Alberta Premier Danielle Smith won’t rule out using taxpayer funds to help clean up old oil and gas wells in the province.
Close to half a million oil and gas wells are scattered around Alberta, two-thirds of which are not producing. Estimates of the potential cost to clean them up vary wildly, from $33-billion into the hundreds of billions of dollars. A recent analysis from the University of Calgary’s School of Public Policy concluded that the province would face a financial and environmental catastrophe unless the problem is addressed.
Oil and gas companies are obligated to pay for reclaiming their oil and gas well sites – which means returning them to their natural undisturbed state. That hasn’t always happened.
When companies face financial trouble or go under, their wells can end up on the books of the Orphan Well Association, an industry-funded group tasked with cleaning them up. (The OWA has also taken millions of dollars in loans from the Alberta and federal government in recent years to shore up its operations.)
Ms. Smith said that is “not a sustainable approach.”
Asked Wednesday whether she would take taxpayer-funded clean-up off the table, Ms. Smith did not answer yes or no. Instead, she said ideally, companies would pay to clean up their own messes.
“We have to figure out: How do we make sure that companies at the moment that have a huge unfunded liability – but don’t have assets to be able to support it – what are we going to do about that? It’s a big question. We can’t just keep carrying it forward into the future,” she told media at the International Pipeline Conference and Expo in Calgary.
Ms. Smith said the polluter-pay principle is important but it hasn’t been followed over the past 70 years.
“There has been an idea that liability could just be carried forward to the next purchaser with no dollars following it,” she said. “It’s a $30-billion liability, on conservative estimates, and we can’t just keep carrying it forward.”
Heading into the 2023 provincial election, the United Conservative government was considering a controversial oil and gas well cleanup plan which would provide incentives to fossil-fuel companies to clean up their inactive wells. Critics labelled it a royalty giveaway that would compensate industry for work it is mandated to do.
While there is no strategy yet on how the province will deal with mature oil and gas assets, Ms. Smith said Wednesday she has tasked the chair of the Premier’s Advisory Council on Energy Future, David Yager, to consult with industry, municipalities, landowners and Indigenous partners about how Alberta should address the problem.
Mr. Yager is a long-time oil and gas executive and policy analyst, and was a driving force behind the Wildrose Party, once led by Ms. Smith.
The advisory council concluded in a 2023 review of the Alberta Energy Regulator that the province “must take the clear and unequivocal public policy position that energy is the most important driver of Alberta’s economy and will be for the foreseeable future.” It also called for a review of Alberta’s regulatory system, with a focus on modernizing the AER.
The AER overhauled the province’s reclamation rules in 2022, which included the introduction of mandatory clean-up spending by oil and gas companies.
While the vast majority of companies have spent what they’re supposed to, 33 were last week slapped with administrative sanctions by the AER for not meeting those requirements in 2022 and 2023.
The AER said in an e-mail that about 90 per cent of licensees met the spending requirement for 2022, but 51 did not. That represented about $4.2-million of the industrywide mandatory well clean-up spend.