Shell Canada's refinery, south of Sarnia, Ontario, on March 29, 2007.DAVE CHIDLEY/The Canadian Press
Shell Canada’s ongoing bid to transfer hundreds of natural gas licences in Alberta to a junior energy player will go to a public hearing, after dozens of landowners and the Orphan Well Association filed concerns that Pieridae Energy Ltd. lacks the financial might to cover the cost of cleaning up the assets.
The decision by the Alberta Energy Regulator (AER) to send the application to a hearing came the same month Pieridae cleaned up a leak from a sour gas pipeline it operates on behalf of Shell southwest of Cochrane, which is about 20 kilometres from the outskirts of Calgary.
The unusual step of sending the application to a public hearing underscores rising worry in the province about the number of inactive oil and gas wells, and who gets left on the hook for cleaning them up. It also signals a possible shift at the regulator, which for years critics say has not done enough to enforce the polluter-pays principle that guides the province’s energy framework.
Close to 40 statements of concern filed with the AER oppose the Shell-Pieridae plan, which would transfer the licences for Shell’s Waterton, Jumping Pound and Caroline gas plants – and the fields that supply them, known as the Foothills assets – to Pieridae Alberta Production Ltd., a subsidiary of Pieridae Energy. In all, the application includes 282 well licences, 70 facility licences and 81 pipeline licences.
Those concerns include various anxieties about site maintenance and effects on farms, but one thread weaves them together: a worry that Pieridae could fail, sending the sites onto the books of the Orphan Well Association (OWA), with taxpayers or industry left holding the cleanup bill.
Pieridae reported a $100-million net loss in its 2020 annual report, but spokesman James Millar told The Globe and Mail that the company has demonstrated it is technically, operationally and financially able to satisfy all of its regulatory obligations now and into the future. He also noted that when the company purchased Shell’s assets, “all vital employees came over [from Shell] to Pieridae so we have their skills to operate the assets safely.”
But many landowners say Shell has profited off the wells for decades, and should not be allowed to shirk its environmental responsibilities.
Even the OWA is leery of the plan. The non-profit association, which is responsible for cleaning up wells with no owners, is funded via industry levies. But it has received more than $500-million in provincial and federal government loans since 2017, as it struggles to deal with a growing burden of sites flooding its books.
The association said in a statement of concern that the transfer would “pose a significant potential risk to the OWA and the industry in general who funds our work unless it is appropriately backstopped financially by the parties to the transaction.”
The issue dates back to 2019, when Pieridae bought a series of gas-producing Shell assets for $190-million. They are to play a key role in feeding the massive Goldboro project that Pieridae has planned for the Nova Scotia coast to export liquefied natural gas.
Following the sale, Shell and Pieridae requested the AER divide the existing operating and environmental approvals of the assets between the two companies. But the Alberta regulator denied the application in May, 2020, saying the proposal to split the liability contained too many uncertainties.
Shell reapplied to the AER in January. This time, it asked to transfer all licences and approvals for the Foothills Assets to Pieridae, with Shell retaining the liability for the management and remediation of specific environmental contamination for the Waterton and Jumping Pound gas plants.
But the AER didn’t accept that application either. Instead, given the breadth of concerns, it decided a public hearing is necessary.
Douglas Glass, a complainant who worries that Pieridae will not be able to handle the eventual environmental cleanup, has lived in the middle of the Jumping Pound gas field for 30 years, and is blunt in his critique of the Shell-Pieridae plan.
“We trusted in Shell – they’re a big company, they’ve got lots of money behind them to clean up. Pieridae is a mess financially and I’m concerned that what will happen is they will go under, and then these things will get left,” he said.
“I wish them well. I hope they make it. But it’s all a house of cards.”
William McNabb, whose mom runs a ranch by the gas fields and submitted a statement of concern, says there’s uncertainty around junior players like Pieridae.
“There are good people there because they’re transferring over from Shell, but you just don’t know what’s going to happen,” he says.
He’s not surprised the application is going to a public hearing. He thinks it’s because “people are wising up” to instances of energy companies using regulation gaps as an easy out around environmental reclamation.
“People are starting to see there is a loophole that’s being used by corporations to get rid of assets to the government. That’s what we’re really trying to prevent here,” he said.
As for the Pieridae pipeline leak reported to the regulator on May 3, analysis found that around 4,000 litres of hydrocarbons and processed water dripped into the soil, contaminating an area measuring about 1.5 metres by 10 m. Mr. Millar said crews discovered the leak during scheduled maintenance at its Jumping Pound gas complex. They immediately shut down the pipeline and notified the regulator and landowner.
Mr. Millar said soil samples have determined that the environmental impact of the leak was “minimal.” He added that affected soil and water were “immediately removed and appropriately disposed of.”
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