Edmonton

Loans won't solve the custody battle over Alberta's orphan wells, landowner says

For Dwight Popowich, the abandoned natural gas well on his property near Two Hills is an eyesore and a money pit.

'It's not an orphan well. We know exactly who mom and dad are' 

Sequoia Resources remains in receivership after ceasing operations in March 2018. (Kyle Bakx/CBC)

For Dwight Popowich, the abandoned natural gas well on his property near Two Hills is an eyesore and a money pit.

The well on Popowich's property, about 100 kilometres east of Edmonton, was drilled in 2008. It stopped producing in 2012, and its owner, Sequoia Resources Corp., stopped operating in March 2018.

He collected $2,500 per year until 2017, when the cheques suddenly stopped. 

Popowich has waited years for the well to be transferred to the Orphan Well Association, the group tasked with cleaning up wells left behind by bankrupt companies.

In the meantime, no remediation work has been done and Popowich has been unable to sell the land, stalling his retirement plans. 

This is not a lease. This is forced expropriation.- Dwight Popowich

"This thing is in the middle of my field and I have to work around it," he said. "I don't have the use of my land. It's been taken away from me. This is not rent. This is not a lease. This is forced expropriation." 

Popowich said he doubts a $100-million loan extension to the Orphan Well Association will be enough to put a considerable dent in Alberta's growing problem, or clean up the pumpjack on his property. 

Energy companies, he said, should be held accountable for the cost of cleaning up 3,406 deserted oil and gas wells scattered across the province.

"This is not right," Popowich said. "There is a polluter-must-pay principle at play here. They're the ones that made the mess. And the one on my land, we call it an orphan well. It's not an orphan well. We know exactly who mom and dad are. 

"Our government, our oversight people, are not making this happen. They're trying to find a way to download it onto the taxpayer." 

Dwight Popowich has been left in limbo and unable to sell his land while it has an inactive well left behind by a company that ceased operations in 2018. (Kyle Bakx/CBC)

The loan to the Orphan Well Association was announced by Alberta Premier Jason Kenney during a news conference Monday, though details of the extension were included in the provincial budget.

Kenney touted the loan as a "lifeline" for workers in an oil and gas industry struggling with chronic job losses and an unforgiving energy market. 

According to the industry-funded OWA — which remediates old wells, pipelines and facilities that can't be sold when energy producers go bankrupt — the financial boost from the government loan will help double its workload in the coming year. 

Meanwhile, the government is also reviewing its own processes to deal with orphan wells. Energy Minister Sonya Savage said the government will be proposing a suite of new regulations "covering the entire lifecycle of wells in the first quarter of the year."

"Without the advance, this additional loan, after this next year, we would have been out of money.- Lars DePauw

Association executive director Lars DePauw estimates an additional 1,000 wells, largely in southern Alberta, will be remediated using money from the loan. He estimates the work will create 500 jobs for workers hired as contractors by the association. 

As more companies go under, the association's inventory of abandoned wells has grown at an unprecedented rate.  

Without the cash infusion, the association would have struggled, DePauw said. Now they can double their workload, he said. 

Orphan wells have become an environmental and financial burden for Alberta. The loan brings the total taxpayer-funded loan to the association to $335 million.  Around $235 million was already handed over by the previous NDP government. 

The new loan will be paid back with interest, DePauw said.

"Without the advance, this additional loan, after this next year, we would have been out of money," DePauw said. 

"We would have had basically another year worth of work and then we would have had to scale back our operations.

"This is not really taxpayer dollars. This is a loan, and the oil and gas industry is going to be repaying that loan through the annual levy."

As announced in Thursday's budget, Alberta is increasing the levies it collects annually from the oil and gas industry. 

The province will increase the amount of money collected from the oilpatch to $69 million in 2020-21, up from $60 million last year.

In addition to the 3,406 orphan wells there are another 94,000 inactive wells around the province. Some may once again produce oil and gas if commodity prices improve, though most will sit idle until they're eventually cleaned up.

The province's own estimate of the eventual cleanup bill for every well in Alberta is $30 billion.

"We have been seeing an increase in the number of the sites that we deal with," DePauw said. "It's kind of hard to forecast because it's a long process even after a company goes insolvent. But until commodity prices increase, we do think that this trend will continue." 

'A vacuum of policies'

The province needs to do more to prevent wells from becoming orphaned in the first place, said Nikki Way, a senior analyst with  the Pembina Institute, an non-profit environmental advocacy organization

Way said the loan extension is necessary but doesn't address the root of the problem. Without increased regulation, taxpayers could be left with the bill.

She wants the province to tighten regulations on operators to protect taxpayers from footing the bill. 

"We didn't get here by accident," Way said. "We have a vacuum of policies.

"If this is the only thing we do, we're not going to get to the core of the issue and it will be increasingly likely that the public will actually pick up the tab at the end of the day and I don't think anyone in Alberta wants that."

With files from Alex Zabjek and Kyle Bakx