The Alberta government launched a long-range campaign last week to make oil and gas companies pay for cleaning up a generations-old and growing backlog of 96,969 depleted and inactive wells.
Energy Minister Sonya Savage announced a stiffened polluter-pay policy that requires producers to devise five-year cleanup plans and act on them under supervision by the Alberta Energy Regulator (AER).
The policy grants landowners the right to nominate discarded wells on their property for prompt cleanups. Oil and gas firms would have to justify postponing action on the requests.
The cleanup backlog includes 21% of 456,729 Alberta wells licensed since 1914 that grew through an environmental loophole. Producers have been able to cap depleted bores, instead of permanently plugging and reclaiming them, by paying token lease rentals.
“Farmers and other private landowners deserve a voice in the reclamation process, to ensure industry brings their land back toward its original condition — enhancing safety and their ability to repurpose their land,” said property rights lawyer Keith Wilson. “This is a positive step forward on an issue that is important to many Albertans.”
Unlike fossil fuel producer jurisdictions in the United States, Alberta has a split-title property regime that fosters conflict. About four-fifths of oil and gas resources are Crown or provincial government-owned. Industry access to leased drilling targets has priority over surface rights owners, who have had little or no control over wells and cleanups.
The new policy follows a wave of inactive wells deteriorating into orphan wells, deserted by defunct and bankrupt firms. With no solvent owners, orphan wells become cleanup burdens on the AER, the Alberta treasury and corporate survivors.
As of April the Alberta Orphan Wells Association, a cooperative industry and AER group partly funded by a levy on all oil and gas producers, had an inventory of 2,983 deserted wells in need of permanent plugging.
The Explorers and Producers Association of Canada (EPAC) praised the new policy as a path to improved relations with landowners and possibly investors that allows for orderly, gradual inactive well cleanups without bankrupting oil and gas firms.
“This is an innovative and modern approach to ensure continued focus by companies on their responsibilities to local communities,” said EPAC President Tristan Goodman, a former senior AER official.
The Petroleum Services Association of Canada predicted the new policy would become a job creator, with the mandatory five-year cleanup programs pulling field contractor firms out of a slump caused by the Covid-19 pandemic.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 2158-8023 |