$260B liability figure for abandoned energy infrastructure an 'error in judgment': AER
Current liability figure is actually $58.7B, energy regulator says
The Alberta Energy Regulator is distancing itself from an internal report from one of its senior officials that put the estimated liability of abandoned energy infrastructure in Alberta at $260 billion.
The figure is contained in a presentation from Robert Wadsworth, AER's vice president of closure and viability, from earlier this year, contained in internal documents released to the National Observer, Global News and the Toronto Star under a Freedom of Information request.
The AER claims the current liability estimate is $58.7 billion and sent a news release Thursday downplaying the significance of Wadsworth's numbers.
"We want to apologize for the concern and confusion that this information has caused," the statement said.
"This particular estimate was created for a presentation to try and hammer home the message to industry that the current liability system needs improvement.
"While the message to address liability is important, the numbers were not validated and were based on a hypothetical worst-case scenario. Using these estimates was an error in judgment and one we deeply regret."
The numbers were similarly dismissed by Alberta Environment Minister Shannon Phillips.
"That figure is a snapshot in time," Phillips told reporters Thursday. "It assumes that all oil and gas activity on the landscape in Alberta would stop tomorrow. That's not the case."
Alberta Liberal MLA David Swann said the liability issue is a long-standing problem that the NDP has done little to address since they took office.
He says industry, not taxpayers, should pick up the cost.
"Polluters pay. That is a fundamental principle of good governance," Swann said. "And everyone who signs on to approvals for the development of our resources knows that they are on the hook, they should be on the hook, and they should plan for future cleanup costs."
Liability estimates lay out the costs of reclaiming old oil wells, pipelines and tailings ponds.
The problem, according to Wadsworth's presentation, is a growing inventory, insufficient collection of funds from industry and an increasing number of licensees without money to properly remediate their sites.
He said the way the Liability Management Ratio is calculated is ineffective. The AER increased the ratio to 2.0 or higher two years ago so the value of active wells owned by a company must be double the cost of reclaiming them when they are no longer producing.
In his presentation, Wadsworth asked rhetorically why has there been no political will to change liability programs in Alberta.
"Until recently, the implications of our flawed system had not been realized. There had been little to no impact to the government or the public of the flawed system," he wrote.
"We can continue down our current path until the impacts are felt by the public of Alberta or we can start to implement the numerous changes that we know need to be made."
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Wadsworth said the situation is changing, thanks to cases like Redwater which the AER appealed to the Supreme Court of Canada. The court still hasn't released its decision.
Lower courts have ruled that Redwater's creditors should receive any proceeds from selling off the firm's assets.
The AER argued those funds should go toward paying for the clean up of the company's inactive wells.