Abandoned Well Cleanup Could Take 2,800 Years, Alberta Regulator Tells Industry

It may take more than 2,800 years to clean up abandoned oil and gas wells across Alberta, National Observer and Star Calgary reveal in an exclusive report this week, after obtaining a September 2018 presentation to a private industry gathering by a senior official with the Alberta Energy Regulator (AER).

“While industry and government officials have long touted Alberta’s oversight as world-class and ahead of other jurisdictions, Rob Wadsworth, vice-president of closure and liability for the AER, warned in the presentation that the province’s oilpatch was facing a financial and ecological catastrophe due to weak regulations,” Observer reports. Stanford University post-doctoral fellow Blake Shaffer noted that the companies that own the wells won’t likely be around in a few hundred years to cover the cost of cleaning up the messes they leave behind.

“This is a big issue, and we need some policy changes,” Shaffer told Observer. “These shouldn’t be things that are multi-generational.”

While Alberta “has an estimated 343,000 wells in total, according to the provincial government,” Observer explains, “Wadsworth’s presentation focused on the ‘top 15’ companies with the biggest inventory of decommissioned wells. These are classified as abandoned, meaning they’ve been plugged, but the land hasn’t been returned to a natural state.”

Among those companies, he said the best would reclaim all its abandoned wells in 51 years, the worst in 2,830 years.

“We’re almost getting into geological times,” said Ryerson University accounting professor and oilpatch liability specialist Thomas Schneider. “Alberta was a have-not province (a) long time ago. It could very well be again in the not-too-far distant future, and could have a lot of contaminated areas as a legacy of its oil and gas history.”

Wadsworth’s presentation “blamed the problem on the regulator’s ‘insufficient’ collection of security deposits on wells and an increasing number of companies with ‘questionable’ ability to pay for cleanup,” Observer states. “Unlike most oil and gas producing jurisdictions, Alberta also doesn’t impose cleanup deadlines on oil and gas companies,” a state of affairs that “leaves a multi-billion-dollar liability that is much larger than the regulator’s publicly-stated figure of C$58.65 billion to clean up oil and gas wells, potentially leaving taxpayers to foot the bill.”

The presentation cites a $260-billion price to cover the Alberta oilpatch’s cleanup costs, a figure Observer first reported last November, and that the AER explained away as “a hypothetical, worst-case scenario” in which “industry stopped producing all hydrocarbons.” The September presentation includes $130 billion for mining—mostly the cost of clearing the industry’s massive tailings ponds—plus $100 billion for conventional oil and gas and $30 billion for provincially-regulated pipelines.

“The estimates included in the presentation reflect a snapshot in time that was based on an unlikely worst-case hypothetical scenario,” an AER spokesperson said in a statement. “Development and closure activities occur constantly, therefore estimates related to the cost and time associated with liability are always in flux.”

Observer notes the problem is not limited to Alberta. “There are similar liabilities mounting in other jurisdictions such as Saskatchewan and British Columbia, but B.C.’s NDP government announced a new regulation on May 31 that would impose legal timelines for companies to restore old oil and gas sites,” write investigative reporters Emma McIntosh and Mike De Souza. “The provincial government is also phasing in a new levy, over three years, that will be collected to cover the liability costs of cleaning up orphan sites.”

The Observer report includes detail on Alberta fossils’ failure to meet their financial and regulatory obligations, and the industry’s continuing efforts to deregulate the drilling approval process.