, “are asking us to be innovative in our regulations.”

‘Surprisingly little research’ done on reclamation

The regulator may well have heeded industry’s requests for simplifying cumbersome regulatory processes, but the pilot project from Alberta Environment and Parks — which has not committed to conducting any further field research — appears to be ringing alarm bells about the reclamation process.

This pilot project is one of the first of its kind to actually attempt to establish whether reclamation has been successful in returning sites to “equivalent land capability.”

Anne McIntosh, an assistant professor of biology at the University of Alberta, worked on the pilot project. “What do we already know? Very little,” she told The Narwhal. “Surprisingly little research has been done on reclamation.”

“I was just shocked when I started on this project.”

A flooded and inaccessible oil lease site in Wainwright, Alberta. Sites like these need to be reclaimed, but there are currently no timelines in Alberta for when a company needs to clean up a site. Photo: Amber Bracken / The Narwhal

The project sought to establish the “ecological recovery” of a site, using various methodologies to determine if reclamation had brought the area back to the original, pre-drilling condition of soils and vegetation — as is required by legislation.

Researchers took samples from old wellsites — looking at soil condition, crops, plant life, noxious weeds and tiny microorganisms — then took the same samples not far away, to establish a baseline. The research involved “goes beyond what’s done as part of the reclamation assessment process,” according to the project’s director.

They then calculated what’s known as an ecological recovery score — assuming the higher the score, the closer it might be to actually achieving the legislated requirement of “equivalent land capability.”

The results are startling.

The project found that over two thirds of the sites — all of them certified as reclaimed— in forested and grassland areas had recovery scores of less than 50 per cent.

In forested areas, for example, 90 per cent of wellsites studied had recovery scores of less than 50 per cent when it came to soil, meaning the soil was substantially more compact, had a higher pH and was generally in worse condition than adjacent reference sites.

And when researchers looked at soil mesofauna in agricultural areas — the tiny invertebrates like mites and nematodes often used as indicators of soil health — they found much lower concentrations at reclaimed wellsites.

On croplands, some wellsites were found to be “unsuitable” for crop production — despite being officially reclaimed.

Drone images presented at the conference showed examples where former wellsites could clearly be seen from above, their exact outline visible through the degradation of crops that have been planted on top of them — though they were certified as reclaimed more than twenty years ago.

A drone shot used in the government presentation, showing ineffective reclamation. Image: Alberta Environment and Parks

The implications of the government’s findings could be far-reaching.

If the pilot project’s preliminary results are indicative of what’s going on in the rest of the province — and researchers are careful to note that they can’t make assumptions about the bigger picture — the true costs of reclamation could continue to increase well into the future.

When asked for details, Alberta Environment and Parks’ Environmental Monitoring and Science Division initially responded by e-mail, noting that “although reclamation activities are intended to re-establish the capability of the land, important elements like plant and bird communities, soil properties, and nutrient cycling may not be fully established for years or even decades.”

Alberta Environment and Parks declined to make the scientist who gave the government presentation available for an interview with The Narwhal, saying “we are not able to get you in touch.”*

In a later interview with Dan Farr, Alberta Environment and Parks’ Director of Biodiversity and Ecosystem Health Sciences — who oversees the pilot project — told The Narwhal he’s “not surprised” that wellsites differ from reference sites, and declined to comment on the implications of the project for the reclamation certificate process.

When asked if the preliminary results of the research suggested reclamation certificates were not ensuring equivalent land capability — as is the requirement — he paused.

“Equivalent land capability,” he noted, “is more qualitative than quantitative.”

“If we consider equivalence to [mean] equal ecologically,” he said carefully, “then the answer is clearly no.”

But if it is interpreted to mean the land “delivers similar functions,” he said, then one needs to look, for example, at whether “cultivated lands grow crops.”

He acknowledged that the government’s findings indicated that many wellsites had reduced the land’s ability to grow crops.

“It looks like there’s a legacy related to the fact that there was a well pad there before,” he concluded.

‘Not recovering with time’

According to McIntosh, sites examined in the government pilot project often show a “halted or arrested successional trajectory” — meaning they are on a slow, or virtually non-existent, path to full recovery.

“We’ve always sort of thought if you gave them enough time, they’d go back [to their previous condition],” she said.

Terry Osko, a reclamation research consultant with a PhD in wildlife ecology, who has worked in the field for 20 years is hesitant to draw too many conclusions about the future. “Moving forward there should be fewer and fewer,” sites that show such stilted recovery, he told The Narwhal. Site reclaimed today, he said, “are probably not going to be in as rough of shape as ones that were from the 70s.”

Others worry that no one is checking that sites certified today are recovering.

An orphaned oil and gas well near Taber, Alberta. According to the Government of Alberta’s research, well sites like these, once reclaimed, often show long-term negative effects, despite regulations that require “equivalent land capability.” As it turns out, many years of industrial activity are difficult to undo. Photo: Theresa Tayler / The Narwhal

Alberta Environment and Parks’ Land Policy Branch told The Narwhal by e-mail that “no policy changes are being contemplated at this time for long-term monitoring of lands” that have received reclamation certificates.

Researchers, presenting in New Orlean this past August at the Ecological Society of America’s annual meeting, made the government project’s conclusions clear.

“Wellsite development impacts can be long lasting and may remain for 50 years or more after reclamation,” they noted.

“Some sites are not recovering with time.”

“Our goal is getting the science out,’ McIntosh told The Narwhal. “It’s in the government’s hands to decide to what do with it.”

An Alberta oil and gas well lease from 1949 that states land used must be restored “to the same condition.”

Alberta’s 1978 rules stated oil and gas sites must be reclaimed “to a condition of as good as or better than the original site.” Industry has long promised to restore oil and gas well sites but government research finds this is most often not the case. Image: Report of the Select Committee to Review Surface Rights, 1981 / University of Alberta Rutherford library

Desktop audits

Despite the poor scores of reclaimed sites studied by the government, less than three per cent of certificates have been cancelled by the regulator since 2016.

Some twenty per cent of applications are audited. An audit can mean only a desktop review of the application done by a human “reclamation assessor” — were all the application’s fields filled out correctly? Is the site location correct? — but does not imply any field work is done by the regulator.

The regulator declined to comment on the number of field inspections they have conducted.

Information obtained by The Narwhal found the number of field inspectors — who can accompany reclamation assessors on site inspections — has declined by 16 per cent since the Alberta Energy Regulator took over enforcement from Alberta Environment in 2013.

The regulator was unable to tell The Narwhal how many reclamation assessors it currently employs.

This means that the majority of on-site evaluation is left to the company, and the professional tasked with signing off on the application — ranging from foresters to agrologists to engineering technologists.

According to the government’s presentation, it’s a “professional judgement-based system,” rather than an “evidence-based” system.

10 different people, 10 different ways to interpret something

Terry Osko, the reclamation research consultant, has faith in his colleagues. “I think it would be quite rare to have shoddy work done in the field because [consultants] are good people by and large and all regulated by professional organizations,” he told The Narwhal.

The Alberta Institute of Agrologists is one of those professional organizations. It’s made up of about 2,800 members, according to David Lloyd, the Institute’s CEO.

Lloyd told The Narwhal that the organization’s members are held to a code of ethics, and the profession has a new set of standards meant to “identify the knowledge, skills, experience and the kinds of judgment or decisions that one should make.” The standards are meant to be “self-assessed,” he said and “are not punitive, but supportive.”

He added that the Institute plans to start “random practise reviews” of its members in the very near future — something that no other professional organizations in the field do.

“I believe our members are ethical and competent,” he said. “And if they’re not, we’ll hear about it… from landowners [or] another professional colleague.”

A flooded and inaccessible oil lease site in Wainwright, Alberta. Photo: Amber Bracken / The Narwhal

If a professional is reported to have violated their code of conduct, and an investigation finds the claim to be credible, the Institute has a variety of punitive tools available, according to Lloyd — ranging from revoking or suspending professional practise permits, levying a fine to requiring courses be taken (like an ethics course).

But some worry the regulator has insufficient capacity to oversee industry and the consultants it contracts. As one consultant, who asked to remain anonymous, put it, “the [regulator] is just watered down. It doesn’t have the capacity. It’s jack of all trades, master of none.”

Reclamation consultants, he said, need to be prepared to be “challenged” by companies eager to “get that liability off the books.”

“I’ve heard that the clients of our members can sometimes put pressure on [them],” Lloyd told The Narwhal. “It’s up to [the professionals] to decide how to handle that as professional. They have a requirement to make the right decision.”

When it comes to interpreting standards, some worry there’s too much leeway. One agrologist who spoke with The Narwhal on the condition of anonymity, said “10 different people [have] 10 different ways to interpret something.”

‘I’m not setting it on a trajectory to heal’

One consultant who has worked in reclamation in Alberta’s boreal forests for more than 10 years — who asked his name not be used because he’s “not old enough to retire” — told The Narwhal he’s very concerned about the standards used when he’s asked to assess a site.

“Disturbed sites are extremely hard to reclaim,” he said.

He works in forests, and sees a disturbing trend in re-planting. “What we’re doing now in reclamation — what I’m required to do — does not come anywhere close to [proper reclamation],” he told The Narwhal.

“I’m not setting it on a trajectory to heal. They’re monocultures.”

He acknowledges that reclamation criteria have improved over the years — a company can no longer simply plant an area to grass if it used to be forest, for example — but he still sees issues with the reclamation criteria.

“Many of the decisions they’re making are based on money,” he says, explaining that the “simplest” or “easiest” species to replant are often chosen, with very little regard for biodiversity, and that there is too often a lack of training of the people doing the reclamation, so that many replanted trees often die.

When he goes out to check if a forest has been restored on a site, he just needs to find “some woody species,” even if the replanted trees have died, he explains. Rose bushes will often do. If he finds some, he says, “I can still certify it.”

“That is nothing like the forest we cut out.”

While he’s adamant this has negative impacts for the area, he has no way of following up, as monitoring isn’t required once that certificate is issued. “I don’t know how long that site is going to be stagnated for,” he laments.

“I’ve never had to return to a site,” he said. “I’ve had sites where I wished I could have, but I didn’t have to, because they passed.”

‘Still a lot of cowboy stuff’

Another consultant who also spoke with The Narwhal on the condition of anonymity — a professional agrologist with 20 years of experience in the field — said that he was mostly concerned with the front-end of oil and gas activity: the construction of wellsites.

“When it comes to any sort of disturbance of any kind of ecological system,” he said, “you’re destroying the natural ecosystem.” The goal, then, is to try to do the best you can to get it on the right path from the get-go.

But he’s concerned that there’s little environmental input until a company decides it wants to reclaim a site.

The attitude during construction, he said, is too often, “move the dirt, get it out of the way, get the pad drilled, get it producing.”

While regulations and ideas about reclamation have improved over time, he said, “[contractors] just do what they did ten years ago.”

“There’s still a lot of cowboy stuff.”

He’s concerned that the majority of the environmental input is thrust onto reclamation, and that education and pre-planning could help solve a lot of problems. “They’re on the back end, trying to fix what happened on the front end.”

Effort varies

Osko, the reclamation research consultant with a PhD in wildlife ecology, has a pragmatic approach. “Since I started back in 1999, the improvement in practise is taking off kind of exponentially,” he told The Narwhal.

But the reclamation process could, in his mind, still be improved — perhaps a preliminary reclamation certificate could be issued, for example, with a required follow-up before it’s finalized. The timing of that, he added, could take into account the expected recovery time, based on site type or local ecology.

“It varies within industry, within companies, and with sort of the economic situation, how much effort is put into the process,” he noted.

And when it comes to the notion that companies will only meet the minimum standard required of them, he said, “everybody pays income tax, nobody wants to pay more income tax then the government wants them to pay.”

But he’s encouraged by companies he’s worked with who, he said, are motivated to do more than the minimum. There is, he told The Narwhal, “both economic and social incentive for responsible stewardship.”

Overall, Osko is optimistic that industry is on an upwards trajectory. “Some days I’m discouraged by what I see, but I stay in it because I’m overall encouraged.”

‘Small but numerous’

Though each individual wellsite is small, the cumulative effects of so much industrial activity may be much larger.

As a 2017 study published in the journal Forests put it, the footprints of oil and gas activity are “small but numerous, creating many disturbances across a large area.”

“They’re sort of little postage stamps peppered across the landscape,” said McIntosh.

There are approximately 450,000 wells in Alberta, roughly one for every 1.4 square kilometres — and that’s not including the tens of thousands that have already been issued reclamation certificates.

Billions are dollars need to be spent in Alberta just to get wellsites to the reclamation certificate phase — and there are concerns about whether industry will be able to pay.

And some wonder if the buck will stop there. If certified sites aren’t recovering ecologically — or agriculturally — critics worry that Albertans have given up more than they signed up for.

For many, there are questions — shouldn’t the regulator be checking the work of industry and private consultants? And who is ensuring that reclamation is truly a restoring a landscape, if no one ever goes back to find out?

Over the course of numerous interviews, one particular sentiment came through loud and clear: Albertans deserve to know whether the province’s reclamation program is functioning as intended — and whether anyone is checking to make sure it works in the long-term, too.

Mike Smith holds the shovel he used in his work as a well site inspector. Photo: Amber Bracken / The Narwhal

A shovel head that Mike Smith had used during his career as an inspector for the Alberta government. Its label reads, “snapped under pressure.” Photo: Amber Bracken / The Narwhal

‘Snapped’

Back in Wainwright, Mike Smith warms up some of his wife’s soup for lunch, then goes down into his basement to retrieve some of the mementos he kept from his long career. He wants to show us the inspirational quotes he tacked up next to his desk, and a shovel he used to inspect sites for years.

After checking the soil at countless sites, the shovel finally broke, so Smith — sentimental about it after all those years — cleaned it up, took it back to his office and affixed a message to it.

“Snapped under pressure,” it reads.

The shovel hung on the wall next to his computer until he retired.

*Update December 7, 2018, 9:30am pst. To address reader questions, this article was updated to note that Alberta Environment and Parks declined to make the scientist who gave the presentation related to well reclamation available to The Narwhal for an interview.

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In the middle of snow-speckled fields just off the Crowsnest Highway near Taber, Alta., rusting barrels dot the landscape, among storage tanks and lines of pipe. Soft plastic tape that has peeled off pipes ripples in the cool October breeze.

This site is now classified as an orphan, ever since the company that owned it, Neo Group, went bankrupt three years ago. The site is entirely surrounded by crops — mostly potatoes.

Daryl Bennett, who was born and raised in Taber — his family homesteaded in the area in 1903 — gets out of the vehicle to look around. He’s a director of a local group called Action Surface Rights, which describes itself as “dedicated to helping fellow landowners understand and navigate the maze of government and industry processes.”

He points out the site’s wellhead and flare stack, listing possible hazards: soil contamination, dust, issues with farming, invasive weeds. Then he gestures to the adjacent field, full of potatoes.

“If there’s a leak and it gets into the potato crop, it’s going right there into the French fry factory,” he says.

The site is on a list of facilities under the management of the Orphan Well Association entitled “Orphan Wells to be Abandoned,” where it has languished for at least two years. The list currently contains 2,000 wells that have yet to be properly sealed — known in the industry as “abandoning” — and whose owners are now bankrupt.

Daryl Bennett at an orphan site near Taber, Alberta, left behind by a bankrupt company. The emergency number posted at the site was no longer working. “Who do you call?” Bennett wondered. Photo: Theresa Tayler / The Narwhal

Beyond the barrels and pipes, there are likely other hazards below the surface. Data shows the total depth of the well at the Taber facility is 407 metres, so the risks reach far below ground level.

The problems facing farmers are numerous, Bennett tells The Narwhal. Farmers must ensure their irrigation systems can pass over wells without hitting them, farm around the roads that lead to wellsites, deal with the dust and weeds that come with disturbed soil, and worry about contamination of their crops — and they often face long, paperwork-filled fights to claim the annual rent they’re owed by energy companies.

Before he climbs back into the vehicle, Bennett wanders over to the entrance of the site and looks at the now-defunct company’s sign, still hanging prominently on a small shed. “In case of emergency, please call,” it reads, listing a toll-free number for the bankrupt company.

The Narwhal called the toll free number listed and was met with an automated message stating, “the number you have reached has been changed.”

“If there is a problem, who do you call?” Bennett asks. “There’s nobody there.”

‘Kicking the can down the road’

Bennett is part of a movement of landowners concerned the government — and the Alberta Energy Regulator in particular — is not only struggling to deal with Alberta’s long-standing well issue, but that the organization is propping up a beleaguered industry without requiring the necessary assurances that wells will be cleaned up in the future.

Critics worry that not only are orphan wells already sitting neglected in farmers’ fields across the province, but that a whole new wave of inactive wells are poised to be thrust onto the Orphan Well Association — and that, increasingly, taxpayers may be forced to shoulder the bill.

It has been estimated that at the current rate of spending, it would take 177 years to clean up the province’s inactive, suspended, abandoned and orphan wells.

Daryl Bennett, a director with Action Surface Rights. Bennett has spent years trying to make sure his neighbours are fairly compensated by the companies that drill wells on their land. Photo: Theresa Tayler / The Narwhal

Bennett sees no shortage of possible hazards at orphan sites like this one, including soil contamination, dust, issues with farming and invasive weeds. Photo: Theresa Tayler / The Narwhal

In theory, there is a system designed to ensure wells are cleaned up once companies are done with them, ensuring there is money available for proper reclamation, even if companies go bust.

But critics worry the system has been perverted to the point that the Alberta Energy Regulator is now propping up the province’s oil and gas companies through accounting systems that exaggerate assets and underestimate liabilities by using outdated information — meaning companies are able to drill new wells despite questions around their ability to pay for their eventual cleanup.

“They’re putting the best spin on it,” farmer and Action Surface Rights chairman Ronald Huvenaars told The Narwhal of the regulator’s methods. “If you went to an accountant and had it audited, there’s no way an accountant would ever sign off on that.”

Farmer and Action Surface Rights chairman Ronald Huvenaars on the driveway of his family farm, Pigs Fly Farms. Photo: Theresa Tayler / The Narwhal

Huvenaars stands beside active infrastructure on his family farm. Increasingly, he’s worried that companies in Alberta aren’t taking into account the costs they’ll have to pay to clean up wells like this one when they reach the end of their productive life. Photo: Theresa Tayler / The Narwhal

As one briefing paper published by the University of Calgary put it, “This type of system works well during an oil boom but not so well during an oil bust.”

The trouble is, the Alberta Energy Regulator is still acting like it’s in an oil boom.

“It’s just kicking the can down the road,” Huvenaars said. “It’s kind of like a snowball, it’s getting bigger and bigger as it rolls.”

And that, he said, leaves landowners feeling powerless when it comes to industry activity on their land.

‘Continually releases greenhouse gases’

Conventional wells are drilled through layers of earth — soil, layers of rock, groundwater aquifers — to reach a pocket of oil or gas within a rock formation. When they’re successful, the deposits are tapped and brought back to the surface — through a steel pipe that runs the depth of the well, surrounded by concrete — without contaminating any of the layers above.

Once the well’s productive life has ended, a company can choose to suspend the well (temporarily take it out of service), decommission it completely by fully sealing it off (known as abandoning), or leave it to sit, unsealed, indefinitely. A well becomes an “orphan” if the company that owns it goes bankrupt, whether it is safely sealed or not.

Alberta has no time frames on when a well should be properly sealed and reclaimed, unlike other jurisdictions — deadlines on properly sealing a suspended well range from six months to 25 years in the United States.

When things go awry at an inactive well, there’s risk of explosion, soil and water contamination and release of air pollutants, according to Jodi McNeill, a policy analyst with The Pembina Institute. And then there are the emissions.

“When something hasn’t been plugged, it just continually releases greenhouse gases into the atmosphere,” McNeill said.

As long as the companies that hold the licences to these wells stay financially afloat and honour their cleanup obligations, this isn’t necessarily a significant risk to landowners, Bennett told The Narwhal.

One of his concerns is the implications of the Supreme Court’s upcoming decision on the Redwater case — due out this fall. If the lower court’s decision is upheld, it would allow the creditors of bankrupt companies to collect what they’re owed before any money is used for cleanup of the company’s liabilities.

In essence, the decision could make cleanup the last priority when distributing any funds a company might have left — a substantial concern for landowners waiting for wells on the property to be cleaned up, and a big potential bill for taxpayers.

The regulator, an appellant in the case, is similarly concerned, saying in February, “If this decision is upheld by the Supreme Court of Canada, we — and every other regulator in Canada — will no longer be able to hold companies accountable for cleaning up their mess.”

A gas well on the horizon. Since 2009, the Alberta government has given the Orphan Well Association more than $30 million in grants and moved to loan the organization $235 million in 2017. Photo: Theresa Tayler / The Narwhal

But critics worry that the regulator is already struggling to do just that.

Documents obtained by The National Observer revealed that a top official with the regulator estimated that cleanup of conventional oil and gas wells would cost the province at least $100 billion — a number, it noted, is “expected to grow.”

How that number got to be so big is of no surprise to people familiar with how the regulator works.

“The [regulator’s] system is not achieving anything,” said Keith Wilson, a lawyer who has been working on these sorts of cases for thirty years.

“If anything, it’s creating a false sense of comfort that this problem is being addressed — and we know it’s not.”

Public money for an industry problem

The huge price tag is due, in part, to the large number of wells in the province. A report from the C.D. Howe Institute estimates that there are roughly 450,000 wells in the province — a well for every 1.4 square kilometres in Alberta.

It’s estimated that at least a third, 155,000, of those wells are no longer producing, but have not been reclaimed, representing a financial liability for the company that owns them. If the company goes bankrupt, the cleanup responsibility is shouldered by the Orphan Well Association.

The Orphan Well Association brought in just $30 million from the orphan fund levy, collected from industry, in 2017. Since 2009, the Alberta government has given the Orphan Well Association more than $30 million in grants and moved to loan the organization $235 million in 2017.

The federal government has similarly siphoned public money to clean up after bankrupt companies. Last year, it announced it would allocate $30 million to efforts to clean up orphan wells in Alberta.

Last year, the industry-managed Orphan Well Association reported more than $30 million in total expenditures. In that year they abandoned (the term used to refer to plugging, or sealing, a well) just 232 wells.

In total, just over 600 orphan sites have obtained reclamation certificates over the years, meaning they have been sealed and the sites have been deemed to have been remediated.

There are more than 2,000 wells in the Orphan Well Association’s inventory that have not been sealed, and more than 1,100 that need to be reclaimed. (The Orphan Well Association did not respond to The Narwhal’s requests for an interview.)

An orphan well near Taber, Alberta. Bennett was surprised to find that the pressure on the well was still high. It has yet to be safely sealed. Photo: Theresa Tayler / The Narwhal

In theory, wells shouldn’t end up in the hands of financially unstable companies, because the permissions for and transfer of Alberta’s wells are regulated by the Alberta Energy Regulator, a corporation at arm’s length from government meant to oversee all energy projects in the province.

But, critics worry, the regulator’s system isn’t working.

‘Rosy picture’

There are two primary mechanisms the regulator uses to collect money from companies to fund cleanup of wells left behind by defunct operators.

The Orphan Well Levy is calculated by determining a company’s share of total industry liabilities, using a program called the Licensee Liability Rating. Money paid into this levy is used to fund the Orphan Well Association’s annual cleanup efforts.

The other mechanism is known as the Liability Management Rating system. In this system, a company’s assets (essentially an estimate of the money it makes from oil and gas production) are measured against its liabilities (the cost to seal and clean up all its infrastructure) to establish a ratio. If the company’s ratio of assets to liabilities is less than one — if it has more liabilities than assets — it must pay a security deposit to the regulator.

In theory, this system should ensure that financially unstable companies would have already paid a deposit to cover cleanup costs before ending up in the red.

Crucial to the calculation of a company’s assets is the company’s reported production in the previous year, multiplied by what’s known as the “industry netback,” which is essentially a measure of gross profit.

This could be a reasonable calculation of a company’s assets if updated regularly, but The Narwhal found the regulator still uses profitability numbers that haven’t been updated in nearly a decade.

Keith Wilson is adamant this is very problematic. “The [system] is supposed to be a responsible measure of the ratio of the company’s liabilities to their assets,” Wilson, the lawyer, told The Narwhal.

“It’s obvious to anyone who takes even the most superficial examination of the [regulator’s] program that it grossly overvalues the assets and equally grossly underestimates the liabilities.”

The result, he added, is “a rosy picture that has no bearing to the true risk to the taxpayer and to landowners.”

The landscape surrounding Huvenaars’ family farm is beautiful — and dotted with wellsites. There are 450,000 wells in Alberta, one for every 1.4 square kilometres. Photo: Theresa Tayler / The Narwhal

The land surrounding Ron Huvenaars’ farm. Photo: Theresa Tayler / The Narwhal

Rolling average that ‘has never rolled’

Alberta’s “industry netback” — the standardized measure of a company’s gross profit, used to calculate a company’s financial standing — was set in 2015, but the actual figures used in the calculation of the netback are based on data from 2008 to 2010, according to Melanie Veriotes, a spokesperson for the Alberta Energy Regulator.

In essence, this means the regulator is calculating a company’s assets by using a measure taken from a time when oil prices reached nearly 150 USD per barrel and when natural gas prices followed a similar trend.

Oil prices declined after the 2008 global recession (and subsequently began to recover in 2010), but the average real monthly benchmark oil price (for WTI crude, commonly used as an industry benchmark) over the three years was still over 80 USD per barrel.

In contrast, the average real monthly oil price from 2015 to 2017 was significantly lower — at under 50 USD per barrel.

Oil prices are not explicitly included in the calculation of industry netback, but Veriotes confirmed that “oil prices indirectly influence the industry netback.”

“Oil prices are low today and have been for the last three years,” Lucija Muehlenbachs, an associate professor of economics at the University of Calgary, told The Narwhal by e-mail.

“If more recent data were used, this would make the industry netback much lower.”

Essentially, the Alberta Energy Regulator is allowing oil and gas companies to assume much higher profits than they currently receive — a practise the industry website Daily Oil Bulletin refers to as “providing some relief,” acknowledging that “a recalculation of this value using a more realistic netback would push many producers into negative… territory.”

Veriotes told The Narwhal that industry netbacks are updated “if the values have changed and as priorities allow.”

This doesn’t sit well with Regan Boychuk, a founder of Reclaim Alberta, a group advocating for the cleanup of inactive wells as a job creation program.

He is adamant that the netback was intended to be a regularly updated rolling average, as stated in the regulator’s own rules.

“The regulator has never updated the netback,” he told The Narwhal. “The three-year average has never rolled.”

“If industry had to pay even tiny deposits towards its cleanup obligations, many many companies would collapse,” he added.

“It is that far gone.”

Calculation of liabilities wildly off-base

Critics say the exaggeration of profits alone is a huge problem, one with big implications for the regulator’s ability to ensure industry cleans up its well sites.

For decades, landowners have argued that this is a crucial part of the social contract — that companies pay for the messes they make.

“As parents we teach our children that before they go to the next box of Lego, they need to clean up the last box of toys,” Wilson, the lawyer, told The Narwhal.

Why, he wondered, shouldn’t industry do the same?

The system’s flaws, critics say, mean it’s increasingly feasible that taxpayers will end up on the hook for a larger share of cleanup costs as more companies declare bankruptcy and the Orphan Well Association struggles to keep up.

And, as it turns out, the problem isn’t just that assets are exaggerated by the regulator.

There’s another important number: the liability estimate. This is the estimate of the total cost to fully seal off and clean up a company’s wells — and it’s essential to the regulator’s balance sheet.

The ratio of assets to liabilities is crucial to whether a company can take on new wells, whether it is required to pay a security deposit against the cost of cleanup and the amount it will have to pay into the orphan well fund.

Yet the regulator’s liabilities numbers, too, can be wildly off-base.

Cleanup costs are calculated based on the Alberta Energy Regulator’s estimates from 2015. These numbers have been criticized for failing to take into account variation in site condition and for being much lower than actual costs.

Ronald Thiessen, a researcher at the University of Calgary, has spent years analyzing available data on reclamation costs of Alberta’s wellsites. He found that cleanup costs for at least 60 per cent of wellsites exceed the regulator’s estimates.

According to Thiessen, one of the biggest contributors to cost is the amount of contaminated soil that must be dug up, loaded onto trucks and driven away. Salts present big challenges around wellsites, he said, and leaked oil and gas can also be a problem.

The regulator uses average cost estimates for reclamation to establish a company’s total liabilities, based on geographic area. The regulator’s estimates of the costs to clean up wellsites range from $16,500 in the grasslands to $42,125 in the high alpine; the average estimate across the seven geographical areas is $28,321.

Thiessen’s research, though, found that the median cost of cleaning up an orphan well in Alberta is nearly double the regulator’s estimates, at $53,000 per site.

He recommends the regulator raise its estimates of reclamation costs, which he acknowledges would mean a greater cost to companies in the former of the deposits they would need to pay.

“Taking an average and applying it to any given site is dangerous,” Thiessen told The Narwhal.

Jodi McNeill of the Pembina Institute agrees. “There are a lot of concerns about the formulaic way in which assets and liabilities are calculated,” she said. “Both the asset and liability side are not being representative of true site-based liabilities.”

Bennett and Narwhal journalist Sharon Riley visiting an orphan well near Taber, Alberta. Farmers must ensure their irrigation equipment will pass over wells like these. Photo: Theresa Tayler / The Narwhal

She’s also concerned that the regulator doesn’t take into account larger cleanup costs for the outliers — the sites with huge cleanup bills.

“[The system] can’t account for cases where a wellsite can have especially big problems,” she said. “We’ve seen wellsites that have a cost of $2 or $3 million to clean up.”

When The Narwhal asked Melanie Veriotes, a spokesperson for the regulator, if it planned to update its figures, she said by e-mail “regardless of which assessment tools we use, companies are responsible for the costs associated with cleaning these sites. None of these calculations change that fundamental premise.”

“We are working to update our liability management program,” Veriotes added, noting that the regulator is “reviewing our processes to better understand what is working well and what needs to change.”

Wilson, the lawyer, is adamant that the average cost to clean up a site is much higher than the regulator’s estimates — or Thiessen’s research.

“I get criticized by people in the industry when I say that the average reclamation cost is $300,000,” he told The Narwhal.

“They say, ‘you’re nuts, it’s way higher.’ ”

Thiessen agrees that the average cleanup cost could be much higher than what his research found, but, he noted, “a larger, more representative and publicly available dataset is required,” — something industry hasn’t released.

Wilson points out that even if the average cost to clean up a wellsite was $53,000, the total bill to clean up Alberta’s wells is still enormous.

He pulls out his calculator to do a quick estimate.

“Error!” he says, laughing when his calculator can’t compute the figure, “Error! The number’s just crazy big.”

‘Get rid of it’

Wilson was asked what was wrong with the regulator’s rating system at a conference earlier this year. His answer was clear.

“Everything.”

When asked how to fix the system, Wilson replied, simply, “get rid of it.”

Politically though, that’s tricky. “The current government is in a political competition with its nearest rival, the [United Conservative Party], as to who can project better a pro-industry image,” Wilson told The Narwhal.

Some worry that tweaks to the system could mean a financial disaster, pushing more companies to bankruptcy — and more wells on to the Orphan Well Association, which can’t afford to clean up its current inventory.

There’s also the possibility, according to Muehlenbachs, the economics professor that “fear for the industry [or] fear of what this says of the industry,” might stop the regulator from making any substantive changes.

The idea of propping up companies doesn’t sit well with landowners who have to live with the wells on their land.

And if the Redwater decisions stands, which many believe it will, Action Surface Rights worries it could incentivize companies to walk away from liabilities.

Bennett is worried that companies will “come in and milk the resource as much as they can and abscond with millions of dollars.”

“They privatize the profits and then they bugger off and socialize the losses.”

Journalist Sharon Riley discusses well liabilities with landowner Daryl Bennett in the Taber Tim Hortons. Photo: Theresa Tayler / The Narwhal

‘What do you do?’

All of this leaves landowners like Ronald Huvenaars feeling vulnerable.

Huvenaars’ dad started a farm in 1964. For years, the family raised hogs, though these days they focus mostly on crops — renting out land for potatoes; producing seeds for Dupont. The land for the family’s farm, Pigs Fly Farms, is dotted with shelters for the bees that pollinate canola.

Huvenaars stands beside a derby car used by his kids. Photo: Theresa Tayler / The Narwhal

Huvenaars poses in front of silos on his family farm, Pigs Fly Farms, which produces seeds for Dupont. Photo: Theresa Tayler / The Narwhal

And then there are the wells. In 1985, an oil and gas company approached Huvenaars’ dad about drilling a well on the family farm. His dad agreed.

“It was kind of one of those things where it’s like well, they’re gonna do something anyways,” Huvenaars told The Narwhal, noting that the economy was tough at the time. “There was no money in farming and if you could create a little extra cash, it was enough to keep things going.”

But things have changed. Huvenaars says there’s no way he’d allow another well on his land without a fight.

Action Surface Rights is adamant that the inherent trust between landowners and industry is eroding — and concerned that the way the regulator is enforcing the rules don’t help matters.

But for Huvenaars, there’s little he can do when it comes to the two wells on his land, other than hope for the best. For many landowners, there’s a feeling of powerlessness when it comes to dealing with industry.

“It’s there,” Huvenaars said. “So what do you do?”

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By Barry Robinson, Ecojustice.

The Alberta Energy Regulator (AER) is Alberta’s one-stop regulatory body for the oil and gas industry. When it was created in 2013 by the merging of the former Energy Resources Conservation Board and parts of Alberta Environment and Parks, the AER made bold claims about transparency, enforcement and becoming a “world-class” regulator.

Unfortunately, the AER has failed to live up to its promises. The AER has shown over and over again that it is either unable or unwilling to enforce its own laws, directives and orders. The AER has become a toothless regulator.

As a public interest lawyer I see first-hand how the AER’s failures affect Albertans.

Take for example two of Ecojustice’s clients. Tony and Lorraine Bruder operate a cattle ranch near Pincher Creek. A preliminary environmental site assessment conducted at an abandoned sour gas well site on their property showed that the site was potentially contaminated with drilling waste, salts, metals, and hydrocarbons, including polycyclic aromatic hydrocarbons — all nasty things that you do not want on your property.

In September 2015, as a first step towards cleaning up this mess, the AER ordered Nomad Exploration Ltd., the licensee of the well site, to complete a more detailed environmental study by the end of November 2015.

Nomad ignored that order. Over the next few months, we repeatedly asked the AER what it was going to do about Nomad’s failure, but the AER took no action.

Finally, in May 2016, the AER ordered Nomad to prepare a plan by the end of June 2016 to complete the more detailed environmental study — that is, to prepare a plan to do the very thing the AER had already ordered Nomad to do six months earlier.

Most competent regulators escalate enforcement when an operator does not follow its orders — when you do not follow the rules, the consequences get more severe. In this case, the AER de-escalated enforcement. The penalty for not completing the detailed environmental study was just an order to “try again.”

This time, the AER said that Nomad must include in the plan a schedule to complete the detailed environmental study by the end of August 2016. After an extension of time and a couple of failed attempts, Nomad never did provide the AER with a schedule to complete the study. The AER then ordered Nomad to complete the study regardless by January 3, 2017, but then at Nomad’s request extended that date to February 15, 2017.

And guess what — Nomad again failed to meet that deadline.

Three Ways to Improve Alberta’s Toothless Energy Regulator #abpoli #abandonedwells @ecojustice_ca https://t.co/Zi2xiTuCrq

— DeSmog Canada (@DeSmogCanada) April 7, 2017

When we recently asked the AER what they were going to do about this continued non-compliance by Nomad, the AER’s response was “the AER is continuing to gather and assess the relevant facts and information in order to determine the most appropriate response moving forward.”

In other words, 18 months after ordering Nomad to complete the detailed environmental study, the AER still does not have a plan on how to enforce that order.

The Bruders’ case is only one example of a much broader and systemic problem of lack of enforcement by the AER. 

In July 2014, the AER announced that approximately 37,000 wells out of 80,000 inactive wells were not in compliance with the requirements for inactive wells. How does a regulator, that bills itself as “world class,” allow almost half of all inactive wells in the province to be out of compliance?

More recently, we have seen situations where the AER issued numerous warnings and orders to companies with no effect, with the end result that the only option was to transfer hundreds of wells to the Orphan Well Association, leaving financial responsibility for these sites to be borne by other industry members, the Canadian taxpayer, and eventually the Alberta public. The AER has numerous enforcement tools at its disposal but it simply refuses to use these tools to ensure compliance.

Which leads me to my response to the question, “How do you solve a problem like the AER?”  In a recent letter to Shannon Phillips, the Alberta Minister of the Environment and Parks, and Margaret McCuaig-Boyd, the Minister of Energy, we made three recommendations.

First, before drilling a well, the operator should have to deposit sufficient funds with the AER to pay for the clean-up. Then, when an operator refuses to carry out the clean-up work, or goes bankrupt, the AER would hold the necessary funds to complete the work.

Second, in 2014, the Responsible Energy Development Act stripped the Minister of Environment and Parks of her power to enforce environmental orders against energy companies and gave those powers to the AER. Given that the AER appears unwilling to use those tools, we think that those powers should be given back to the Minister.

Third, we think that it is time to consider whether the AER should continue to exist. If the AER is unwilling to enforce Alberta’s laws and its own directives and orders, perhaps the AER’s role should be transferred to the Departments of Energy and Environment and Parks.

In a recent publication, Jim Ellis, the President and CEO of the AER, said that regulators like the AER “hold a moral and ethical obligation to initiate bold and courageous action to improve the human condition.”

Perhaps before the AER embarks on the lofty goal of changing the world, they should get the simple stuff right — like enforcing the law.

Image: Pumpjack in rural Alberta. Photo: Kris Krug/DeSmog Canada

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It’s been an awfully rough year for Alberta, with the resource-rich province currently grappling with a 31.5 per cent drop in oil prices, 39 per cent increase in unemployment and a quadrupling in the number of abandoned oil and gas wells.

But for many advocates of geothermal energy, that particular trio of stats represents a massive window of opportunity for the province, especially when paired with the government’s recent decision to phase out coal-fired power and generate 30 per cent of its electricity via renewables by 2030.

In short: retrofit old oil and gas wells to capture geothermal energy, putting thousands of tradespeople back to work, attracting billions in investments and producing baseload renewable power for the entire province.

“The market timing is better than it’s ever been, the economic forces are better than they’ve ever been and I think we’re poised for a true boom,” says Sean Collins, partner at Terrapin Geothermics.

Interest in the idea has been growing in recent months, receiving a major boost in early August with MLA Shaye Anderson’s formal proposal to convert an inactive well to capture direct heat for an 8,000 square foot greenhouse near Leduc.

Currently, the Alberta government is in the process of implementing its Climate Leadership Plan; a spokesperson from the province’s ministry of environment and parks says it will look at exploring the option more, emphasizing it’s a “complex issue that requires input and consultation from multiple agencies and stakeholders” in order to get it right.

Here are a few things that will have to happen for Alberta to take advantage of its massive geothermal potential (which, according to a 2013 study by the Canadian Geothermal Energy Association, could be as high as 8,800 megawatts of power given a five per cent recovery rate at a depth of 3.5 kilometres, far surpassing the combined capacity of Alberta’s coal-fired power plants).

Province Needs Geothermal Regulations

Despite years of pressure from the geothermal industry, there’s no regulatory framework in Alberta (or Canada for that matter) that actually allows for the capturing of geothermal energy.

“You can go and try find it: I wish you luck,” quips Craig Dunn, chief geologist at Borealis GeoPower.

Collins says many wells across North America are already pulling 95 to 99 per cent water up and just “happen to scrape a little bit of hydrocarbons out of the top.” But at the moment, that hot water is treated as a waste product: it’s not allowed to be transported via pipeline for direct heating purposes or harnessed to spin a turbine to generate electricity (or heat another fluid with a lower boiling point to spin the turbine in a process called “binary cycle”).

That must change for geothermal to stop serving as what Collins dubs “the forgotten technology in Canada,” which could come in the form of new legislation or amendments to existing rules.

Jonathan Banks — research associate at the University of Alberta specializing in the mapping and commercialization of geothermal potential in the province — says there will also be regulations required in getting electricity into the power grid; a delayed process will likely deter investors as they want to start generating cash flow sooner rather than later.

It’ll take some work. But it’ll eventually lead to test projects to demonstrate the technology and attract public and private funding, then opening up the doors for widespread commercialization.

Mapping of Geothermal Hot Spots Underway

Alison Thompson, chair and co-founder of the Canadian Geothermal Energy Association (CanGEA), says there are 440,000 wells scattered across Alberta, with 77,000 listed as inactive or suspended and another 180,000 formally abandoned or “orphaned.”

Many of those wells won’t be suited for geothermal retrofits. Banks stresses that wells are abandoned for many different reasons, including economic undesirability and compromised structural integrity. Drawing up salt water through existing well casings can result in “often aggressive and expensive issues,” Banks says. Sour gas can erode the well casing. Others aren’t close enough to cities and towns to harness the potential for direct heating.

Many maps have already been drawn up due to oil and gas drilling. But more work will have to be done to establish the premium spots for geothermal on a case-by-case basis.

Currently, Banks is working with Alberta Innovates – Energy and Environment Solutions and five rural municipalities in the northwest of the province to complete targeted reservoir exploration, mapping in 3D the boundaries of the best reservoirs related to the population centre.

When the team started looking, they were hoping to find 10 reservoirs of a certain criteria, with a combined capacity of 100 or 200 megawatts of power. Instead, they found 50 reservoirs. More mapping with likely lead to more such findings, helping to reduce commercial risk and accelerate technological developments as more retrofits are completed.

Retrain Oil and Gas Workers for Geothermal

All that would be required to make a promising pre-existing well operable for geothermal capture, Banks says, would be a deepening of the well by as little as 10 or 20 metres since water reservoirs tend to sit just below oil and gas pools.

Day rates for drillers are at 20 year lows, he adds, making it a highly cost-effective option.

Lliam Hildebrand — founder and executive director of Iron & Earth, an organization of oilsands workers pushing for investments in renewables — suggests that such opportunities would be just the beginning for labourers.

“If we actually started creating some geothermal power projects, our skills as tradespeople — as welders and steel fabricators and electricians and crane operators and pipefitters — are all directly transferable to the industry with very, very little retraining required.”

Hildebrand says a lot of the jobs would be in the manufacturing of actual steel components like the heat exchange, piping and tubing, as well as the electrical work required to hook the generators up to power lines. Rig operators would have to undergo some specific retraining, he says; CanGEA is already hosting workshops for that component of it.

In addition, it will take some retooling and specialized equipment: “What we really need from the government is this type of research and development and innovation grants to help these manufacturers position themselves as providers for these kinds of manufacturing demands,” he says.

Many orphaned wells are capped with cement and remediated by an industry association, rendering them economically useless for the purposes of harnessing geothermal.

Discussions would have to happen between many stakeholders including companies, leaseholders, the provincial government, the Alberta Energy Regulator and Orphan Well Association to figure out the complicated logistics, especially around leasing and liability issues.

Dunn says purchasing an abandoned oil well for a dollar is like buying a car with a body in the back: “It’s a great deal until you have to figure out what to do with the mess.” There are completely viable geothermal developments, he says, but companies take very significant project risk given potential issues around remediation or other lingering environmental concerns.

“My sense is most geothermal companies are going to be really hesitant: no-one’s going to take over the liability for a well, just because there’s a split incentive problem where companies may give you their worst wells that have things you don’t really know of,” Collins says.

The key, he says, is to target people at the point in time where the operation has the budget to do some removal and convince them to convert the well instead of plug it. Nobody’s gone through the specific leasing process on any major scale to know what the best set-up is.

That’s where the government can step in, helping to bring various players together to establish when the best window of opportunity is for companies to step in and do something different with the well.

Government Help Needed to Level Playing Field

Sara Hastings-Simon, director of the Pembina Institute’s clean economy program in Alberta, emphasizes that government intervention like the Alberta Oil Sands Technology and Research Authority (AOSTRA) allowed for the development of the oilsands, with direct stimulus spending kicking off solar in the U.S.

“Every new energy resource in the history of Canada has received support to build that industry,” emphasizes Dunn. “That’s true across the board: deep natural gas got subsidies for wildcatting, heavy oil got a massive subsidy with royalties and everything else along the way. This is not an equal playing field when you’re breaking into new energy markets.”

Geothermal should be recognized for the point in commercialization that it’s at, Hastings-Simon says. In other words, it has to be treated differently than solar and wind, which have had respective headstarts (geothermal has been historically disadvantaged due to the fact that companies could make more money focusing on extracting $100/barrel oil).

Direct funding is a must, although Hastings-Simon stresses it must be project-based not company-based.

“Obviously you need to be careful and do it in a smart way so you’re not wasting taxpayer dollars, and you need to make sure you’re not doing it for 50 projects at once,” she says. “You’re recognizing the point at which geothermal changes into being a more commercialized technology and the support then changes form again.”

Government also has the power to reduce upfront costs of capital via loan guarantees and accelerated capital depreciation; Hastings-Simon says that could come via the Climate Leadership Plan’s innovation fund, or tied to economic development and trade (as expertise could eventually be patented and exported).

Creating a Geothermal Buzz

Let’s be honest: geothermal’s an extremely cool technology.

The Alberta government has spent decades and millions of dollars promoting its oil and gas sector. Why not turn those same efforts towards boosting the public’s understanding and enthusiasm for geothermal?

Heck, here are a few random facts that could be used in promotional campaigns:

1) Geothermal heat can be used to melt snow on sidewalks and roads, saving cities millions of dollars in snow clearing costs;

2) Since the wells already exist and have been used reliably for decades, there’s a near-zero chance of seismic activity often associated with fracking and drilling;

3) Geothermal can theoretically be paired with carbon capture and storage as supercritical carbon dioxide can transport heat more efficiently due its density; and

4) Alberta’s cold winters would greatly improve the efficiency of geothermal plants given the temperature gradient between the resource’s depth and ambient environmental conditions.

The technology is also rapidly advancing: Banks says his team is developing a heat engine that can take advantage of lower temperature resources in the province, boosting what might be a few hundred megawatts of power to several gigawatts of power.

All up, geothermal represents a stupidly massive opportunity for Alberta to heat its homes, greenhouses and animals barns, generate electricity to replace coal-fired power plants and put thousands of out-of-work tradespeople back to work.

Dunn is hopeful, suggesting the massive handicap against the industry is “very fixable with the right protocol motivations.”

“It’s a clean, renewable resource that is almost perfectly aligned with our current workforce,” he concludes. “Why would we not at least try?”

Image: Geothermal operations in California. Photo: California Energy Commission

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Abandoned oil and gas wells in Alberta are on the rise — but where many see a growing liability, Alberta’s fledgling geothermal industry sees massive opportunity.

“We’ve got these old wells that we know are hot and we’re going to fill them with cement and walk away,” says Tim Davies, CEO of geothermal company Turkana. “It’s just stupid.”

There’s currently no permitting framework for geothermal in Alberta, leaving the renewable energy out of play.

“I own the well, I own the land and I own the oil. But I can’t own the heat,” Davies said. “There’s just no mechanism for that in place.”

“The oil business has drilled 400,000 wells in Alberta alone,” Alison Thompson, president of the Canadian Geothermal Energy Association, told DeSmog Canada. “They’ve already found all the hot water the province has.”

“The oil patch has those skills to get the most out of every well,” Thompson said, adding the workforce has been hamstrung by a lack of forward thinking policies. [view:in_this_series=block_1]

The number of orphaned wells — left in the wake of a mass exodus of oil and gas producers — has quadrupled in the last 12 months.

Ben Lee, owner of Raven Thermal Systems, says the oil and gas sector’s loss could be the geothermal industry’s gain.

“For the first time in more than a decade you’ve got very skilled workers that have exactly the skillset that a successful geothermal project needs,” Lee told DeSmog Canada.

Geothermal energy draws on the earth’s natural warmth to create a renewable form of energy with a low environmental footprint and virtually no carbon emissions. Importantly, geothermal provides reliable base load capacity, similar to a hydro dam or gas-fired power plant, enabling system stability.

Despite being home to enormous geothermal potential, Canada is the only country on the Pacific Ring of Fire that doesn’t use the resource to produce commercial-scale energy.

CanGEA released a report in late 2014 that found geothermal could supply all of the energy needs of British Columbia for much cheaper than the Site C dam, currently under construction.

“You’ve got top-notch geologists, reservoir engineers, drilling and completion engineers, surface engineers and all the associated landmen and everything else that comes along with a successful drilling program,” Lee said.

“They are available, and available on the cheap to some extent right now, because there is so much supply.”

Lee, who has a degree in aerospace engineering and specializes in heat transfer systems, used to work in other resource industries but last year founded Raven when he saw an opportunity to bring underutilized geothermal energy to the forefront.

But Alberta has yet to see a single geothermal operation materialize.

Lee said the regulatory climate in Canada has failed to keep pace with knowledge of Canada’s vast geothermal potential. Currently there is no licensing framework in place for the development of geothermal energy in Alberta.

For Lee and others struggling to find work in the province, waiting for policy to catch up has been painful.

“We have some very available high-end skill that’s sitting around and could be very quickly turned around because at the end of the day whether you’re drilling for oil or drilling for hot water, the process is the same.”

Craig Dunn, an exploration geologist with Borealis Geothermal, the only company in Canada to have a geothermal exploration permit for B.C., said many of the techniques used to develop oil and gas deposits are directly applicable to geothermal.

The steam-assisted gravity drainage, or SAGD, used to recover bitumen deposits in the Alberta oilsands is “basically geothermal in reverse,” Dunn said, saying with one steam is pumped into a reservoir and in the other steam is pumped out.

“I got into this because one of my last jobs was in a heavy oil play,” Dunn said.“And I thought, ‘is this the best we can do? Is this a resource we want to hand down to our children?’ ”

Canadian Companies Going Abroad for Geothermal Opportunity 

Brett Erickson from FlashPoint Resources Management Inc., a Calgary-based drilling and completions firm, said his company has been busy applying its skills in Nicaragua and other countries, such as the U.S., that are open to geothermal development.

“Alberta has some of the best engineers and best mind power when it comes to drilling and power generation as a whole,” he said, but other countries “are ahead of Canada when it comes to green energy.”

“I believe it’s because we’ve got access to easier, cheaper energy like oil, gas and coal,” Erickson said. He added geothermal is expensive to start but it’s “the greenest energy out there.”

“It’s a lot more reliable than hydro or wind,” he said, “with less of a footprint.”

Erickson said it’s going to take some help to get geothermal up and running in Canada.

“It is an expensive technology but over the long term it has a payback and that’s what investors care about, the long-term payback,” Erickson said

Proving geothermal is low risk but high return has been a key struggle for geothermal companies in Canada, Erickson said. “With the downturn in oil there are investors that are sitting on money that usually would have gone to oil projects.”

“The pieces are in place for geothermal to take off in Canada.”

Thompson, who previously worked with companies interested in using geothermal energy to reduce the carbon footprint of the oilsands, said industry is eager for the opportunity to apply what they know to this new resource to reduce greenhouse gas emissions.

“If someone would just at the government level formulate a task force…we don’t need to reinvent the wheel,” Thompson said. “It’s plug and play. That’s what we’re hoping for.”

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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.

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