Two Alberta landowners say the Alberta Energy Regulator (AER) is breaking the law by not collecting enough money from industry to cover cleanup costs for a ballooning number of orphan oil and gas sites across the province.

They also allege that industry and provincial politicians are involved in setting the orphan levy amount, and consideration is being given to factors that are not allowed, including the health of the industry and commodity prices.

The cost of cleaning up the 7,302 wells that have been turned over to the industry-funded Orphan Well Association (OWA) to date is estimated [pdf] at C$1.66 billion. The AER is responsible for deciding the annual levy amount, but critics argue industry funding is falling behind the growing costs for reclaiming the sites.

The AER increased the amount collected from industry by 7% this year though the number of new wells in its inventory has doubled. The regulator oversaw a similar increase of 7% last year, despite a mounting number of orphan wells that year too.

Vermilion-area farmer Teresa Patry and Two Hills landowner Dwight Popowich, whose property houses an orphan well and who previously called for a public hearing, announced Sept. 8 they’re escalating efforts by taking the regulator to court, requesting a judicial review of the AER’s management of the Orphan Fund Levy. The two are backed by the Alberta Surface Rights Federation and the Alberta-based Polluter Pay Federation. Ecojustice lawyers are representing the group.

“Behind this court case are real families with real consequences,” Patry told reporters at a news conference on Tuesday. “For years, my family has lived with uncertainty about what these sites mean for our home, our land, our health, and our future.”

Patry said her family has unexplained health concerns. She is also worried about her animals and repeatedly tried to get answers from the AER before she joined the court case, saying she would fight for families across the province who “deserve to feel safe in their own homes.”

“It’s been a disappointment, because when they come to drill these wells, they tell you that when they’re done, that land will be as good, if not better and I can tell you with the utmost certainty that piece of land is not like it was before,” she told The Energy Mix in an interview.

“Landowners didn’t create these liabilities and we shouldn’t be expected to live with the consequences indefinitely while the regulator chronically underfunds the orphan well levy and quietly shifts responsibility away from the companies that benefited from these wells,” she told reporters.

Popowich formally challenged the AER to hold a public hearing last year on the levy that he said was unlawful and insufficient, but the regulator did not agree to a hearing. Popowich also filed conflict of interest complaints with the province’s Ethics Commissioner and the AER over the actions of one of its directors, David Yager.

Yager authored the provincial Mature Assets Strategy to deal with oil and gas cleanup liabilities while he was simultaneously serving on the AER board, acting as a special advisor to Premier Danielle Smith, and working as an oil and gas consultant. He received more than $250,000 in sole-sourced government contracts to design the strategy, which took industry input but wasn’t opened to the public.

The Ethics Commissioner said it had no jurisdiction over Yager, and the AER refused to conduct an investigation after insisting Popowich first agree to an in-person meeting with phones confiscated to prevent recordings.

“None of us wants to go to court, we’d rather be at home with our families, but after years of trying to be heard, we’ve reached the point where I feel we have no other choice but to ask the courts to ensure the regulator follows its legally mandated responsibilities,” Popowich told reporters on Tuesday.

The group’s court filing alleges [pdf] that the AER is not properly following Alberta’s Oil and Gas Conservation Act, Section 73 (2), which describes how the orphan fund levy should be set. The rules state that the levy should sufficiently cover the costs of orphan well cleanup for that year, as well as any deficit from the previous year. There is also a provision allowing the AER to cover any emergency or non-budgeted expenditures.

“Instead of applying this needs-based formula from the statute, what they do is they consult with industry groups, and get levy amounts from them,” Ecojustice lawyer Susanne Calabrese told The Mix. “Then they provide this to the Government of Alberta, who then puts whatever levy amount that they choose and approve of into the budget.”

Popowich said the court case is about “protecting Albertans, a job the regulator was supposed to be doing,” adding “had they simply followed the law as it is written, then we wouldn’t need to be here today.”

“We aren’t asking for special treatment,” William Heidecker, president of the Alberta Surface Rights Association, told reporters. “This isn’t just about wells, it’s about accountability, and it’s about whether Albertans can trust the systems that are supposed to protect them.”

The AER said in a statement emailed to The Mix that it was “unable to comment publicly on matters before the courts,” but it did confirm that “the levy amount was endorsed by the Government of Alberta as part of the overall budget.”

The regulator said the OWA was created 25 years ago and has received 4,100 reclamation certificates. There are almost twice that number of orphan wells still waiting in line in various stages of reclamation.

Josh Aldrich, press secretary to Alberta’s Minister of Energy and Minerals, told The Mix his office couldn’t comment directly on the matter, as it is before the courts. But Aldrich stated that the orphan well levy is set at $155 million by the AER, and “is more than triple what it was under the NDP in 2019.”

Aldrich also pointed to a separate program that collects funds from companies that have not abandoned their well sites. The program doesn’t cover orphan wells and is designed to ensure active companies set aside funds to pay for future closure costs, which were estimated at $36 billion at the end of 2024. He said the program “requires the [fossil] energy industry to spend a minimum of $750 million annually to properly decommission and reclaim old wells and infrastructure.”

“Alberta’s government continues to work with industry and landowners to identify more ways that companies can meet their cleanup obligations and we hope to share more on this in the coming months.”

Meanwhile, Ecojustice argues that taxpayers continue to foot the bill for costs the province covers, including $330 million paid to the OWA in interest-free loans and grants, and $150 million in unpaid surface lease payments. There is also more than $250 million in unpaid municipal taxes left by these delinquent companies.

The Alberta NDP’s shadow minister for energy and minerals Nagwan Al-Guneid told The Mix that “Albertans should not be left carrying those burdens.”

 “At a time when many oil and gas companies are benefiting from strong commodity prices, Albertans deserve a credible plan that ensures industry, not taxpayers, are left on the hook for multi-billion-dollar liabilities,” she said.

An analysis by the Guardian found that eight of the biggest oil companies made almost US$93 billion in the first full financial quarter after the U.S.-Israeli war on Iran triggered a surge in global oil prices to more than $126 a barrel.

Mark Dorin of the Polluter Pay Federation told The Mix the AER is “asking the government what they’re willing to pay, then they ask the Orphan Well Association, how much work can you get done this year?” adding that the AER isn’t legally allowed to do that.

Dorin said those are “irrelevant factors” because “the law provides for as many orphan well associations as we need to get the job done, and (the AER) is just ignoring the law.”

He said Alberta’s law holding companies responsible for cleanup costs is “the envy of the world,” and other countries “wish they could hold industry as a whole accountable for those who’ve reneged on their responsibilities,” but added, “we don’t have a regulator that will uphold the law.”

“It’s like the police department’s gone AWOL.”

An initial court hearing for the application has been set for Sept. 22. The group’s allegations have not been proven in court.