New, increased oil levies fall over a billion dollars short of the money needed to clean up Alberta’s orphaned and abandoned wells, a new report says.
The Alberta Energy Regulator (AER) recently announced plans to collect $144 million in levies from the industry to fund the Orphan Well Association (OWA.)
The association is meant to be industry-funded and is tasked with closing and reclaiming toxic abandoned wells. However it has fallen way behind and the costs to the environment and landowners is skyrocketing.
Cleanup costs climb
Drew Yewchuck, the report’s author, said the levies will continue a years-long underfunding problem that is leaving Albertans liable for a massive environmental cleanup.
The OWA lists 3,700 orphaned wells in their online registry, with a total estimated cleanup cost of $862 million.
However Yewchuck, a public interest lawyer, said this cost estimate is misleading because it dates from last March when the association had 1,732 wells needing to be decommissioned.
That’s then half the number of orphan wells on its books today.
“So the 3,700 wells and the $862 million numbers do not align,” Yewchuk told TheRockies.Life, adding that the real cost is likely much higher.
After factoring in $337 million in government loans needing repayment, the proposed levies will leave the OWA short by $1.2 billion, according to Yewchuk’s number crunching.
Albertans on the hook
Dwight Popovich, an alfalfa farmer near Two Hills, has been staring at an abandoned well on his property for more than a decade. The well’s owner, Sequoia Resources, went bankrupt in 2018.
Popovich is one of many Albertans demanding that the oil and gas industry be held to the same polluter pay standard that most businesses are held to. You make a mess, you clean it up.
Vern Bretin, a landowner near Strathmore, is another.
“I’d like to see the regulator following the law, and in doing so that would give back to landowners their proper rights,” Bretin told CTV News.
The AER needs to do better
Since the OWA’s creation in 2002, the OWA has underfunded its well cleanup and only weakly pushed industry to pay cleanup costs. Its failure to require polluters to pay has been well documented.
In its first ten years, the OWA collected only around $13 million per year for cleanup.
When oil prices dropped in 2014, multiple companies went bankrupt and a backlog of orphaned sites landed on the OWA’s desk. The AER’s increase in oil levies did not keep pace with cleanup costs.
In 2023, the Auditor General of Alberta released a report criticizing how the AER handled its ballooning abandoned well problem.
“Before 2022, AER did not scrutinize the orphan levy proposed by OWA and did not analyze longer-term sustainability of the Orphan Fund. There were no examples of AER suggesting modifications to the amount or evidence of AER doing an analysis of the proposed levy,” the report said.
The auditor general found the regulator failing in numerous areas, including the collection of adequate financial security to ensure the timely closure of wells and poor regulation of remediation and reclamation.
A massive problem
In 2020, then-Prime Minister Justin Trudeau’s Liberal government announced $1.7 billion in public funds to clean up wells in British Columbia, Alberta and Saskatchewan.
For two years, Calgary geophysicist Jenny Yeremiy worked for Canadian Natural Resources Ltd, advising the company on how to deploy these cleanup funds.
Yeremiy, who now advocates for the Coalition for Responsible Energy, said the experience gave her insight into the huge scale of the mess being left behind by an industry that is making billions of dollars in profits.
“I think it’s one of the biggest issues in Canada right now,” Yeremiy said in an interview with TheRockies.Life.
Recently the coalition filed a regulatory appeal and a reconsideration request, asking the AER to increase the amount it collects from industry to fund the clean-up efforts of the Orphan Well Association.
“I think there is a massive opportunity right now to address this issue while oil and gas companies still have money,” Yeremiy said. She noted that if oil prices fall, as many analysts are forecasting, the situation could change.
Bigger than the OWA
The OWA only assumes responsibility for wells left behind by bankrupt companies.
According to recent estimates, there are roughly 170,000 inactive, suspended and abandoned wells on the books of still viable and operating energy companies. That’s nearly one-third of all wells drilled in Alberta.
In January 2024, the AER pegged the cost of cleaning up every well in the province at $33 billion.
However, the regulator came under fire when leaked documents showed the cost could be as high as $88 billion. “We really don’t know how many of these wells and associated infrastructure are leaking, so it’s a huge human health and environmental problem as well,” Yeremiy said.
