Report calls for public takeover of old oil and gas wells to fund their cleanup
Most of Alberta's energy wells no longer hold enough oil and gas to pay for their cleanup and the public should take them over to ensure their remaining revenue funds remediation, a new report concludes.
Most of Alberta's energy wells no longer hold enough oil and
gas to pay for their cleanup and the public should take them over to ensure
their remaining revenue funds remediation, a new report concludes.
"It is a radical idea," said Regan Boychuk of the
Alberta Liabilities Disclosure Project, which produced the report. "It is
something akin to nationalization."
Using data from the Alberta Energy Regulator released under
Freedom of Information legislation, the report estimates the overall cleanup
cost for the province's 300,000 unreclaimed wells at somewhere between $40
billion and $70 billion — a figure that doesn't include infrastructure such as
pipelines or pumping stations.
The Disclosure Project, which has followed the issue for
years and has advised academics and government, concludes there may not be
enough value left in the ground to fund the work.
The same data set from the regulator suggests that 80 per
cent of Alberta's operating wells no longer hold enough oil and gas to pay for
their own remediation. It also says that by the regulator's own standards, 49
per cent of oil and gas companies licensed by the regulator are insolvent,
their assets outweighed by liabilities.
Still, those companies retain wells that pump and generate
revenue. The report suggests the creation of an agency that would step in on
insolvent companies, operate whatever wells remain and use the proceeds to fund
remediation.
Boychuk points to the example of Trident Exploration, which
collapsed in 2019 leaving more than 4,000 unreclaimed wells. He said those
wells were still pumping the equivalent of 10,000 barrels of oil a day.
Instead of being sold to pay creditors, the report says a
reclamation trust could have taken over those wells and used the revenue to
clean up the sites and create reclamation jobs.
"A reclamation trust would make lemonade out of lemons
like Trident," Boychuk said.
Such an agency could create as many as 10,000 jobs across
the province, using skills Albertans already possess, he said.
Instead, Boychuk said, the public is paying. Between
government grants to fund reclamation, unpaid taxes and outstanding lease
payments to landowners, the report says Canadians subsidize energy cleanup to
the tune of $4.3 million a day.
"Polluting companies must pay for their own
cleanup," Boychuk said. "It's the law."
Richard Wong, operations manager for the Canadian
Association of Petroleum Producers, suggested the report's analysis is too
pessimistic. He said capital investment in oil and gas is expected to increase
during 2021 -- "a signal that the industry is on the road to
recovery," he wrote in a statement.
"Accelerating the decommissioning and reclamation of
inactive wells and associated sites remains a priority for our industry. We
continue to work with the Alberta government to advance policies and
regulations which ensure substantial progress."
Thomas Schneider, a professor of accounting and finance at
Ryerson University who advised on the report, said Alberta needs to do
something as liabilities mount and the resource dwindles.
"In Alberta today, the regulator only collects a
deposit from a company when it's deemed to be insolvent. This is absurd. We
need to collect cleanup costs before a company becomes insolvent."
He said oil and gas companies should have to report all
their cleanup liabilities.
A spokesperson with Alberta Energy was not immediately
available for comment.
The government is introducing a new program to encourage
producers to reclaim wells, which will require companies to spend a certain
percentage of their environmental liabilities on well cleanup each year.
Energy Minister Sonya Savage has said that figure could be
four per cent. It remains unclear how the program would be administered or
enforced.
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