The Alberta government paid more than $30 million on behalf of delinquent oil and gas companies in 2024, The Narwhal has learned. The companies failed to pay rent owed to landowners for the use of their property for oil and gas activities. 

This represents a 4,500 per cent increase in the amount of money the government is paying for these missed payments since 2010. 

Companies are required to pay rents to landowners for oil and gas activity, whether to drill a well or install another related facility. When they don’t pay, landowners can apply to a tribunal to have those rents paid for by the province.

The payout is supposed to be a stopgap to make sure landowners aren’t out of pocket, with the government going after delinquent oil and gas companies to get them to repay the money.

In reality, that rarely happens.

Data obtained via a freedom of information request shows just $167,000 — less than half a per cent of the total paid out in 2024 — was recovered from oil and gas companies. 

Data obtained through a freedom of information request shows the government of Alberta paid more than $30 million to landowners on behalf of oil and gas companies in 2024. Only a small fraction of these payments is ever recouped. Graph: Shawn Parkinson / The Narwhal

“The bottom line is … these companies don’t have any money,” Shaun Fluker, a law professor and executive director of the Public Interest Law Clinic at the University of Calgary, said in an interview. “The money has been pulled out of the ground,” he said, explaining that many of these sites are older and produce very little in the way of oil or gas.

“The Crown is not going to recover these funds,” he added.

The total paid by the government on behalf of delinquent companies since 2010 is nearly $150 million, according to data from the province’s Land and Property Rights Tribunal, an independent, non-partisan tribunal that handles landowner claims for land rent. The annual figure has risen almost every year since 2010.

The amount of money paid on behalf of oil and gas companies has climbed almost steadily since 2010, ballooning by 4,500 per cent between 2010 and 2024. Graph: Shawn Parkinson / The Narwhal

“This number is rising fast now,” Fluker said. “We can now see in the distance [that we’ll reach] half a billion dollars paid by the government — and up we go.”

When asked by The Narwhal about whether the data indicated an issue with the system, Mike Hartfield, the executive director of the Land and Property Rights Tribunal said by email, “That’s a question best answered by Albertans. The tribunal is focused on doing what it’s here to do — making fair and timely decisions for Albertans following the legislated process set out in the Surface Rights Act.”

A spokesperson for the Ministry of Environment and Protected Areas did not respond to emailed questions from The Narwhal.

Landowners can’t deny oil and gas companies access to their land, so the government promises compensation

There are currently more than 150,000 inactive and marginal oil and gas wells across Alberta. Inactive wells have not produced any oil or gas for months (or years). Marginal wells have a very low production. Taken together, they make up more than a third of all the wells in Alberta.

“There’s a huge number of so-called marginal sites out there that are inactive, but they haven’t been designated as such,” Fluker said. “The company’s not insolvent, but it’s just simply not doing anything with the facilities.”

‘Outrageously bad’: Alberta taxpayers pick up another multimillion tab for oil companies’ land rent

Landowners bear the burden of oil and gas activity on their land, including disturbances to agricultural crops. Weeds, spills, leaks and soil compaction as a result of the wells can also cause issues.Land rent — also referred to as surface lease payments — is a critical way farmers and landowners are compensated for the loss of their land when it is occupied by oil and gas infrastructure. Ultimately, landowners do not have the power to refuse an oil and gas company access to their land.

As part of this arrangement, when an oil and gas company cannot — or will not — make its land rental payments, landowners can apply to the Alberta government to have the government pay rent on the company’s behalf. 

Landowners can’t refuse oil and gas companies access to their land, yet they bear the burden of extraction activities, including disturbances to agricultural crops and spills, leaks and oil compaction from wells. Land rent is a critical way farmers are compensated for these losses. Photo: Amber Bracken / The Narwhal

Once a landowner’s claim is verified by the tribunal, the minister of environment and protected areas issues payments to landowners from the government’s general revenue stream. The government is then supposed to try to recoup that amount from companies.

The tribunal itself has no ability to enforce repayment at that point. It can, however, terminate access rights for companies, which Hartfield noted “can serve as a strong incentive for operators to pay.” 

Fluker says the issue of unpaid land rents is “intertwined” with a number of issues when it comes to the liabilities of oil and gas companies, including an inability or unwillingness to cover the cost to clean up an old well, as well as outstanding municipal property taxes.

Unpaid land rent is in addition to unpaid municipal taxes

Land rents aren’t the only way oil and gas companies are costing individual landowners and small communities — many also owe unpaid property taxes to rural municipalities. In March, Rural Municipalities of Alberta announced that its members, made up of rural counties and municipal districts across the province, faced $68 million in unpaid taxes from oil and gas companies in 2024 alone. 

In the seven years the organization has been tracking the issue, at least $253.9 million of municipal property taxes have gone unpaid by oil and gas companies.

“The problem continues to worsen,” Kara Westerlund, the president of Rural Municipalities of Alberta, said in a statement at the time. 

“Oil and gas companies are willfully avoiding their property tax responsibilities. Yet, year after year, this issue persists due to a lack of proper industry regulation and accountability.”

Tribunal working to reduce wait times in the face of ‘exceptionally high’ landowner requests

In response to questions sent via email, Hartfield said the tribunal did not analyze trends in amounts paid out, but did note increased awareness around the compensation process, which he said was in part the result of increased engagement efforts.

Hartfield noted the tribunal has been involved in community information sessions — along with the Alberta Energy Regulator, Orphan Well Association and the Farmers’ Advocate Office — in the Alberta communities of Vegreville, Lac Ste. Anne, Delia, Stettler, Consort and Wheatland County, with more planned in the months ahead.

He also noted “advancements in technology, streamlined processes and red-tape reduction” mean the tribunal is “better equipped to manage high application volumes and continue reducing decision timelines.”

There are currently more than 150,000 inactive and marginally productive oil and gas wells across Alberta. “When marginal sites become even less economic than they were, companies stop paying,” Shaun Fluker, a law professor and executive director of the Public Interest Law Clinic at the University of Calgary, told The Narwhal. Photo: Amber Bracken / The Narwhal

“The results speak for itself: back in 2022-23 decision timelines on these applications took as long as 12 months, whereas today we’re down to five months,” he added.

Still, Hartfield said the tribunal expects the total number of requests next year to be “similar.”

He added the tribunal has adapted “to handle exceptionally high volumes of applications — over 35,000 under the Surface Rights Act since 2016.”

‘Trying to squeeze whatever extra economic juice’ is left in wells

The Alberta government is currently developing what it is calling the Mature Assets Strategy, which “aims to maximize value and optimize resource recovery from mature oil and gas assets while effectively managing the closure of inactive sites.” Critics say this means the government is trying to prolong the life of old oil and gas wells.

“This government is interested in trying to squeeze whatever extra economic juice there is to squeeze out of these assets,” Fluker said.

But, he added, the approach so far has not dealt with the root causes of the unpaid rents and taxes problem.

“The unpaid surface lease issue is sort of like the bubbles percolating to the surface,” he said. 

“When marginal sites become even less economic than they were, companies stop paying: they stop paying the landowner, stop paying the contractors, they stop paying the property taxes,” he said. “And these are the things that percolate up.”— With files from Drew Anderson

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When Alycia Aird drives from Moberly Lake, B.C., heading east through the traditional homelands of the Saulteau and West Moberly Lake First Nations, she sees remnants of the oil and gas industry everywhere.

“It’s just dotted all over with lease sites and roads and [oil and gas] features all fragmenting the landscape,” she said. Every hundred metres or so, Aird spies gas rigs, tree clearings or job sites. Some are still active — many are not. 

Aird’s homelands, about 750 kilometres northeast of Vancouver, is littered with thousands of old wells that are no longer producing oil or gas. Each well site has disturbed local ecosystems, and has the potential to contaminate nearby water sources and emit planet-warming gases. 

But for Aird, a member of Saulteau First Nations, each site also presents an opportunity to rewild her homelands. Aird is the general manager of Aski Reclamation LP, a First Nations corporation that employs local Indigenous people to restore the Saulteau and West Moberly First Nations’ homelands. 

Thousands of inactive and abandoned oil wells are dotted across the Canadian landscape, with ongoing environmental impacts. First Nations company Aski Reclamation is restoring former oil wells in their Treaty 8 homelands, rewilding their territory in the process. Photo: Amber Bracken / The Narwhal

Since its inception in 2019, the company has earned contracts to reclaim land degraded by oil and gas, mining and forestry. 

“These are people who are going to go back to the land when oil and gas companies decide to leave,” Aird said. “People here are invested long-term with the objective of having land that supports them and their cultural activities.”

Oil and gas wells are ‘there forever’

The Peace River region of B.C., in the northeast corner of the province, has been a hotbed of oil and gas extraction since at least the 1950s. Prospectors dug holes straight down into the ground, hoping to hit a deep formation of fluid.

In an effort to reach more oil and gas, rig operators started horizontally fracking to make the oil or gas flow from difficult-to-access rock formations. The practice consumes massive amounts of freshwater and raises long-term water concerns.

Mary Kang, an assistant professor of civil engineering at McGill University who researches oil and gas wells, said once wells are drilled into the ground, often thousands of metres deep, “they’re there forever.” When they are no longer producing oil or gas, the deep hole remains but it is supposed to be permanently sealed off — known in the industry as “abandoning.”

In 2021, a report for the B.C. Energy Regulator estimated that more than 16,000 wells in the province will need to be permanently sealed in the coming decades. In northern B.C. and many other parts of Canada, rusting oil and gas infrastructure is a common sight. Photo: Amber Bracken / The Narwhal.

Each of these wells emits methane, a powerful global-warming gas, into the atmosphere. According to a study co-authored by Kang, wells that have been permanently sealed can still emit anywhere from a fraction of a gram to 48 grams of methane per hour. According to the United States Environmental Protection Agency, that’s about equal to the emissions from burning up to a pound and a half of coal per hour. 

To minimize the environmental impacts of a well site, Kang said it needs to be permanently sealed, and the site needs to be reclaimed. However, she adds that often this “could be not done at all — or done poorly.” 

The B.C. government requires well owners to outline how they will restore old well sites once they become “dormant,” a classification applied once they have not produced for five years. 

For example, owners of wells that become listed as dormant after this year are required to plan for the wells to be restored within 10 years. 

But older sites may have not been reclaimed to today’s standards.

Wells can also be temporarily suspended by operators, in the hopes that one day they will produce again — which Kang said rarely happens. 

In an email to The Narwhal, B.C. Energy Regulator spokesperson Lannea Parfitt said since 1991, the regulator has recorded 10,661 well suspensions from permit holders. This includes oil and gas wells that may have been suspended more than once. Previously suspended wells have been brought back into production 753 times. 

According to the regulator’s website, the average lifespan of an oil and gas well is about 20 years. At present, there are more than 9,100 permanently sealed oil and gas wells in B.C. Approximately 6,500 more have been suspended and 1,000 sit inactive. According to Kang’s research, there are about 370,000 non-producing oil and gas wells across the country.

When an oil and gas well permit holder goes bankrupt, the well becomes “orphaned” and it falls to the regulator to manage the site. In an email to The Narwhal, a spokesperson for the regulator said there are 819 orphan sites in B.C., 78 per cent of which have been permanently sealed. 

Orphan wells, like the one pictured in Fort Nelson, become the responsibility of the B.C. Energy Regulator to manage once their permit holders declare bankruptcy. There are more than 5,500 orphan wells across Canada, including over 800 in B.C. Photo: Garth Lenz / The Narwhal

Even after a well has been sealed, contaminants in the surrounding soil and water need to be cleaned up and the land around the well still needs to be reclaimed, as well sites often have been cleared of trees and native plants and the soil has been compacted. Reclaiming an old well site takes several years. 

The province’s budget says the regulator aims to hire or collaborate with Indigenous groups to reclaim 30 orphaned well sites by the end of 2025, and 75 more by the end of 2027. It aims to reclaim all orphaned sites by 2030. 

According to a 2023 report from the International Energy Agency, there are more than 5,500 orphan wells across Canada.

A First Nations-led solution

Teena Demeulemeester, supervisor for the Saulteau First Nations’ treaty rights and environmental protection department, said in the mid-2010s, she saw oil and gas companies trying to restore well sites. But at the time, she said, reclamation efforts on her homelands were not incorporating Traditional Knowledge. 

She remembers visiting several former well sites where grass seed had been scattered atop earth compacted by heavy machinery, like bulldozers and excavators. 

“They were fields of just grass. It wasn’t coming back to a natural habitat,” Demeulemeester said. “The grass mat choked out any trees or traditional plants, because it was so thick and so overtaking.”

Aski Reclamation staff collect seeds from native plants as part of their reclamation work, in order to ensure restored sites are both ecologically diverse and culturally grounded. Photo: Quinton Tutin / The Narwhal

Animal patterns started changing, too. Demeulmeester said the nations are currently collecting data on caribou trails. Despite reclamation efforts, Aird said many members have told her they haven’t been able to hunt animals the nations have traditionally relied on for sustenance.

“They haven’t felt comfortable hunting moose here based on how much oil and gas [contamination] is happening,” Aird said. “When they’ve harvested moose, there’s been a large amount of concern with tumours on the organs.”

‘When is enough enough?’ Downstream from the Kearl oilsands spill, residents grapple with what comes next

Demeulemeester said she saw money was being put into reclamation. But the Saulteau First Nations weren’t looped in. 

“First Nations were not involved in the process,” she said. “Reclamation was occurring and we didn’t have any input.”

So, in the late 2010s, the Saulteau First Nations held meetings with members to ask the communities what they wanted to see on their homelands. One of the key objectives identified in the meetings was for the nations to start a reclamation company of their own.

In 2019, the B.C. Energy Regulator, then the B.C. Oil and Gas Commission, hired the First Nations to reclaim an orphan well pad east of Moberly Lake, between the Peace and Pine Rivers, about 750 kilometres northeast of Vancouver. 

Aird said when she first arrived at the site, the area was sparse. The former wetland had been cleared of vegetation and only a few cattails had sprung up while the well pad sat unused. 

A team of seven field workers and a contract ecologist studied how water previously flowed through the site. They carved a winding creek bed into the ground. To help the site retain water, they dug out a small pond.

Aski Reclamation staff collect seeds from native plants as part of their restoration work. Previously, says Teena Demeulemeester, restoration companies would scatter grass seeds over former well sites, choking out trees and traditional plants. Photo: Quinton Tutin / The Narwhal

By consulting Elders and members, the Saulteau First Nations collected data on plants used for sustenance, medicine and more. The nations compiled information dating back at least 50 years, and created a database of trees, shrubs and grasses that are native to their homelands. 

With this knowledge, the reclamation team identified what plants needed to be re-introduced to the site. They planted several native species, including black spruce trees and cottonwood. They reintroduced willow and red osier dogwood, which Aird says are important for moose. 

Five years later, Aird said native animals have returned to the site, too. She leads tours of the site so Saulteau First Nations Elders can see how the land has changed. The bare well pad has been transformed into a thriving wetland.

“Every time I go to the site, I seem to see a bear that’s hanging out there,” Aird said. “There’s frogs all over the ground, there’s birds chirping; it’s an ideal candidate for what restoration looks like.”

With that pilot project, Aski Reclamation was born.

 Since then, the company has grown to a team of 42 staff. The B.C. government has granted the company significant contracts to reclaim former well sites across Saulteau First Nations’ homelands.

In an email to The Narwhal, a spokesperson for the B.C. Energy Regulator said it has hired Aski Reclamation to work on 10 more orphan sites. The regulator has added the company to its list of approved vendors for orphan well reclamation. 

“The success of Aski is an example of how collaboration can lead to positive outcomes as we work together to reclaim and heal the land,” the spokesperson wrote.

The well site reclamation business is only expected to grow. As of 2024, B.C. requires oil and gas permit holders to have restored 40 per cent of their wells that were dormant in 2019. 

According to a 2021 report for the regulator, more than 16,000 oil and gas wells in the province will need to be permanently sealed in the coming decades. About 14,000 of those are “unconventional” wells, built in the hydraulic fracturing boom of the early 2000s.

While some clients have suggestions about how a site should look after being reclaimed, or may even provide seedlings, Aird said Aski Reclamation usually has full control over their end product. (Aski Reclamation declined to provide details on their clients, citing confidentiality and business relationships.)

A database, created by Aski Reclamation with insights from Elders and members of the Saulteau First Nations, includes native trees, shrubs and grasses. The staff use it to determine what plants to reintroduce to former oil well sites, in order to restore the balance of the environment. Photo: Quinton Tuton / The Narwhal

The only limiting factor, Aird said, is budget. It means the company might not get to add a feature, like a pond or a creek, to the site, or monitor the site for several years. 

“Not all companies have been planning for this change and for a restoration economy,” Aird said. “They only have so much budget. So we try really hard to be as economically feasible as possible and make sure that we do a good job.”

Fate of old oil and gas wells unclear

Every year, Aird returns to the well pad east of Moberly Lake to monitor how it’s rewilding. 

“There’s water going through it and there’s all this wildlife. There are [animal] footprints everywhere and frogs. You can hear birds,” she said. “It is a huge stark contrast in comparison to all the well sites that you drive by to get to this one.”

While it thrives now, the future of the site is still uncertain. 

Applying cultural and Traditional Knowledge in their work has led to the return of birds and other wildlife, says Alycia Aird, general manager of Aski Reclamation. Photo: Quinton Tuton / The Narwhal

According to Kang, part of that puzzle includes the quality of the well plug. In her research, she’s found that some poorly plugged wells can leak more methane into the atmosphere than unplugged wells. Other properly plugged wells can start to leak, in the event of an earthquake or similar land disturbance. 

Aski Reclamation doesn’t plug wells. Instead, owners need to plug the well themselves or hire another contractor before asking Aski to rewild the land. And once an operator plugs the well, Kang said the regulator considers them “off the hook.”

“We don’t know about the integrity of the plugs, and we don’t know what will happen 50 years down the road,” Kang said. She said it’s not clear how regulators can manage these sites, but that monitoring wells may be a solution. 

The company has branched out to other reclamation projects. It earned a contract to contribute to Natural Resources Canada’s 2 Billion Trees program, and plants native trees to reclaim swathes of forest cleared for obsolete forest service roads. 

This year, according to Aski Reclamation’s restoration division manager Stacy Hammond, the company has 12 planting projects on the go, some of which include multiple sites. They have also started to restore former mining sites. 

With every project, the landscape seems a little less fragmented. Some members of Saulteau First Nations are returning to reclaimed sites for cultural practices, according to Demeulemeester. She said it seems like Aski Reclamation is starting to reverse the disturbances oil and gas have caused on their homelands. 

“Restoration and reclamation is occurring now,” Demeulemeester said. “And it’s healing the land.”

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.

This story is a collaboration between The Narwhal and CTV National News.

The land around Bill and Sylvia Flesher’s property is typical for this corner of Alberta, about an hour’s drive southwest of Edmonton. Small hills and valleys are dotted with boreal pines and innumerable pump jacks. Their property hosts 14 wells, 10 of which have been orphaned. 

The first well was drilled in the early ’60s and over the years the family was happy about the extra income. 

“It was sort of like an off-farm job,” Bill says. “We could use that money to buy machinery, subsidize the farming here and, you know, it really helped as far as money goes.”

But the years went on and the industry shifted. The wells were sold and then sold again as the volume companies could pull from them started to dwindle. Eventually they were sold to other companies that went out of business and left the wells to rust and wither. 

“Now we’re not getting any income from the wells. And we also can’t utilize the space in the area that they were because they’re still under lease,” Sylvia says.

The Fleshers aren’t alone. And it’s a problem officials at the Alberta Energy Regulator have long worried about, according to documents obtained through a freedom of information request and part of a joint investigation between The Narwhal and CTV National News.

“Thousands of landowners are being impacted by numerous struggling and failing licencees,” reads one document, part of a package the regulator initially withheld portions of and only agreed to share following an investigation by Alberta’s freedom of information watchdog. 

Those documents show the Alberta Energy Regulator doesn’t know how bad the problem is in the province, or what the true cost of cleaning up old wells is. In one internal analysis, officials write they are growing increasingly concerned about a potential “landslide” of new orphan wells as more companies fall into insolvency and a long list of higher risk inactive wells in 2019.

Across Alberta, there are almost 13,000 oil and gas assets — old pipelines, wells, well pads and related facilities — being managed by the Orphan Well Association after companies have gone bankrupt and walked away from their obligations. Many are wells, often drilled hundreds of metres below the surface in search of the province’s rich deposits of oil and gas. Some wells flow nearly constantly, producing a gush of income for their owners, others never produce anything at all. All need to be safely sealed before other cleanup work can take place.

Aging oil and gas infrastructure can cause air, soil and water contamination, but internal documents show companies are far more likely to deal with the lower-hanging fruit and clean up sites that were never in production. Photo: Amber Bracken / The Narwhal

The number of inactive wells, still owned by solvent companies but some sitting dormant for decades, is currently just shy of 75,000 — according to public data, approximately 20 per cent are not compliant with current regulations. 

All told, there is a well, in some stage of its life, on every 1.4 square kilometres of land in the province — hundreds of thousands of them in total.

As officials predicted the potential for a 480 per cent increase in orphan wells, the regulator set about trying to deal with a problem it said was becoming an “exponentially large drain on Albertans and provincial coffers.” The documents provide a glimpse into the results of the regulator’s analysis of companies’ financial health, including those it considered to be at high risk of default.

Since the documents were penned, the regulator has slowly started changing the way it manages liabilities. Critics say the reforms are unlikely to solve the problem, particularly from a regulator that some say is captured by the industry it’s meant to oversee. 

For Sylvia, the fatal flaw goes back decades, when the regulator decided not to collect enough money from companies to be able to clean up their messes. 

“The big companies take the cream off the top, then as soon as there’s a little bit less production, then they sell it to a smaller company that doesn’t have the resources to be able to reclaim,” Sylvia says. 

‘Slow-motion landslide’: Alberta Energy Regulator worried about possibility of dramatic increase in orphan wells

In September 2019, the Alberta Energy Regulator watched anxiously as the oil and gas industry was hammered by a price crash and economic downturn, exposing what the organization said were “policy and regulatory gaps” in how it managed companies’ ability to pay to clean up their old wells.

“[The Alberta Energy Regulator] and the [Orphan Well Association] are experiencing a slow-motion landslide of licencee failures,” reads a document from 2019 summarizing the threats. “Several mid-sized companies are moving through insolvencies, with the bulk of orphaned volumes expected to fall to the [Orphan Well Association].”

Wells and infrastructure not owned by a solvent company often end up with the industry-funded Orphan Well Association. Landowners often wait years, sometimes decades, for their land to be cleared and can’t use those areas while they wait. Documents from 2019 show the Alberta Energy Regulator was increasingly concerned about the scope of the problem. Photo: Amber Bracken / The Narwhal.

The regulator confirmed it shared its internal analysis with officials from two ministries — Alberta Energy and Alberta Environment.

“If current market conditions continue, the known failures could grow [the Orphan Well Association] inventory by up to 160 per cent within 12-24 months. There is the potential of up to a 480 per cent increase in [Orphan Well Association] inventories, should companies currently demonstrating signs of distress fail as well,” reads one internal document.

That would have taken the number of wells in the Orphan Well Association inventory from 9,703 to more than 56,000. 

In July 2019 the regulator said it only had $224 million worth of security on hand — less than one per cent of the estimated $30.2 billion in liabilities. But it called for “patience” in documents, as it allowed companies to continue operating to try to recover some funds before they foisted the cleanup onto the industry-funded Orphan Well Association. The regulator added it worried collecting more money from companies could tip more of them over the financial brink. The regulator has the authority to collect security at any time, but has historically only done so when a company is already in distress.

That lack of security meant many of the wells left behind by the failed companies would end up with the Orphan Well Association. 

But it wasn’t just orphans the regulator was worried about. 

Eighty per cent of wells certified as reclaimed never actually produced oil or gas

The internal documents show the vast majority of wells that were cleaned up never actually produced oil or gas, grossly distorting the calculus on cleanup work still to be done on inactive wells. Wells that never produced oil or gas are at far lower risk of soil contamination and other problems that arise with the presence of hydrocarbons.

The regulator’s own calculations show 80 per cent of reclaimed wells and 44 per cent of abandoned wells — permanently plugged but not yet reclaimed — have never produced oil or gas, leaving a mountain of more difficult, and more expensive, sites on the landscape. 

It meant the regulator didn’t know how big the problem truly was, saying true liability costs could be 2.5 times higher than its own calculations. 

“Determining an accurate liability calculation is difficult as the extent and severity of contamination in Alberta is unknown,” reads a September 2019 memo.

Those problems continue. 

Documents obtained through freedom of information, but initially withheld by the regulator, show it was aware there were gaps in its ability to oversee cleanup of oil and gas sites. The documents were written at a time when multiple companies were going out of business, and there were concerns about a 480 per cent increase in orphan wells. Concerns about the number of wells persists.

Contaminated sites can pose problems for landowners like Lexya Hansen, who lives not far from the Fleshers in Brazeau County. She’s been trying to get compensation for the two orphan wells on her property, as well as information on what environmental work has been done to date.

“It’s not just about money, we have this wellhead at surface that’s on the south side of the creek,” she says.

Inactive wells can leak contamination into the land and air, including methane. Contamination on the land or in groundwater can take decades to remediate and cost far more than plugging a well that never produced hydrocarbons. A 2019 briefing note obtained by The Narwhal showed the regulator was aware of 577 sites in 2019 with known contamination of soil or groundwater, with as many as 400 of them classified as “potentially high risk.” 

Wells can also take a financial toll.

Hansen says she tried to move her mortgage and was denied by the first bank she went to after it demanded environmental site assessments due to the fact she had the wells on her property. 

Lexya Hansen worries about contamination from an orphan well next to a creek on her property. Photos: Jay Rosove / CTV

“I think that there’s records of spills, so that’s a potential concern,” she says. 

In an emailed response to questions, Karen Keller, a spokesperson for the regulator, said the regulator is working to “proactively identify potential issues, develop timely solutions and increase closure work at all stages of development, which in turn will protect Albertans and our environment.”

The regulator also now requires operators to report actual cleanup costs for their sites through its new inventory-reduction program, Keller said, adding they hope those figures will allow it to provide “more accurate liability estimates over time.”

The worst-case scenario for orphan wells outlined in the documents has not come to pass, but not because of any regulatory intervention. 

The Alberta Energy Regulator and the Alberta government say they’ve taken steps to prevent a ‘landslide’ of orphan wells, but landowners and experts say it’s not enough. Photo: Amber Bracken / The Narwhal

The post-pandemic economic recovery and the surging price for oil and gas in the wake of the Russian invasion of Ukraine injected massive capital into the oil patch. Assets were sold to other companies, or still-solvent partners in a particular well would assume the liabilities, according to the regulator. 

The number of inactive wells has fallen by three per cent since 2019, according to the regulator, but it has not provided any data on whether the wells that have been plugged or reclaimed are higher risk wells — or whether industry continues to pluck low-hanging fruit. 

The conclusion of what Keller called “an exercise to understand the potential impacts of a hypothetical worst-case scenario” could not be ignored: without significant change, the regulatory regime was not up to the task of managing environmental and health risks posed by the industry. 

Alberta Energy Regulator introduces a suite of changes in an attempt to increase pace of cleanup

Since those internal conversations at the Alberta Energy Regulator, there have been changes to the system that oversees how companies report cleanup costs and pay securities. 

The government passed its new liability management framework in 2020, which the regulator says gives it more flexibility to tackle well cleanups. 

Under the new system, the regulator uses what it describes as a more in-depth assessment of the financial health of companies and can act proactively if there are signs of distress. There is a new inventory-reduction program that sets minimum spending for cleanup and allows landowners to nominate old sites to be prioritized for cleanup. The Orphan Well Association also has new powers to manage sites, sell or operate assets and appoint receivers. 

Much of that work is still new and ongoing. It will take years before the new framework is fully operational. 

Some orphaned wells, like this one near Camrose, Alta., are in poor shape. Documents show the regulator doesn’t know the full extent of contamination from oil and gas activities in the province, but said in 2019 it was aware of 577 sites with known contamination, 400 of which could be deemed high risk to the public or the environment. Photo: Amber Bracken / The Narwhal.

“Work to implement the first four components is well underway,” Keller, the regulator spokesperson, said. The last component — implementing a mechanism to address older legacy sites that have been sitting on the landscape for years or decades, and were reclaimed or plugged before current rules came into play — have not yet started, she said. “We are waiting for policy direction from the government,” she added. 

Those legacy sites do not have owners and are not covered by any industry or government funding. Emergency work is covered by a fee the regulator levies on industry. 

Keller pointed to recent data showing industry spent 40 per cent more on cleanups in 2022 than the minimum required amount, for a total of $600 million (this does not include any money spent as part of the federal government’s pandemic relief package). But she said the regulator has no information on how that money was spent and whether it went to addressing older and more costly sites. 

Keller said the regulator is still analyzing the data and final results are expected later this year.

She also said changes to licence transfers have increased the amount of security collected through that process from $389,000 in 2020 to more than $11 million in 2022.

Under the regulator’s new inventory-reduction program, the oil and gas industry is required to spend $700 million on cleanup activities in Alberta in 2023, up from the required spend of $422 million in 2022.

Alberta Energy Regulator ‘completely fallen apart’ with no solutions: critic

Drew Yewchuk, a public-interest lawyer who researches liabilities and who reviewed the documents obtained in the freedom of information request, is skeptical about the Alberta Energy Regulator’s ability to tackle mounting problems with old wells.

“The regulator knew that the system had completely fallen apart,” he says of those internal discussions. “What’s odd is how little they’ve managed to fix it.”

Yewchuk thinks the new system for evaluating the financial health of a company is too complex to be effective and says the mandatory spending amounts for cleanups are based on the regulator’s inaccurate estimates of province-wide liabilities. And companies in financial distress get lower spending requirements, which he finds problematic. 

Companies that can’t afford their cleanup costs should not be protected, he argues. 

“They should have pushed them into bankruptcy,” Yewchuk says of the companies that were causing concern for the regulator in 2019. 

Drew Yewchuk, a public-interest lawyer, doesn’t think changes introduced by the Alberta Energy Regulator since 2019 will do enough to deal with oil and gas cleanup. He thinks the regulator should be broken up. Photo: Amber Bracken / The Narwhal.

“Those companies couldn’t afford to pay their environmental liabilities. They could barely pay their property taxes. They weren’t paying the orphan levy.”

He accuses the regulator of playing a sort of shell game, allowing companies to acquire licences even though they’re financially shaky; a process that can help keep wells from becoming orphans, but which just delays dealing with the problem. 

That concern was also identified in a recent auditor general’s report, which said more work needs to be done to ensure those acquiring licences can afford their obligations. 

There is one point where Yewchuk is cautiously optimistic: the nomination program that allows landowners to submit a request to the regulator to clean up old sites, but the process is too new to gauge its effectiveness, he says. The program began accepting nominations last month.

Yewchuk argues the Alberta Energy Regulator is captured by industry and should be broken up. The same organization should not be responsible for approvals, monitoring and hearings, he says. 

“This meant that the [regulator] was in a position where after they granted approval, if they later monitored and found out that they made a mistake, they would have to be reporting that they have approved something they shouldn’t have,” he says. 

“And it looks like they didn’t want to do that.” 

Alberta government boasts ‘incredible work’ on cleaning up old wells

The Alberta government says it has taken “the boldest action in decades to address inactive and orphaned wells,” citing the introduction of the new liability framework and the federal government’s spending of $1 billion for well cleanup in the province. 

“We have seen some incredible work to address the challenges of orphan and abandoned wells across the province, and we will continue to prioritize this work in the years ahead,” Alberta Energy Minister Peter Guthrie said in an email prior to the Alberta election writ being issued. 

The minister said the government is considering public feedback on its controversial pilot program that could provide up to $100 million in tax credits to companies that tackle older inactive wells. 

Details will be provided in the fall, he said. 

The current Alberta election could alter that. 

A recent auditor general’s report focused its attention on the same concerns flagged internally in 2019 and said risks still exist around timely cleanup of sites, collecting security and effective monitoring and inspections. 

It also said the regulator must do a better job of reporting data to the public about liabilities and how they are managed. Unlike in many oil-producing jurisdictions, Alberta does not currently have timelines for when wells need to be cleaned up — several U.S. states, for example, have specific timelines for when wells must be plugged and how long companies have to complete cleanup work, something advocates in Alberta have long called for.

‘They just take what they can and then leave’

Back on the Flesher property, Bill and Sylvia aren’t against oil and gas, even on their land. Bill worked in the industry back in the ’60s. They have good relationships with the contractors who visit their sites and with the community members who make a living in the industry. 

Some wells have already been reclaimed on their property and the Orphan Well Association continues to work on others. In some ways they’re lucky. 

But they want accountability from those who pulled wealth from the ground and then walked away, and they don’t think there’s enough being done to fix the mistakes of the past. 

Even though Bill and Sylvia aren’t against oil and gas activity, they’re frustrated with the way companies have been able to walk away from wells and saddle them with the mess. Photos: Jay Rosove / CTV

Hansen, the Flesher’s county neighbour, says she’s frustrated, particularly with how long the issue of orphaned and inactive wells has been a problem. 

“There needs to be way more strict programs in place to ensure this doesn’t keep happening,” she says, pointing to small companies, particularly those owned by overseas interests.

“They just take what they can and then leave, and we’re left with trying to help the government figure out how to handle a massive problem.”

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The Alberta government is under fire for a proposed pilot program that would give financial incentives to oil and gas companies to clean up old wells littered across the province.

The plan, championed by Premier Danielle Smith, has been attacked as a corporate giveaway for immensely profitable companies and a violation of the polluter pay principle. 

The Globe and Mail dubbed it “corporate welfare for the oil industry.” The Toronto Star reported the program “hits a nerve in Alberta.” Others mused that the “Danielle Smith handout might be a step too far for Albertans.” The controversy isn’t going away.

Smith first proposed the idea back in 2021, when she was lobbying the government. After she became premier, she announced she would move ahead with her idea. Backlash began to build.

On Wednesday, the premier released a statement pushing back on what she called “inaccurate claims” about the program, but it did little to shed more light on the program or to quell critics. 

Here’s what you need to know about Alberta’s latest plan, officially dubbed the Site Liability Incentive Program, to clean up its tens of thousands of old oil and gas wells.

How will Danielle Smith’s oil well cleanup program work?

The Alberta government says it wants to pursue a pilot program over three years that could offer $100 million in royalty credits to companies that clean up inactive, suspended or partially abandoned wells at least 20 years old and drilled prior to 1980. In industry parlance, an “abandoned” well is one that has been safely sealed and is not the same as an “orphan” well, which has been left behind by its rightful owner.

There are currently no timelines to ensure oil and gas companies clean up old wells as they’re legally required to do. The Alberta government is proposing a pilot program that incentivizes them to do their work by paying them for it. Photo: Amber Bracken / The Narwhal

How exactly those credits will be applied — and how much money companies will get in the form of credits — is yet to be determined. The proposed program is currently open for feedback, so the details aren’t finalized, but the government has started consultation and provided an outline of its plans.  But companies that clean up old wells would be eligible for breaks on the royalties they would have to pay on new wells drilled after the cleanup.

The government says it wants to know from consultations whether “royalty credits should be provided dollar-for-dollar for site closure costs.”

All work that would earn credits would need to be completed within the three years of the pilot. 

Companies are not eligible for the credits if they owe taxes to municipalities, First Nations or Métis settlements, owe money to the province or the Alberta Energy Regulator, or owe land rent payments to landowners. 

The government says companies must also be in compliance with the regulator’s liability framework — its guiding document on how to manage old energy infrastructure — but it’s unclear whether that applies across all of a company’s holdings or only relates to the individual sites in question. 

In order to receive the credits, companies must conduct an environmental site assessment, signed off on by a reclamation professional, on the land in order to prove the cleanup work was completed.

What is the Alberta government saying in defence of the subsidized oil well cleanup program?

The government wants input on whether the credits expire and, if so, how long they are valid. It also wants to hear whether stakeholders think the credits should be transferable, but does say a company could acquire inactive sites in order to clean them up and receive credits. 

Smith, responding to a barrage of criticism about the program (more on that later), released a statement on Feb. 22 saying the consultations will take several months. 

Oil and gas infrastructure is spread out across Alberta, much of it inactive. The Alberta government says it is seeking to reduce the impact on landscapes and the Albertans that depend on them. Photo: Amber Bracken for The Narwhal

She also said the amount companies would have to spend to earn credits would have to be above and beyond what they are currently required to spend each year, something the government initially said it would consult on.

“While final decisions have not been made, the total amount of royalty credits proposed to be used for the pilot program is likely to be up to $100 million over three years — after which time, the government would assess the effectiveness of the program and consult again before deciding how best to proceed,” she wrote. 

A spokesperson for Minister of Energy Peter Guthrie did not respond to specific questions about the proposed pilot, including compliance requirements. 

“The list of proposed details were accurate at the time of the engagements,” spokesperson Gabrielle Symbalisty wrote in an email to The Narwhal. “Feedback from those engagement sessions are being worked into the pilot plan proposal. That being said, the pilot is still under development and will need to go through the cabinet process after completion.”

Whose idea was it to subsidize Alberta’s oil well cleanup?

Back in 2021, Danielle Smith was working as a lobbyist — the president of the Alberta Enterprise Group, a business advocacy organization. 

At that time, she wrote a letter to then-energy minister Sonya Savage outlining a proposal she called “R-Star” — the basis for the current pilot program.

Smith first proposed the idea of paying oil and gas companies to do their own cleanup back in 2021, when she was lobbying the government. Photo: Jeff McIntosh / Canadian Press

In her pitch letter to Savage, Smith said the failures of the current system leads to the accumulation of orphaned sites, land left to sit without reclamation, as well as unpaid taxes and leases. 

“This has resulted in bad press and a lack of goodwill in rural Alberta, which is reducing support for the energy sector and impacting the government’s popularity,” she wrote. 

Critics keep saying the program could be a $20 billion handout. Where does this number come from?

It’s all over social media and at the top of a lot of talking point memos these days. 

That figure comes from Smith’s letter to Savage, where she said an analysis shows $20 billion in credits could, through a combination of new drilling and closure, generate 366,000 jobs and contribute more to royalties, taxes and GDP. 

It’s a big number that has been seized by the Opposition NDP for use to fan opposition to the plan. 

Aren’t companies already required to clean up their old wells?

It is a legal requirement for companies to clean up their wells. The basis of Alberta’s environmental rules and regulations is the polluter pay principle — a company that makes a mess is responsible for cleaning it up. 

Alberta’s Environmental Protection and Enhancement Act specifically recognizes “the responsibility of polluters to pay for the costs of their actions,” and approval of well licences in the provinces considers the ability of a company to pay for the lifecycle maintenance of a site through to closure and reclamation.

But there are no timelines, and sometimes companies go bankrupt, leaving behind wells with no owner. The regulator also does not collect enough money to cover cleanup costs if a company orphans a site. 

Orphaned oil and gas wells have no legal owner and can pose safety risks and concerns for landowners. Photo: Theresa Tayler / The Narwhal

There are, however, minimum amounts a company must spend each year on closure work. In 2023 it is $700 million industry-wide, and projected to be $764 million in 2024. Individual rates depend on the financial health of the company.

The regulator recently brought in a new liability framework intended to better assess the long-term financial health of companies prior to approving new licences.

It said in 2021 that the changes were necessary because “even during times of prosperity, the amount of closure work has often lagged behind” and it was “clear that how we manage liability has not slowed the growth of inactive sites.” 

It also recently wrapped up a five-year Inactive Well Compliance Program meant to ensure those wells are in line with regulations. A spokesperson for the regulator told The Narwhal that program resulted in 27,352 out of 30,834 non-compliant inactive wells being brought into compliance, meaning they are no longer breaching rules laid out to ensure the safety of wells left sitting, unused, on the landscape.  

The industry-funded Orphan Well Association should, in theory, have enough money to cover the costs for cleaning up wells left behind by bankrupt companies, but it does not.

How big is the oil well cleanup problem in Alberta?

In short, it is big. 

There are approximately 460,000 wells in the province, according to the Alberta government. Of those, there are currently 75,786 oil and gas wells sitting inactive — these are wells still owned by a solvent company but not producing oil or gas.

Data on inactive wells in the province on Feb. 22, 2023, shows 19,713 wells — 26 per cent of all inactive oil and gas wells — are non-compliant with regulations at this time.

There are over 7,000 orphan sites in the province — an inactive well without a solvent owner to pay for cleanup. Approximately 170,000 wells are abandoned — capped and put out of service — but which have not been reclaimed.  

Who’s paying for Alberta’s oil well cleanup now?

Officially, oil and gas companies are required to pay the full costs of cleaning up wells and the sites they are drilled on. But that has not always been the case.

Sometimes companies simply close their doors and desert the wells, leaving them as orphans.

“What we’ve learned, and what Albertans have learned, is that the cheapest way to get out of reclamation is going bankrupt,” Paul McLauchlin, president of the Rural Municipalities of Alberta, told the Canadian Press in January.

Orphan wells, once officially declared so by the regulator, fall under the purview of the Orphan Well Association. That association received $335 million in loans from the province between 2017 and 2020 in order to deal with a significant backlog. 

The federal government also loaned the association $200 million in 2020, following a previous injection of $30 million in 2017.

Even if a well never becomes an orphan, companies have also already received aid to clean up their wells and facilities. The federal government handed $1 billion to Alberta for cleanup grants in 2020: the bulk went to one municipality and just three companies, two of which were oil giants CNRL and Cenovus.

The regulator said it could not say whether that funding helped reduce the overall liability burden in the province because it did not have access to the government’s data. 

Estimates for the total cost of cleaning up Alberta’s oil and gas liabilities range from $58 billion to as high as $260 billion. 

Who stands to benefit from this program?

The government argues this is a win-win-win. Companies get financial incentive to clean up old sites and drill new ones. The government gets an infusion of cash from job creation and new royalties and taxes. Albertans finally get some of their land cleaned up. 

But it’s clear the beneficiaries will be oil and gas companies with a significant stockpile of old wells that need cleaning up. 

Despite facing financial difficulties in recent years, Alberta’s major oil and gas producers are now raking in huge profits. These companies may stand to benefit from Smith’s program. Photo: Amber Bracken / The Narwhal

Smith’s letter to Savage in 2021 was focused on the benefit of the program to junior oil and gas companies, smaller operations which are sometimes drowning in liabilities, but the majors will certainly benefit too. 

An analysis by Scotiabank as part of a research note available to subscribers, says it expects the biggest winner of the program would be CNRL, the largest oil producer in the country, followed by Cenovus and Paramount Resources.

But that doesn’t mean only major oil companies are set to benefit. Of the companies with the highest number of eligible wells in their inventory, the majority are junior companies, according to the analysis. 

Aren’t oil companies swimming in cash?

Smith’s pitch to Savage came at a time when the pandemic and a price crash were taking chunks out of the oil and gas industry and she warned the situation had “become dark for the junior oil and gas sector.”

That is not the story today. 

Companies have seen profits surge over the past year, hitting record highs for many companies. 

Alberta Premier Danielle Smith’s program could see Albertans paying companies to clean up oil and gas wells they’re legally responsible for, regardless of their profits. Cenovus, which operates facilities like these across the province, stands to benefit from Smith’s program. The company brought in $6.5 billion in net earnings last year. Photo: Cenovus

Of the top three companies Scotiabank says could benefit the most from this program, Cenovus raked in $6.5 billion, up from $587 million in 2021. Canadian Natural has not reported its year-end numbers, but gobbled up $2.8 billion in net revenue in the third quarter of the year alone. Paramount has also not reported its year-end results, but had a net income of $222 million in the third quarter. In 2021, it earned $237 million throughout the entire year.

What are critics saying?

The government has faced significant backlash for the proposal, and not just from environmentalists or the Opposition. 

Scotiabank’s research note, which included the analysis, said the program would benefit some producers, but has the potential to “generate negative sentiment toward the sector.” It said the program went against “the core capitalist principle that private companies should take full responsibility for the liabilities they willingly accept.”

Even Savage, now the minister of environment, rejected the plan when she was lobbied by Smith in 2021. She said the program did not align with the polluter pay principle or the province’s royalty regime, according to the Canadian Press.

She has avoided commenting on the government’s pilot proposal in recent days.   

Critics like University of Alberta economist Andrew Leach are concerned Smith’s program is a “wealth transfer” from Albertan taxpayers to industry. Photo: Amber Bracken / The Narwhal

Others, including the NDP, have raised concerns about whether Smith’s connections to companies through her previous lobbying could be influencing her decision to pursue what many see as a giveaway. The party has tried to connect the scheme to the fact Smith has not declared the donors to her leadership campaign in the spring. 

University of Alberta economist Andrew Leach, writing for CBC, called the program “a free lunch.”

“Or, more properly, a lunch paid for by Albertans,” he wrote. “It’s a wealth transfer to the oil and gas industry. Instead of ensuring the polluter pays, R-Star would have us paying the polluter.”

He also argued the program would provide the most reward when prices are high and the least when they are low, the opposite of what should happen to incentivize companies to clean up a mess spread across the province. 

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.

The regulator overseeing the energy industry in Alberta has kept the public in the dark for at least three years about a confidential list featuring hundreds of potentially dangerous sites contaminated by oil and gas development in the province, The Narwhal has learned.

Staff at the Alberta Energy Regulator flagged details about a 2019 version of the list in an internal briefing note prepared for a high-ranking official in the spring of 2020. They prepared the briefing document to highlight risks as the province and industry grappled with low oil prices and reduced demand in the early days of the global COVID-19 pandemic.

The Narwhal obtained a copy of the briefing document in response to a freedom of information request. The full details of the list have not been released.

“The [regulator] is tracking the status of several hundred contaminated sites,” the briefing note, prepared for Martin Foy, executive vice president of the regulator’s operations division, said. “Many of these sites pose some risk to public safety and/or the environment.”

The regulator was aware of at least 577 sites with known contamination of soil or groundwater in 2019 — before the pandemic started — and “as many of 400 of those were potentially high risk,” according to the April 30, 2020, briefing note.

At the time officials sent the document to Foy, the provincial government was also grappling with a review of rules meant to tackle the legacy of decades of oil and gas development in Alberta and ensure taxpayers are not left with a multibillion-dollar cleanup bill.

While some of the sites could have been contaminated due to a spill during active operations of an oil and gas well or other fossil fuel infrastructure such as a pipeline, staff at the regulator said other abandoned or inactive sites may also have been contaminated due to leaks or spills that were not initially discovered, according to other internal documents reviewed by The Narwhal.

There are nearly half a million oil and gas well sites in Alberta, covering an estimated 400,000 hectares — an area approximately five times the size of Calgary. Though the province has legislation requiring them to be cleaned up, some face contamination issues that have not been addressed. Photo: Amber Bracken / The Narwhal

A separate internal Alberta Energy Regulator draft analysis from September 2019 noted oil and gas companies have walked away from more than 600 wells with potential contamination that are within 10 kilometres of either Calgary, Edmonton or Red Deer. Prior to 2003, the government issued reclamation certificates in Alberta without requiring any assessment for contamination, the analysis said.

A Petro-Canada gas station polluted their land decades ago — they’re still fighting to get it cleaned up

That analysis — sent to officials at different provincial government ministries and released through freedom of information legislation — noted the companies responsible for these 600 legacy sites are no longer active. Although an industry-funded association collects money from companies to cover the cleanup at sites left behind by firms that went bankrupt, there are at least seven sites with known contamination that are not covered by this arrangement. 

This may leave taxpayers responsible for footing the bill on those seven sites — or on any other contaminated site that was certified as reclaimed before 2003.

No public list of ‘high risk’ Alberta oil and gas sites

According to the Alberta government, there are nearly half a million oil and gas wells across the province. Of those, the Alberta Energy Regulator — the industry-funded body in charge of regulating the province’s energy industry — reports more than 83,000 are inactive and more than 87,000 are abandoned.

Wells deemed “inactive” no longer produce oil or gas but may do so again in the future, while “abandonment” is the industry term for permanently sealing or plugging a well. An abandoned well can still pose risks to the public, and soil contamination may not be dealt with until later stages in the cleanup process, which can take years. 

Contaminated sites may cause health issues, including cancer, particularly if hydrocarbons get into the water supply. All types of oil and gas sites can potentially cause contamination if they are not monitored properly and Alberta has developed rules companies must follow when they suspend operations. 

When contamination occurs on an oil and gas site, a company is required to notify affected members of the public. Some old oil and gas sites in Alberta may have lingering contamination as they were certified as reclaimed before assessments for contamination were required. Photo: Amber Bracken / The Narwhal

By law, companies must notify anyone who may be “directly affected” by the release of anything that may cause an “adverse effect.”

Though the regulator and government track information on contamination on individual well sites, it’s not easy for the public to find or understand it: doing so would would mean searching through various pages on the regulator’s website or other provincial government pages to download files and creating a spreadsheets to verify the status of sites or their locations.

And though the regulator compiled an internal list of sites that may pose a risk to public safety, it hasn’t publicly released this list of “potentially high risk” sites.

Landowner frustrated with Alberta Energy Regulator’s lack of transparency

Dwight Popowich owns land near Two Hills, Alta., with an old natural gas well that was orphaned in 2018 when its owner declared bankruptcy. He told The Narwhal in an interview he was not surprised to hear the regulator withheld its analysis of the extent of industrial contamination.

Popowich said he has been pressing the regulator for years to provide more support and information, but has found it hard to get any specifics.

He believes both provincial government and regulatory officials in Alberta want to hide details that give the oil and gas industry a bad name.

“They’ve always been quiet about this,” Popowich said in an interview after The Narwhal told him about the statistics revealed in the briefing note. “They don’t want that kind of information out there and having a bad name about how dangerous this stuff is.”

Alberta Energy Regulator claimed revealing statistics would harm decision-making

The regulator went to significant lengths to conceal key parts of its internal analysis and statistics, heavily redacting the documents in response to freedom of information requests submitted in 2020.

By law, public bodies in Alberta such as the regulator must release information upon request to anyone who pays a $25 fee, unless it has a valid reason to refuse.

But the regulator claimed its statistics and analysis were part of “confidential” advice needed to make decisions about the future of aging fossil fuel sites. It also argued releasing its statistics on the number of contaminated sites it was tracking would complicate its efforts to make decisions about the issue.

Imperial Oil ‘repeatedly failed’ to tell landowners about contamination: Saskatchewan government

The Office of the Information and Privacy Commissioner — a provincial freedom of information watchdog — rejected those arguments after investigating the regulator’s attempts to censor the material. In a letter sent to The Narwhal, the information watchdog concluded the regulator’s arguments were lacking details explaining how the passages would reveal advice and that it “did not properly exercise its discretion to withhold all the information.”

In response to a list of detailed questions from The Narwhal, a spokesperson for the Alberta Energy Regulator said in an email the regulator is “active across the province” to ensure an oil and gas company “fixes the problem” if its sites are violating rules. The regulator also said it posts data and statistics about oil and gas wells on its website.

In response to a question about the potential for unknown contamination at old oil and gas sites that received reclamation certificates without being assessed for contamination, the spokesperson said the provincial auditor general has reviewed this issue and determined the Alberta Environment Ministry needs to develop clear guidance for the regulator on how to manage these sites and who should pay for the cleanup of old sites not otherwise looked after.

The Alberta Energy Regulator sought to keep its list of “potentially high risk” oil and gas sites confidential but was required to release documents referencing the list by the Office of the Information and Privacy Commissioner of Alberta. Photo: Amber Bracken / The Narwhal

The spokesperson did not answer questions about the location of the 577 sites where the regulator knows there is contamination and whether they were located near homes or human activity. The regulator also did not respond to questions asking what it did to notify landowners or members of the public who may be directly or indirectly affected by contaminated sites on the list by publication time.

In response to a question about what would constitute “potentially high risk” sites, the regulator pointed to a document on its website about “contamination management,” which outlines how immediate action must be taken by a site operator if there is potential for “adverse effects” of contamination.

The offices of Minister of Environment and Protected Areas Sonya Savage and Minister of Energy Pete Guthrie did not respond to a list of questions sent by The Narwhal about the revelations in the newly released documents. 

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.

The noisy patch of land just off the Queen Elizabeth II Highway in Airdrie, Alta., is a long way from the coffee fields of Uganda where Zubeda Jessa grew up. Every morning, she unlocks the front door of her liquor store to the constant stream of traffic on this busy stretch, 20 kilometres north of Calgary. She settles into her well-worn chair behind the counter, a Petro-Canada gas station visible through the barred side windows. 

It’s been the same routine for Zubeda almost every morning for the past 30 years, but it wasn’t supposed to be this way. 

When her late husband, Firoz, bought the patch of land in the early ‘90s, it was part of a larger vision. He had already bought the motel next door in 1987 and would later add an apartment block to the holdings. He wanted to cobble together properties where his wife and children could gather, work and play. He wanted, Zubeda says, a secure future for his family. 

That vision all but collapsed when contractors started digging out dirt and rock in 1994 to build the liquor store and found soil infused with gasoline, spilled from the Petro-Canada and an old Gulf gas station tank years before. The contamination, it would turn out, had spread past the would-be store and also contaminated the land under their motel. 

Soil soaked with oil products — which can be harmful to human health — is not unusual in Alberta, particularly from leaking underground oil and gas tanks. Although it is difficult to get any information on just how widespread the problem is, municipalities across the province list gas stations as by far their number one issue when dealing with old industrial sites that could have contamination.  

The act that governs contaminated sites in Alberta includes the principle of polluter pays, meaning the person or business responsible for the contamination should cover the expense of cleaning it up — but that principle is complicated in practice. 

Thirty years after it was excavated, Suncor, the current owner of Petro-Canada, has partially cleaned up the site and continues to monitor the contamination, but the Jessa family, which includes four adult children, is still trying to get the company to compensate them or to finish cleaning up. Until then, they say, they are stuck with land that is all but worthless. Zubeda says she has seen almost nothing of the world beyond her home, her work and the roads in between as a result. 

“I am 74, I have to get retirement,” Zubeda says from behind the counter of the Horseman Liquor Store one November morning. “I’m tired of working, 46 years I’m working with the three jobs, growing kids and working in the house, working in a business — 14 hours a day I was working.”

Fumes from contamination made people ‘dizzy’: report

Zubeda grew up in Uganda, but married her husband, Firoz, in Tanzania. They moved to Canada in 1971, following the advice of the Aga Khan to settle in new lands amidst turmoil in East Africa. They found their new home in Calgary, but eventually Firoz realized the potential in what was then a small town north of the big city. 

Airdrie was growing, the ‘88 Olympics were just around the corner and every time Firoz drove out to look at the Horseman Motel, the parking lot was full. Despite his wife’s skepticism, they scraped money together and bought the property — what Firoz called his “five-star motel” — and watched as it thrived. 

The parking lot stayed full for a time. Too full. And the family started using the vacant parcel of land next door for additional spots. 

Zubeda Jessa and her family have spent decades trying to navigate their way through a complicated process to clean up their land, long ago contaminated by a neighbouring gas station. The gas station is now owned by Suncor. Photo: Karl Lee / The Narwhal

Zubeda remembers it as a time of laughter. 

“​​He was excited,” she says of her husband. “And we were so excited that we bought this motel.”

One night a few years later, a fence went up around the vacant property that served as overflow parking and the family soon made an offer for the land, which was owned by Petro-Canada. They needed the parking spaces and soon envisioned a liquor store and bottle depot on the property as the province moved to privatize alcohol sales in the early ’90s. 

It wasn’t long after, as crews got to work digging to lay the new foundation for the liquor store, that the stench of oil came up through the ground. 

Provincial environmental regulations prevented the Jessas from building in that soil and they faced a tough decision. Firoz and his wife didn’t know what to do. Their English wasn’t strong and they knew nothing about contaminated earth. They listened to those who offered advice and they set about cleaning up their land. Nobody told them the polluter should foot the bill.

A consultant’s report from that work in 1994 says the stench from the contamination “was so strong that all the people standing a short distance away from the excavation could not tolerate it and got dizzy.”

Exposure to petroleum hydrocarbons and chemicals including benzene, toluene and xylenes can have serious health consequences — including cancer and neurological impacts — at high concentrations. That exposure can take place through consumption of contaminated water or inhalation. In the Jessas’ case, there has been no documented link between the contaminated soil and health impacts, but that hasn’t quelled their concerns.

The family hauled out what Zubeda says was 89 double-dump-truck loads of contaminated soil from the site — 2,470 tons, according to the consultant’s report. They laid a barrier in the ground and then another 89 double-dump-trucks hauled in clean dirt to fill the hole. They paid for all of it. 

The Jessas paid for an excavation of contaminated soil from their property in 1994. As part of the process, a consultant took photos of the process, which show oil-contaminated soil at the Horseman Liquor Store site. Image: 1994 report from Global Engineering and Testing Ltd.

“We were living in a house in Calgary … so we had to sell that house,” Zubeda says. “We sold that house without making profit, for whatever we could get, so we can finish this.” 

The family moved into the motel.

A plan in the early 1990s to convert the Horseman into either an Econolodge or Days Inn franchise faltered when the chains wanted an assessment and found the property was contaminated with the same plume that lurked under the store, Zubeda says. The family lost a lot of money making plans that were worthless, she adds. 

Now their motel, advertising rooms for $59, mostly caters to monthly renters. The satellite dishes still perched on its roof are missing panels and the sign beckoning travellers along the highway has already gone from outdated to retro chic. 

The family can’t get financing to fix up their properties. Suncor, they say, won’t buy them out and nobody else would offer money for the contaminated land. They fear the Calgary-based energy giant is just trying to wait them out. 

They’re tired of waiting.

Cleanup at Airdrie site remains stalled 

The family’s lawsuit against Petro-Canada, first launched in 1995, was put on hold as the two sides entered a standstill agreement and negotiations dragged on. Petro-Canada was founded as a federal Crown corporation in 1975, opening to gradual privatization in the early 1990s. At the time of the Jessas’ lawsuit it remained a fraction federally owned. Suncor purchased Petro-Canada in a multibillion dollar deal announced in March 2009.

In August 2021, the family served notice that it would terminate the standstill agreement and restart the proceedings if Suncor didn’t negotiate. Their lawyer says discussions are ongoing.

Suncor declined an interview for this story, but sent a written statement that says it takes its environmental obligations seriously. 

“We have conducted remediation activities at the site in consultation with the Jessas and Alberta Environment and continue to responsibly manage our environmental obligations at this site,” Mita Adesanya, a Suncor spokesperson, wrote in an email.

“We are currently working with Alberta Environment on the 2022 plan for remediation.”

That marks a departure from a 1995 statement of defence and then an amended statement of defence and counterclaim filed by Petro-Canada in 1999 as part of the Jessa suit. In that statement, it denied any contamination flowed from its gas station, and denied knowing about contamination on the parcel that it acquired in 1986 that was previously home to an old Gulf gas station.

Petro-Canada argued on the basis of caveat emptor — buyer beware — when it came to the contamination and said the Jessas bought the land while agreeing to be responsible for any environmental contamination and cleanup. It argued the Jessas were equally negligent for not doing a proper investigation prior to purchase and development. 

The company said the lands were “suitable for use as a parking lot, the purpose intended by the plaintiff at the time the plaintiff purchased the lands.”

In its counterclaim, Petro-Canada asked the court for a declaration absolving it of any liability and requesting that the family pay for its legal costs.

The standstill agreement followed and in the 25 years since, steps have been taken to clean up the site. 

An aerial shot shows the gas station and the motel and liquor store in the background. While the land under the Jessas’ liquor store was contaminated by a leaking underground storage tank at the gas station, there are no records of contamination at nearby residential properties. Contaminated soil can result in exposure to petroleum hydrocarbons and chemicals including benzene, toluene and xylenes. Photo: Karl Lee / The Narwhal

According to a report from an environmental company working for Suncor, the company conducted its own excavation of contaminated soil in 2010 — one year after it bought out Petro-Canada — when it removed 2,736 tons from the properties. It also injected oxygen into the earth to help speed along the cleanup.

Conditions at the site appeared to improve from that work, according to assessment reports. But even the latest report, prepared for Suncor by environmental monitoring company Parsons in May 2020, showed levels of petroleum hydrocarbons in one groundwater monitoring well north of the motel that exceeded provincial residential guidelines.

A 2006 analysis of site conditions, conducted by an environmental consultant for Petro-Canada, also showed levels of benzene — a known carcinogen found in petrochemicals — and other petroleum hydrocarbons exceeded soil guidelines at that time. Groundwater was infused with benzene, toluene and ethylbenzene above guidelines, the analysis found, though levels of these toxins have since declined.

Suncor did not respond to follow-up questions regarding the specifics of the remediation plans for 2022 or regarding its position on the Petro-Canada statement of defence. For the past few years, the plans have only included monitoring and sampling. 

The saga of the Horseman Motel and Liquor Store is not an isolated incident. 

Gas stations part of a larger problem of leaking Alberta oil and gas sites

The impact of contaminated land on families and urban communities is not as well known in Alberta as that of orphaned oil and gas wells. 

But every once in a while a case bubbles up into the public consciousness: the Gas Plus spill in Calgary’s Bowness neighbourhood that leached 9,000 litres — enough to fuel almost 200 Honda Civics — into surrounding residential soil in 2010 and sat in limbo for years before the province took over cleanup; the decades of contamination from the Lynnwood Ridge refinery that wiped a whole neighbourhood from the map in southeast Calgary in 2001. 

Suncor is currently dealing with a historic leak in northwest Calgary that has spread under the wealthy community of Houndsfield Heights-Briar Hill. Unlike the Jessas’ contamination, that leak is the subject of an environmental protection order issued by the province and requires regular updates and communication with the affected community. 

Leaking underground tanks from gas stations are a problem across Alberta — affecting everything from property values to water to agriculture and human health —  but the extent of it is difficult to quantify. 

$100 million in federal funding for cleanup of Alberta oil and gas wells went to sites licensed to CNRL

Alberta, like most places, distinguishes between brownfields — old commercial sites that could have contamination — and contaminated sites, where there are known issues. But there is no central repository of data about either, including leaking gas station tanks. 

The Alberta Urban Municipalities Association, which changed its name in November to Alberta Municipalities, says there were 1,700 brownfield sites in Alberta, according to its latest estimate based on member community responses to a survey from 10 years ago. Some of those will be contaminated, some will not. 

The majority of the sites impacting its member communities are gas stations. In a 2014 survey about brownfields and which types communities were grappling with, just over 25 per cent were gas stations, by far the largest category. 

The next three categories also dealt with petroleum products: chemical and petroleum warehouses or storage; automotive repair shops and dealers; or establishments selling oil, gas or chemicals.

Alberta’s Ministry of Environment and Parks, which regulates the  cleanup of former industrial lands and contaminated lands, did not acknowledge The Narwhal’s requests for information. Ministry spokesperson Tom McMillan stopped responding to both repeated emails and phone calls from The Narwhal after an initial response to clarify what information was being asked for. 

The Alberta Energy Regulator, which oversees contamination from oil and gas exploration, lists reported incidents, including leaks, going back to 1975. There are almost 40,000 incidents of varying severity listed, though this does not include contamination stemming from gas stations. 

“The cost is the number one challenge, often these are on sites where the land value is less than the cost to remediate.”

Angela Duncan, interim president of Alberta Municipalities

The only public source of provincial information regarding contamination and inspections of former industrial sites — including those overseen by the regulator — requires input of individual locations to obtain contamination data. There is no easy way to track, identify or highlight problem sites because of the way the government has organized the data on that site. (A freedom of information request for the data resulted in being pointed back to the website.)

A national register of contaminated sites overseen by the federal government lists 1,137 sites in Alberta, but that number includes sites suspected to have contamination and those that have already undergone remediation.

But there are bits of information to point to the scale of the issue. 

The province announced two programs to deal with underground gas station tanks, one in 2000 and a second in 2006. According to a presentation by the government in 2007, 1,091 applicants received funding under that program to remove tanks and potentially deal with contamination. 

In 2007, 717 sites from that program had undergone some form of remediation and a further 245 were approved for additional funding.

The Jessas undertook their remediation long before the programs started.

Alberta Environment and Parks did not respond to repeated requests for confirmation on these numbers or to provide an update on the current inventory of contaminated sites.

Environment Minister Jason Nixon’s office did not respond to several emails and a phone call from The Narwhal asking for comment.

Suncor did not say how many other properties, contaminated by old gas stations, were on its books. 

‘Not a lot of tools in the toolbox’ to deal with contaminated Alberta sites: official

Angela Duncan, the interim president of Alberta Municipalities and the deputy mayor of the small community of Alberta Beach, says brownfields can have a big impact, particularly on small communities. The organization has been trying to get the province to take the problem seriously since 2000.

“The cost is the number one challenge, often these are on sites where the land value is less than the cost to remediate,” she says. 

“The second is that these are often privately owned sites — not all of the time, but more often than not they’re privately owned — and there’s not a lot of tools in the toolbox to force redevelopment.”

Essentially, the only thing a municipality can do is offer tax incentives to landowners in the hopes they’ll clean up and redevelop the land, but the province has so far failed to offer its share of the property tax pie to help. 

Alberta Municipalities wants the province to help fund environmental assessments of brownfields to see if they’re contaminated, remove red-tape barriers for local governments and the private sector to find solutions, develop policies that will deal with old reclamation certificates issued before more stringent environmental rules were in place and match local tax incentives. 

All of those requests were part of a motion that recently passed at the annual Alberta Municipalities convention in mid-November. It was put forward by the town of Calmar, which is struggling under the burden of multiple legacy well sites and potentially contaminated land that it cannot develop. 

The entrance to the Horseman Motel in Airdrie, which sits on land contaminated by an old gas station. The cost to clean up contaminated soil can be prohibitive for landowners dealing with the problem, and, as in the Jessas’ case, getting the polluter to pay can be a decades-long process. Photo: Karl Lee / The Narwhal

“So, for example, one oil site you’re looking at $25,000 to $50,000 per site,” Duncan says of the costs for an environmental assessment. “And that’s kind of a starting point. I’ve heard of some of these costing up to six figures.” 

Irina Sabau is the managing director of Environmental Diagnostics, which conducts site assessments and remediation in urban areas. She says it was the issue of underground storage tanks that really got businesses like hers going. 

“In the ’90s and 2000s, the Safety Codes Council had a grant out for people that had underground storage tanks to remove it and clean it up,” she says, referring to the independent regulator that oversees safety codes, inspections and permits in the province. “In Alberta, that’s how this environmental assessment industry started moving ahead.”

“It went, of course, hand-in-hand with the fact that the lenders were starting to see the environmental liability around and they started asking for environmental assessments as well.”

Sabau estimates 50 per cent of the work Environmental Diagnostics does is tied to storage tanks. She says depending on the complexity of the contamination on any given site, cleanup can be relatively simple or practically impossible. It can be over quickly or stretch into decades. 

“It can get to a point where risk management is your only solution, but it is an accepted approach under the current guidelines,” Sabau adds.

She would like to see the province step in to provide more support for those struggling with contamination on their properties. 

“I think [the government] should work with owners of contaminated sites a little bit more because they definitely have the tools,” Sabau says. “The one-time owner of a gas station, or a one-time owner that inherited a contaminated property, doesn’t have the tools.”

Cost of dealing with mess more than a million dollars: family 

The Jessa family says the money that comes from monthly rent at the motel, the liquor store and the apartment building goes mostly to operating costs. They’ve taken out a $3 million loan to help pay for the lawsuit and to keep their businesses going. They say they are stressed and treading water and accuse Suncor of stalling over compensation or remediation plans. 

To date, the ordeal has cost them $1.5 million, according to the family. They say they have been let down. 

Answers are few, and the City of Airdrie, citing the ongoing legal dispute, would not answer basic questions, including whether records for the site were destroyed in a fire several decades ago. 

Firoz, who the Jessa family describes as an eternal optimist, died of lung cancer six years ago, struggling with the burden of land he once thought would bring security to his family.

“He was tired,” Zubeda says. “Later on, he was saying that he wanted it to be gone.”

That’s what she wants as well, but she’s not willing to lose everything in the process. 

“We told them, if you buy us out, that’s okay,” Zubeda says from her perch at the liquor store. “They say we’re not going to buy out. We buy out for $0. Okay, thank you. We will fight until we can’t.”

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Hundreds of millions of dollars in federal funding allocated to clean up oil and gas well sites in Alberta has gone toward cleaning up sites owned by some of Canada’s largest oil and gas companies, data shows.

In the early days of the COVID-19 pandemic, Prime Minister Justin Trudeau announced $1.7 billion in federal funding to help with the sealing and cleaning up of orphan and inactive oil and gas wells across B.C. and the Prairies — on the heels of intense industry lobbying efforts.

“Our goal is to create immediate jobs in these provinces while helping companies avoid bankruptcy and supporting our environmental targets,” Trudeau said.

Alberta received the bulk of the funding, to the tune of $1 billion. The province began rolling out those funds last year — through an initiative it dubbed the Site Rehabilitation Program — to contractors with plans to clean up oil and gas sites licensed to companies that had ostensibly been struggling to pay to clean them up themselves.

But an analysis of publicly available data for two granting periods — which together allocated more than $400 million in federal funds — shows the lion’s share of Alberta’s federal funding in those periods was used to clean up sites owned by some of the country’s largest oil and gas companies.

Half of the more than $400 million went to sites held by eight companies — including Canadian Natural Resources Limited (CNRL), Cenovus, Husky Oil Operations Limited, Imperial Oil Resources Limited and Torxen (which acquired $1.3 billion in assets from Cenovus in 2017 and is headed by a former Cenovus executive). The remaining half was divided between sites held by 275 other companies.

Contracts for work on sites held by CNRL, a company that has reported an average of $1.9 billion in annual net profits over the last 10 years, were allocated more than $102 million in funding in the two grant periods. Like many in the industry, the company struggled in 2020, reporting a net loss of $435 million, though these were less than the losses it faced during the 2015 oil price crash. Despite its losses in 2020, the company’s shareholder dividends were increased by 11 per cent in March, which the company boasted marked the “21st consecutive year of dividend increases.”

“This funding definitely violates the polluter pays principle,” Julia Levin, climate and energy program manager with Environmental Defence, told The Narwhal. “It allows an industry that has profited from taking billions of dollars out of the ground in the form of oil to walk away from their environmental responsibilities.”

When companies walk away from environmental responsibilities, the impacts are felt by farmers and landowners, said Morrigan Simpson-Marran, an analyst with the Pembina Institute.

“When a company goes under, when a well sits inactive for a long time, when assets are orphaned — it’s ultimately the landowner who always feels those impacts first,” she said.

The COVID-19 pandemic meant landowners were at greater risk of facing more neglected oil and gas infrastructure, as oil prices plummeted and cleanup of inactive sites became less of a priority, or a possibility, for cash-strapped companies.

“This funding has enabled an increase to the amount of closure work in western Canada and has provided support to the oilfield service sector at a time of economic challenge,” Jay Averill, a spokesperson for the Canadian Association of Petroleum Producers (CAPP), said in emailed responses to questions from The Narwhal.

Simpson-Marran said she understands the need for this program but “it’s really important that it doesn’t become a precedent for the polluter pays principle not being upheld.”

Data shows that oil and gas sites owned by large, profitable companies are receiving the lion’s share of federal funding announced at the outset of the COVID-19 pandemic. Chart: Carol Linnitt / The Narwhal

Partial funding seen by some as an incentive to pay for cleanup

There are approximately 330,500 wells across the province, according to the Alberta government. More than half of those wells are inactive or permanently sealed but not cleaned up. (These figures do not include the more than 7,000 orphaned sites in the province that have been left behind by financially insolvent companies.)

According to the Alberta Energy’s Regulator’s most recent figures, liabilities in the province — the cost to safely seal and cleanup wells — are pegged at more than $30 billion, though the regulator has internally estimated the actual cost is much, much higher.

CNRL holds a substantial share of those liabilities, according to data available through the Alberta Energy Regulator’s information portal. The company holds licences for 38,000 wells that are no longer in use but not yet cleaned up — a fraction of its large liabilities around the world.

In its most recent filings to the U.S. Securities and Exchange Commission, CNRL notes the cost of decommissioning, permanently sealing and cleaning up its existing developments globally is pegged at more than $19 billion. (CNRL did not respond to The Narwhal’s request for an interview.)

The other large companies whose sites were the major recipients of federal funding are also sitting on huge liabilities.

The situation is similar in B.C., where data obtained by The Tyee showed that of the first $50 million allocated to cleaning up well sites, $12.4 million — roughly a quarter — was earmarked for sites licensed to CNRL. ($120 million of the $1.7 billion in federal funding went to B.C.)

In the early days of the COVID-19 pandemic, Prime Minister Justin Trudeau announced $1.7 billion in federal funding to fund the sealing and cleaning up of orphan and inactive oil and gas wells across B.C. and the Prairies. Photo: Garth Lenz / The Narwhal

Data from earlier funding periods was not available in Alberta. “Information is confidential to the licensees and their service providers,” a spokesperson for the office of the Minister of Energy said by email. “Providing this information could harm the competitive positions of service companies and their customers in negotiating contracts with licensees.”

Federal funds were distributed not to energy companies themselves, but instead paid directly to the contractors those companies would normally pay to do the cleanup work on their sites. In some funding periods, the government covered the full cost of the contractor to do the cleanup work; in other periods the government paid half and asked the company to pay the remainder.

Bruce Ralston, B.C.’s Minister of Energy, Mines and Low Carbon Innovation, told The Tyee the split-funding approach, also used in B.C., creates incentives for companies to spend their own money on cleanup.

In emailed responses to questions from The Narwhal, CAPP’s Averill said the program “provided an incentive for companies to accelerate their own spending on decommissioning and reclaiming wells and associated infrastructure.”

“The Canadian government’s reclamation program helped put people in B.C., Alberta and Saskatchewan back to work when these provinces needed it most through 2020,” he added.

Levin worries large oil companies “simply put their own programs on hold” and have “replaced their own spending with federal funding.” 

Regulatory changes are needed to help hold companies accountable for their liabilities, the Pembina Institute’s Simpson-Marran said. 

“There shouldn’t need to be incentives for companies to clean up their mess.”

Critics call for updates to rules for Alberta oil and gas well cleanups

As part of its initial funding announcement, the federal government said Alberta “has committed to implement strengthened regulation to significantly reduce the future prospect of new orphan wells. This will create a sustainably funded system that ensures companies are bearing the costs of their environmental responsibilities.” (The Department of Finance did not respond to The Narwhal’s questions by publication time.)

Critics have long warned that insufficient regulations enable companies to acquire the rights to drill a well in Alberta without adequate assurance that they will ever be able to clean it up. 

Full securities, or bonds, are not required for the cleanup of wells drilled in Alberta, nor are there any legislated timelines on when wells need to be safely sealed or cleaned up once they are no longer producing, with some sitting on the landscape for decades.

According to the regulator, $216 million in deposits are currently held against $30 billion in estimated liabilities — less than one per cent. The regulator has said well liabilities could be more than three times the official estimate in an internally used “worst-case scenario.”

A flooded and inaccessible well site near Wainwright, Alta. Once a well site is no longer in use, it must be safely sealed and reclaimed, a process that can take years to complete. Photo: Amber Bracken / The Narwhal

Last July, the Alberta government released what it called “clear rules” to “advance cleanup of oil and gas wells,” saying in a press release that it was taking “long overdue action” that would “shrink the inventory of inactive and orphaned wells across the province.” (A spokesperson for the premier’s office did not respond to questions from The Narwhal.)

The new rules included plans for requirements on the amounts companies must spend on reclamation efforts annually.

The press release said the plan “upholds the polluter-pay principle, ensuring that industry is responsible for cleanup costs.”

Averil, the spokesperson with CAPP, said by email that the organization is supportive of inventory reduction targets, adding that “reducing environmental liabilities is a priority for the oil and natural gas industry and this initiative allows important work to accelerate, helping businesses survive and be part of the economic recovery.”

Alberta’s plan does not include deadlines for when a site needs to be cleaned up, and does not require full upfront deposits for the cost of safely sealing the well and reclaiming the site.

“At the end of the day, if we really want to cut this issue off at the knees, what we need is timelines for every stage of the well life, full security and transparency of data,” Simpson-Marran told The Narwhal.

Long time to see results of oil and gas well cleanup in Alberta

Levin with Environment Defence told The Narwhal she worries evidence has not yet surfaced to indicate Alberta’s Site Rehabilitation Program has been a success. The federal funding, she said, was announced “under the guise of environmental stewardship and job creation. We’re just not seeing those things happen.”

According to data provided to The Narwhal by a spokesperson for the Alberta Energy Regulator, the number of applications for reclamation certificates — the final seal of approval on the cleaning up and restoration of an old well site — dropped slightly in 2020 compared to 2019.

Meanwhile, there was nearly a nine per cent increase in the number of wells safely plugged and sealed (known in confusing industry parlance as “abandoned”) in 2020 compared to 2019.

Abandonment involves ensuring there are no issues with leaks, and that the well — often hundreds if not thousands of metres deep — is cut off and safely plugged and capped below the surface.

Reclamation is a lengthier process, particularly for sites with contamination issues. According to the regulator’s website, “the reclamation process can take many years or even decades, depending on how the land functioned before it was disturbed — for example, whether it was forested land, native grassland, peatland, or farm land — and the amount of soil disturbance.”

Journalist Sharon J. Riley visiting an orphan well near Taber, Alta. Alberta’s industry-funded Orphan Well Association, which is responsible for cleaning up sites with no owner, also received a portion the $1.7 billion in federal funds, in the form of a loan. Photo: Theresa Tayler / The Narwhal

Alberta landowners may ‘bear the brunt’ of oil and gas well issues

As contractors slowly take on the work of sealing and reclaiming old oil and gas sites, landowners have the opportunity to “nominate” sites for cleanup through the Site Rehabilitation Program. 

Landowners have long dealt with contamination issues, leaks, weeds, soil compaction and other impacts of having inactive wells languishing on the landscape. 

“Wells that are on the brink of becoming orphans or sitting as inactive” pose the greatest threat to landowners, Simpson-Marran said.

Large companies have long had little incentive to clean up wells sitting as inactive, other than the annual rent and taxes owed on the land (much of which has long gone unpaid). That’s left landowners dealing with tens of thousands of wells across Alberta. 

Regulations to ensure large companies clean up wells in a timely manner are a good step, Simpson-Marran said, and federal dollars could be best spent ensuring wells held by smaller companies don’t end up as orphans, languishing on the landscape for decades.

“We don’t want landowners to bear the brunt of the inactive and orphan well issue,”  Simpson-Marran said. “These dollars would do the most good going to clean up assets of companies who aren’t financially stable.”

“Landowners feel this first. They suffer through it. They bear a lot of the unseen costs. And if our policies aren’t prioritizing their rights needs and trying to foresee these issues, we need to handle that,” she said.

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.

Despite repeated promises to phase out fossil fuel subsidies, Canada’s federal government dedicated $18 billion in 2020 to assist the country’s oil and gas sector, according to a new report that outlines additional support for the industry since the COVID-19 pandemic was declared last March.  

“We’re seeing this pattern of oil and gas companies using the pandemic as an excuse to lobby for more subsidies and more public financing, and the government saying ‘yes’ and pretending to be committed to a green recovery,” said Julia Levin, climate and energy program manager for the non-profit group Environmental Defence, which published the report on Thursday.

“There’s a real hypocrisy this year that has been made clearer than ever,” Levin told The Narwhal. “We need to be starting the wind-down of the oil and gas sector in order to ensure that we have a liveable planet — and these subsidies do the exact opposite.”

Included in the $18 billion are $3.28 billion in direct spending and $13.6 billion in public financing for oil and gas companies that primarily comes from the opaque crown corporation Export Development Canada, according to the report, Paying Polluters: Federal Financial Support to Oil and Gas in 2020.

The report found that federal government agencies have played a key role in financing the construction of pipelines that have large carbon footprints, violate Indigenous Rights and put ecosystems at risk during a global biodiversity crisis. 

In 2020, Export Development Canada provided up to $5.25 billion in financing renewals for the Trans Mountain pipeline expansion, a publicly owned project that will cost at least $12.6 billion and comes with a hefty carbon footprint.

It also approved a loan of up to $500 million for TC Energy, the owner of the Coastal GasLink pipeline that will supply fracked gas from northern B.C. to the LNG Canada project, one of Canada’s largest single sources of carbon pollution — on par with Teck’s mothballed Frontier oilsands mine in terms of its greenhouse gas emissions.

According to the report, Export Development Canada provides an average of almost $14 billion a year to support domestic and international oil and gas companies.

Subsidies listed in the report include more than $13 million the RCMP spent to police the Coastal GasLink pipeline conflict in northern B.C. between January 2019 and March 2020. 

On-going construction of the pipeline, which is opposed by hereditary chiefs from all five clans of the Wet’suwet’en Nation, prompted the UN Committee on the Elimination of Racial Discrimination to ask the federal government to suspend the project until the free, prior and informed consent of Indigenous people is obtained. 

Canada lags behind other countries in phasing out fossil fuel subsidies

The federal government first announced a commitment to phase out fossil fuel subsidies in 2009. More than one decade later, Canada provides more public finance for fossil fuels on a per capita basis than any other G20 country except for China. 

Canada’s lack of action on fossil fuel subsidies comes as other countries follow through on promises to slash subsidies and high-profile investors, such as Sweden’s central bank and Norway’s sovereign wealth fund, divest from oil sands projects. 

On April 12, the New York State Pension Fund — the third largest such fund in the U.S. — announced it had divested $7 million from six oil sands corporations, including Imperial Oil, Canadian Natural Resources, Husky Energy, and Cenovus Energy, saying the companies have not shown they are prepared for a transition to a low carbon future. 

U.S. President Joe Biden has made eliminating fossil fuel subsidies and public finance a priority for his administration, directing all federal agencies to eliminate such spending from next year’s budget and instructing relevant departments and agencies to end international public finance for fossil fuels. 

The executive director of the International Energy Agency and the Secretary-General of the United Nations have also recently urged countries to remove fossil fuel subsidies and supports that include public finance. 

In contrast to the $18 billion Canada’s federal government dedicated to the oil and gas sector in 2020, the government’s new climate plan promises $15 billion in climate initiatives over a 10-year period. The initiatives aim to help Canada reach the commitment it made under the Paris Agreement to reduce greenhouse gas emissions by 30 per cent below 2005 levels by 2030 and to move to net zero emissions by 2050.

“When we set climate targets and we continue to hand out $18 billion a year to oil and gas companies, we make it so that those commitments are impossible to reach,” Levin said. “The oil and gas sector is the sector in our economy that produces more emissions than any other sector, and it’s the fastest growing. It’s incompatible with these climate commitments.”

She said fossil fuel subsidies could increase if funds from Canada’s new climate plan are directed to the oil and gas sector for initiatives such as carbon capture and storage and blue hydrogen derived from fossil fuels. 

Read more: ‘Hydrogen fervour’: the technology breathing hope into Alberta’s industrial heartland

Canada has vowed for years to eliminate fossil fuel subsidies in order to drive more support for diversified sources of clean and renewable energy. Photo: Todd Korol

Support for oil and gas industry increased during pandemic at request of industry

According to the report, many Canadian government support programs established in 2020 were at the request of the oil and gas industry. In April 2020, the Canadian Association of Petroleum Producers sent a letter to cabinet asking for an array of measures that were granted, including funding to reduce environmental liabilities and increased access to credit through Export Development Canada. 

The federal government subsequently announced it would spend $1.7 billion to clean up orphan and inactive wells in Alberta, Saskatchewan and B.C. Alberta received the lion’s share of the funding — $1.2 billion — while $400 million was designated for Saskatchewan and $120 million for B.C. 

Levin said the funding should only have been granted on the condition that provinces enforce the ‘polluter pays’ principle, which compels companies that cause environmental damage to shoulder the cost. Before distributing the funds to Alberta, Ottawa should also have insisted the provinces conduct a needs assessment to determine if companies like Canadian Natural Resources [CNR] were capable of paying for their own reclamation work, she said. 

“What ended up happening is that companies like CNR, all the big companies, paused their own reclamation work and stopped spending their own money, and applied and got the funds through this program. [They] just replaced what they would have been doing anyway with government funds … We just transferred the cost of doing it away from private companies onto taxpayers.”

The government also announced a $750 million program in 2020 to reduce greenhouse gas emissions in the oil and gas sector, especially methane. The report said the same outcomes could be achieved — with no public cost — by putting regulations in place to force companies to invest their own funds into solutions, noting that by taking on the cost of reducing emissions, “we are not holding industry accountable and the cost of doing business is lowered.” 

Oil and gas companies also claimed funds from pandemic support programs such as the Canada Emergency Wage Subsidy while continuing to issue shareholder dividends, the report pointed out. Imperial Oil claimed $120 million through the wage subsidy program and issued $320 million in dividends, the report said. 

Jay Averill, media relations manager for the Canadian Association of Petroleum Producers, said the oil and gas industry is cautiously optimistic after being impacted economically by the pandemic and the association is forecasting a 14 per cent increase in upstream natural gas and oil private investment this year, with capital spending reaching more than $27 billion. “This represents an additional $3.36 billion of private investment into the Canadian economy at a time when very few industries are planning to increase spending,” Averill said in an emailed statement. 

“As one of the largest private investors and employers in the country, the natural gas and oil industry can be a foundation for national economic recovery,” he said. “The industry is committed to working with governments, at all levels, to create an environment where businesses can thrive and attract investment back to Canada. This is how we will maintain jobs and create new opportunities for Canadians.”

Averill also said about 75 per cent of all clean technology investment in Canada comes from the natural gas and oil industry. “These efforts were recently recognized by the Harvard Business School which noted that traditional energy companies are some of the most prolific and influential producers of green innovation.”

Levin said the report underestimates total government support for the oil and gas sector because the lack of transparency makes it difficult to quantify all annual subsidies. Federal tax deductions are not disclosed, for instance, and there is no comprehensive inventory of direct spending by the government.  

She said Environmental Defence uses the World Trade Organization definition of subsidies: any kind of financial contribution by a government or government agency that confers a benefit to the recipient, including tax breaks and direct spending. 

Canada’s support to oil and gas companies includes providing funds to conduct research into new technology to lower their costs of doing business, paying for access to credit, loan guarantees and tax breaks. 

“Allowing oil and gas companies to access unique government financing or to leave their mess behind without paying for cleanup is just as helpful to a company’s bottom line and incentivizing production as a direct payment or tax incentive,” the report noted.  

Levin said the upcoming federal budget and Earth Day Leaders Summit on Climate provide ideal opportunities for the federal government to redirect support away from the fossil fuel industry while providing sufficient support for workers and communities. 

“We’re a global laggard and really need to take steps to catch up.” 

Moria Kelly, press secretary for Environment and Climate Change Canada, said the government remains committed to phasing out “inefficient” subsidies by 2025 and is on track to do so.

Kelly said Canada has already eliminated eight tax breaks for the fossil fuel sector and is working with Argentina on a peer review of fossil fuel subsidies to help determine what needs to be done next in order to meet its commitment. “Our government will continue working with Canadians to cut pollution across the economy in a practical and affordable way,” she said in an email.

Kelly said the Environmental Defence report labels environmental policies that reduce emissions and keep life affordable as fossil fuel subsidies, including orphan well clean-up, support for Indigenous communities that rely on diesel, efforts to ensure Canadian companies decarbonize faster and help the clean-tech sector scale up, and support for workers through the wage-subsidy program.

Environmental Defence is calling on the federal government to develop and publish a roadmap to achieve Canada’s commitment to phase out fossil fuel subsidies by 2025 and to ensure that funded programs apply the ‘polluter pays’ principle. It’s also asking the government to phase out all domestic and overseas public finance for fossil fuels, including financing from the export credit agency Export Development Canada. 

The report did not examine provincial subsidies for the oil and gas industry or include externalities such as healthcare costs from the impacts of fossil fuels and the cost of pollution clean-up. According to the Canadian Medical Association, the burning of fossil fuels is responsible for $53.5 billion in health-related costs each year in Canada.

Updated April 16, 2021, at 8:48 a.m. PT: This article was updated to add comment from the federal government, which was not able to respond by press time.

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The Alberta government has compensated landowners on behalf of delinquent oil and gas companies at a level unprecedented in recent years, The Narwhal has learned.

Last year alone, the government paid more than $20 million on behalf of oil and gas companies — a 142 per cent increase over the year before and equivalent to the total tab from 2010 to 2018, according to data from the province’s Surface Rights Board, an independent tribunal that handles landowner claims for land rent.

Data shows there has been a 3,000 per cent increase in the amount of money the government has paid out on behalf of oil and gas companies since 2010.

At the same time, the portion of that money recovered from companies has plummeted, according to data obtained through a freedom of information request.

When an oil or gas company drills a well on private land, it is responsible for annual payments to the landowner known as land rent.

When the company cannot, or will not, pay land rent, landowners can apply to the Alberta government’s Surface Rights Board to have the government pay rent on the company’s behalf. The Minister of Environment and Parks is responsible for issuing payments to landowners from the government’s general revenue stream.

The government is supposed to be able to recover that money from oil and gas companies through its Crown Debt Collections arm. 

When an oil and gas company drills a well on private land, it must pay rent to the landowner. If the company fails to pay, the government will pay on its behalf. Data obtained by The Narwhal show those payments have increased 3,000 per cent since 2010. Photo: Amber Bracken / The Narwhal

Data obtained by The Narwhal through the freedom of information request shows $21,762.62 was recovered in 2020 — just 0.1 per cent of what the government paid out on behalf of delinquent companies. The rest is paid by taxpayers.

Mike Hartfield, a spokesperson for the Surface Rights Board, told The Narwhal by email that the board anticipates 2021 will be similar in terms of the volume of applications received as well as the amounts the government pays on companies’ behalf.

Daryl Bennett, a farmer in southern Alberta and a director with the landowner group Action Surface Rights Association, doesn’t see an end in sight to the government footing the bill for delinquent oil and gas companies. 

“It’s just going to continue building as time goes on,” he said.

‘They know they don’t have to pay’

More than 336,000 oil and gas wells dot the province and less than half of those are active. 

In recent years, companies have struggled to pay land rent, as well as property taxes — and in too many cases, Bennett said, they simply choose not to pay.

“They know they don’t have to pay the landowner,” Bennet said. “They know there’s no accountability. They know if they don’t pay the landowners, the government will.”

Under the Surface Rights Act, the government has long promised to compensate landowners in instances where companies have been delinquent in their payments. 

“There’s no political will to hold industry accountable.”

It’s the grand compromise of resource development in the province. The government can allow oil and gas companies to drill on private land without the landowner’s permission. In return, the government has assured landowners they will always be compensated for the industrial activity on their land. The government is then supposed to seek to recoup the money from the company. 

But, as the data obtained by The Narwhal shows, that rarely happens. 

Hartfield, the spokesperson for the Surface Rights Board, told The Narwhal that the board can deny access to well sites to companies if they fail to pay, which, he said, “may prompt the operator to pay any outstanding amounts if they wish to continue operating on the particular lease site in question.” It doesn’t, however, preclude a company from simply walking away from its unprofitable wells — and its rental obligation.

According to Bennett, “there’s no political will to hold industry accountable.”

Landowner advocates like Daryl Bennett worry the problem of oil and gas companies not paying their bills is only going to get worse. Even with some recent rebounds, oil prices are still far below the record levels seen a few years ago. “It’s just going to continue building as time goes on,” Bennett said. Photo: Theresa Tayler / The Narwhal

Class-action lawsuits seek damages for landowners

In recent years, landowners have become frustrated with long delays when applying to the Surface Rights Board for compensation. According to Hartfield, “high application volumes in recent years resulted in a large backlog of several thousand applications.” That, he said, meant longer processing times for landowners awaiting decisions on compensation. 

“Strengthening the rights of landowners and operators to fair and timely decisions on these matters is very important to us and we’re doing everything we can to build capacity and speed up timelines,” he added, noting the Surface Rights Board received additional funding in the provincial budget to expand its staff, and hopes to clear backlogs this year with the help of a new electronic filing system.

Not all landowners seek to reclaim their unpaid rent through the Alberta government. Some have become discouraged by backlogs and long delays, while others don’t have the time to file the necessary paperwork.

Mathew Farrell is a lawyer with the Calgary-based Guardian Law Group, representing landowners seeking to be compensated by companies for land rent in class-action lawsuits. “They’re essentially like the landlord, and the oil company isn’t paying its rent,” he told The Narwhal. “We think that that’s wrong and that’s why we’re involved.”

In one case, Farrell is representing landowners who allege in a statement of claim that they received a notice the company that owed them money had decided to stop paying. 

“Due to the severe impact of the COVID crisis that the oil and gas industry is currently facing, Alphabow Energy Ltd. is hereby advising that Alphabow is deferring any and all surface rental payments for the time being,” the company’s notice read, adding the company would review the situation in six months and “determine at that time what our plan is to catch up on outstanding rental obligations.”

In another instance, Farrell is representing a frustrated landowner in Galahad, Alta., who has filed a lawsuit to seek money owed by Rally Canada Resources, Ltd. In that case, the landowner says he has not been paid rent since 2018.

Both are class-action lawsuits and are awaiting certification. Farrell told The Narwhal he hopes the class-action lawsuit will help landowners recoup their rent directly from the company without having to go through the Surface and Rights Board.

A class-action lawsuit, he said, “allows us to do this once and do it for everybody and hopefully help a lot more people: people who … either can’t afford to or aren’t in a position otherwise or don’t have the time to to take these [companies] to task on their own.”

While the amount of land rent the Alberta government has paid to landowners on behalf of oil and gas companies ballooned in 2020, the amount the government was able to recoup from companies is still negligible, leaving taxpayers to foot the vast majority of the tab. Graph: Carol Linnitt / The Narwhal

Oil and gas companies aren’t paying their taxes either 

Land rents are not the only bills oil and gas companies have been shirking.

Last month, the Rural Municipalities of Alberta announced its members had reported oil and gas companies owed $245 million in unpaid taxes. 

“In some municipalities, unpaid tax amounts are so high that service levels are being reduced, municipal staff are being laid off and serious discussions are occurring about whether the municipalities can continue to function,” Paul McLauchlin, the association’s president, said in a statement.

The Rural Municipalities of Alberta also noted the provincial government shoulders some of the blame. The government, the association said in a statement, has allowed what it called “legislative loopholes” to enable unpaid bills to mount. “Unfortunately, the province has yet to take any action, despite repeatedly indicating that they take the issue seriously over the past several years,” the statement read. (The office of the Minister of Environment and Parks, which issues land rental payments from the Surface Rights Board, did not respond to The Narwhal’s request for comment.)

McLauchlin said in the statement that when companies shirk their bills, it’s unfair to other Albertans and businesses. 

“Small business owners across the province are expected to pay property taxes regardless of the profitability of their business,” he said. 

Read more: Alberta picked up $8 million tab for land rent left unpaid by oil and gas companies in 2019

Problem is going to get worse: landowner advocate

Bennett told The Narwhal the dominant factor influencing companies’ ability, or willingness, to pay their bills is oil prices. 

He lays the blame squarely on the boom and bust nature of the oil and gas industry. 

“It’s the price of oil,” he said. “Back in 2010, all these guys were making tons of money and could afford to pay the rental.” By 2011, prices for the oil benchmark West Texas Intermediate were already well on their way to US$100 per barrel, bringing in profits for many smaller companies.

Oil prices crashed near the end of 2014, and the amount paid out by the Surface Rights Board soon more than doubled. The amount is now more than 10 times what it was after the last crash.

“I would think the payments for this year are going to be quite a bit higher than last year,” he said, noting he thinks the latest figures are just the tip of the iceberg. 

Farmers and landowners are compensated when oil and gas companies drill on their land because of the loss of productive farmland, issues with dust and weeds and increased traffic through their property. When companies fail to pay, the government steps in. Photo: Theresa Tayler / The Narwhal

Even though companies may not be paying their bills — taxes or land rent — many still own producing oil and gas wells. 

According to the Rural Municipalities of Alberta, 57 per cent of unpaid taxes stem from companies that continue to operate oil and gas infrastructure.

The goal for many companies, Bennett said, is to “keep these things running as long as possible to generate some revenue.” At the same time, he added, some companies have increasingly worked to reduce their costs — including by ceasing to pay their bills.

And that, Bennett told The Narwhal, leaves landowners more frustrated than ever.

Landowners who see active oil or gas wells on their property, he said, often call him to ask, “How the hell are they doing this when they owe me all this money?”

Read more: Why many Alberta oil and gas companies aren’t paying their taxes

Update Mar 11, 2021 at 10:00 a.m. MST: This article was updated to include a link to the specific data obtained by The Narwhal from the Surface Rights Board and through a freedom of information request.

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For Arthur Hadland, the news that the BC Oil and Gas Commission has assumed responsibility for 401 orphan wells left by a bankrupt oil and gas company is both a blessing and a curse. 

The blessing is that Hadland’s 99-year-old father — one of three dozen Peace region landowners with inactive wells on their properties following the bankruptcy of Ranch Energy — will finally receive almost $25,000 in overdue rent for two wells on the family’s grain and seed farm in northeast B.C.

“He was very pleased,” said Hadland, who can’t visit his father in a Fort St. John senior’s home because of the COVID-19 pandemic, but speaks to him regularly on the phone. 

“His speech is somewhat disassembled because he had that stroke, but he’s fully intelligent. Those oil wells have just stuck in his craw his whole life. It’s always on his mind. So when he heard that, he said ‘very good, very good.’ I’m pleased that he was able to hear that towards the end of his life.”

But the curse is that Hadland and his father Austin, in a small but symbolic way as federal taxpayers, could wind up paying to decommission and restore some of the 401 orphan well sites and three facilities left by Calgary-based Ranch Energy, whose court-approved bankruptcy transaction closed on June 12.

That’s because $15 million in funding for B.C.’s orphan site reclamation fund comes from federal taxpayers, as part of a $1.7 billion economic stimulus package announced by the Trudeau government in April to clean up orphan and inactive oil and gas wells in Alberta, Saskatchewan and B.C. 

The orphan fund, managed by the BC Oil and Gas Commission, is responsible for decommissioning and rehabilitating well sites whose owners have gone bankrupt or can’t be found.

The addition of 401 Ranch orphan wells and three facilities, announced on June 17, more than doubles B.C.’s orphan well tally, bringing it to 770.

That compares to 220 orphan wells in March 2017 — an increase of 250 per cent.

Nine wells from Fort Nelson-based Norcan Energy were also designated as orphans this month and are included in the new total, according to the commission. 

Hadland said he’s happy the restoration work on his father’s wells and other Ranch wells will finally take place. “But it shouldn’t be on our backs as individual taxpayers,” he told The Narwhal. “It should be on the backs of industry. And it’s not.” 

“The process is absolutely wrong. There should have been a fund set aside on every well so that when it came to the end of its term it would be totally rehabilitated by the industry that benefited. But there was no planning like that done at all.” 

“Now we’re going to pay for the remediation, and that bothers me.”

‘A limbo situation’: B.C. landowners owed more than half a million dollars after oil and gas company goes bankrupt

Money to reimburse landowners like Austin Hadland for Ranch back rents — a sum The Narwhal earlier calculated to be in excess of $520,000 — will come from the orphan fund, but not from the federal $15 million, according to an email from the BC Oil and Gas Commission. 

The orphan fund compensates landowners for missed rental payments on designated orphan sites. 

The federal funding will be “strictly used for decommissioning and/or restoration activities,” the commission said. 

Out of $120 million in federal funding to clean up inactive wells in B.C., $100 million has been earmarked to decommission and restore about 2,000 dormant wells that could pose environmental hazards such as methane leaks or groundwater contamination. Dormant wells, which still have owners, have been inactive for at least five consecutive years and are unlikely to return to service.

Another $5 million is for a new “legacy” fund to address the historic impacts of oil and gas operations. 

The orphan site reclamation fund is fully funded by industry contributions, according to the oil and gas commission. 

But critics have said the budget falls considerably short of what is needed for the timely restoration of B.C.’s growing number of orphan oil and gas well sites, noting that taxpayers could ultimately be on the hook for clean-up costs. 

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

Last year, B.C.’s former Auditor General Carol Bellringer reported that it costs an average of $370,000 to seal a well and restore a site.

At that price tag, the bill for decommissioning and reclamation Ranch’s 401 orphan well sites and three facilities would be almost $150 million. 

But the company left only a $15.6 million security, according to previous reporting by The Narwhal, meaning that other industry operators — or, critics predict, taxpayers — will have to make up any difference. 

Prior to the infusion of federal cash, the BC Oil and Gas Commission planned to clean up 15 orphan well sites this year with funds collected from industry. 

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

As B.C. readies for a fracking boom to supply the LNG Canada export project — which will ship fracked gas from the northeast to Kitimat through the Coastal GasLink pipeline — the provincial government recently took steps to help insulate taxpayers and the environment from liabilities associated with dormant and orphan wells.

‘A massive liability’: B.C.’s orphan fracking wells set to double this year

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

Asked about the financial implications of paying Peace region landowners more than $520,000 for missed rental payments on Ranch wells, the BC Oil and Gas Commission said it is currently in discussions with landowners to collect information.

Hadland said he received a call from the commission early this week.

“They said the Ranch issue had been resolved and that Dad’s two wells had been declared orphan wells and that they would be doing a full decommissioning.”

Hadland said he’s eager for the work to begin on the two well sites, known on the family farm as “the boneyard.” His father refused to allow access to the company that drilled the sites, so access was obtained through a court order, Hadland said.  

“There’s all kinds of iron in there and other junk … They’ve destroyed the soil.” 

When Ranch Energy went into receivership in 2018, the company left behind 700 wells, a sea of debt and a large leaking fracking wastewater pit 400 kilometres north of Fort St. John. 

More than 400 of Ranch’s oil and gas wells, along with the wastewater pit, were transferred to Erikson Energy in the court-approved transaction, the BC Oil and Gas Commission said.

The pond held 113,000 cubic metres of sludge and water, according to The Narwhal’s review of Ranch’s receivership documents. 

The oil and gas commission subsequently spent $470,000 from Ranch’s security deposit to remove and dispose of less than one-tenth of the wastewater in the fracking pit, suspected of contaminating soil and groundwater through a leak in the outer lining.

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

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

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

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

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

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

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

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

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

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

What rock-bottom natural gas prices mean for Canada’s aspiring LNG industry

B.C. imposes new penalties for failing to clean up dormant wells

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

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

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

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

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

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

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

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

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

Bankrupt companies will ‘walk away scott free’

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

B.C. left holding massive bill for hundreds of orphan gas wells as frack companies go belly-up

B.C. public at ‘enormous risk’ of inheriting liabilities

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

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

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

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

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

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

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

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

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

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

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

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