Bill and Sylvia Flesher are just one Alberta family impacted by rusting, decaying and leaking wells on their farm.
Their farmland hosts 14 wells, 10 of which have been orphaned, and the impact goes beyond just being an ‘eyesore.’
“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 told The Narwhal.
The Fleshers aren’t alone; Alberta has over 466,000 oil and gas wells, one for every 1.4 square kilometre of land.
A recent Alberta Energy Regulator (AER) report says only about one in three of these wells are active.
Inactive wells dotting the Alberta landscape have been a hot topic lately, especially with worries that ‘orphaned’ wells leak toxic messes into our soil and groundwater, potentially harming people and livestock’s health.This raises questions about who should pay for well reclamation and remediation.
Orphaned, abandoned, reclaimed, suspended, or inactive? We hear these terms a lot, but what do they mean?
We have prepared a short primer to help clarify the definitions at this link. Check it out if you want to win your local pub’s next oil and gas trivia night!
But for this article, we’ll focus on “orphaned” wells.
A well becomes an “orphan” if the Alberta Energy Regulator (AER) determines there are no legally responsible parties to manage its cleanup after the owner runs out of money. Orphan wells can be in various states: inactive, suspended, abandoned, or actively producing.
Once a well–and its site–receive the orphan designation, the Orphan Well Association (OWA) takes over its care and custody until the well is entirely abandoned (closed) and the site is fully reclaimed.
Who Pays For Orphan Well Reclamation?
In theory, it seems straightforward to take an aging well that is no longer producing and move it through all phases, from inactive to remediation.
So why are orphaned wells such a problem? Isn’t the Orphan Well Association on point to deal with situations where the owner has become bankrupt or cannot pay for remediation and reclamation?
The evidence is in, and it’s clear the current system has significant gaps, and oil companies are exploiting these gaps. The first problem is that the oil company that owns the well determines when its suspended wells should be deemed abandoned (closed).
There is no incentive to do this quickly. There is no penalty for delay. So, many abandoned wells are “suspended” indefinitely and sit for years, or even decades, before the well owner coughs up the cash needed to reclaim their well site.
As a result, many of these suspended wells start leaking as the infrastructure rusts and rots.
If you are a rancher or farmer and the leaking well is on your property, that’s a big problem.
If the company goes out of business before they clean up the mess, which often happens, your problem will just get bigger.
The abandoned well becomes an “orphan.”
Now, it’s up to the Orphan Well Association to pay for and clean up the mess.
Is Oil and Gas Paying to Cleanup its Mess?
And where does the money for the OWA come from?
According to an OWA fact sheet, the Association “is funded by Alberta’s oil and gas industry (not taxpayers) and overseen by the Alberta Energy Regulator… but operates independently.”
That sounds great. But the numbers just don’t add up.
According to the OWA, “the industry levy for 2023/24 is set at $135 million, a level we expect will remain consistent over the next several years.”
Yet later, in the same document, OWA tells us: “With the support of the oil and gas industry, as well as provincial and federal government loans, we have decommissioned orphan wells at an accelerated rate for the past several years.”
So, are Albertans and Canadians paying to clean up after the oil companies?
If so, then how much have we paid?
According to the fact sheet, “With loan funding now completely deployed for field activities, the OWA has already begun repayment. Nearly $130 million of the Alberta loan was paid back from industry levies as of July 2023.”
There is no mention of how much of the federal loans have been repaid.
Too Many Wells To Reclaim, Too Little Money
According to the OWA, “As of March 31, 2024, the total remaining closure cost on sites managed by the OWA (including orphans, WIPAs and large facilities) is estimated to be about $862 million.”
However, AER estimates that the remaining wells needing remediation will have a $33 billion environmental liability.
A March 2023 report from the Auditor General of Alberta estimates the clean-up liability for 13,000 orphaned oil and gas assets recognized by the OWA to be at least $60 billion,
Critics say both estimates are low.
No matter how you measure the liabilities, anything in the billions makes the industry’s estimated $135 million yearly contribution to OWA look pathetically meagre!
In 2020, the feds gave Alberta one billion dollars in funding and the OWA $200 million in an interest-free loan to address the orphan well problem.
Guess what?
Alberta did not use all the clean-up funding by the December 2022 deadline and confirmed it sent back $137 million to the feds.
In 2022, the feds gave Alberta $383 million from the Ottawa-funded Site Rehabilitation Program to continue well remediation.
The Government of Alberta loaned the OWA a total of $335 million in an interest-free loan, of which $130 million was paid back by OWA by July 2023.
It’s not like the oil and gas industry doesn’t have the money.
Statistics Canada determined that oil and gas extraction revenues increased to $269.9 billion in 2022, breaking previous profit records. Yet, on average, the industry contributes only $135 million to the orphan well fund.
Outside of the OWA, the oil and gas industry spent $696 million on reclamation in 2022, with much of that money coming from federal government grants. In the end, a less-than-perfect picture of corporate responsibility emerges.
The bottom line is that polluter should pay to clean up their mess. Bill and Sylvia Flesher and other farmers shouldn’t have to live with the company’s toxic legacy.
Unfortunately, there are too many orphan wells to clean up and simply too little money from either industry or government wells to do so.
No wonder Albertans are worried about being stuck footing the bill
They should be.
Despite record profits, oil and gas must be pushed to take responsibility for cleaning up their mess.
