The Sunday Magazine

'If the polluter doesn't pay to clean it up, taxpayers will have to': Alberta's growing oil well problem

As the oil and gas industry goes, so goes the Alberta economy. But when oil companies leave inactive oil wells unremediated, that saddles Albertans with major environmental liabilities that could cost the province tens of billions of dollars to clean up. Daryl Bennett — a farmer from Taber, Alberta and the director of a landowner advocacy group called Action Surface Rights — and Regan Boychuk — a researcher with the Alberta Liabilities Disclosure Project — talk about the extent of the problem and how it affects landowners on, and in, the ground.
An "Out of Service" tag is attached to an orphan oil well.
There are thousands of orphan and inactive wells in Alberta. Some of these sites could be re-purposed for other energy uses, such as geothermal. (Kyle Bakx/CBC)

Across the province of Alberta, tens of thousands of aging oil and gas wells are sitting idle, with no one to clean them up or close them up for good.

These wells pose serious environmental and financial headaches for the farmers who have them on their lands — and they've saddled Albertans with major environmental liabilities that could cost the province tens of billions of dollars to clean up.

According to public estimates from the Alberta Energy Regulator (AER), it would take about $30 billion to clean up those wells, though new reports suggest that number could be as high as $70 billion. The regulator, meanwhile, has only collected just over $200 million in security. 

"There's no money in the bank to pay for all that cleanup," Regan Boychuk told The Sunday Edition's guest host Peter Armstrong.

Boychuk is a researcher with the Alberta Liabilities Disclosure Project, a coalition of academics and landowners pushing for more transparent government data on liabilities.

"The root of the problem is if the polluter doesn't pay to clean it up, taxpayers will have to. And that's not just Alberta; that's across the board," he said.

As crude oil prices continue to fall, the number of orphan wells — those with no solvent company to look after them — have multiplied in Alberta. In 2014, there were only about 160 orphan wells in the province. Today, there are almost 3,500. 

This week, Alberta Premier Jason Kenney announced his government will provide $100 million in loans to the Orphan Well Association to speed up the cleanup process.

But it's not just the orphan wells that worry Albertans. There are thousands of other wells in the province — as many as 90,000 — that are sitting inactive, even though they are run by companies still in operation. Many of these companies are under severe financial strain and face the prospect of bankruptcy. They have fallen behind on their rent payments to landowners, and they owe millions of dollars in taxes to rural municipalities. 

The sheer scale of the problem has prompted the office of Alberta's auditor general to investigate just how the province got here — and whether it's prepared for what's to come.

The soaring number of abandoned oil and gas wells across Alberta is leading to concerns taxpayers will ultimately carry the burden of cleaning them up. (CBC)

'Adding insult to injury'

Daryl Bennett is a farmer from Taber, Alberta and the director of a landowner advocacy group called Action Surface Rights. He says aging, inactive wells have been a serious nuisance for farmers.

"We're okay with the wells being on our land as long as they're cleaned up," he said. 

"When they're suspended or abandoned or go into an orphan situation, they're in an unsafe condition. Most of these wells do have some leakage. The weeds are left uncontrolled. The farmers are colliding with abandoned infrastructure. There's food safety concerns … Some farmers are now facing mortgage restrictions, where banks won't lend them money because of environmental contamination."

But the most important headache for farmers is financial. 

While they don't have the legal right to refuse wells on their property, they are paid annual compensation by the companies that own the wells, to cover them for any adverse effects. But a growing number of those companies have been failing to deliver.

"There is a system in place and a lot of landowners would just prefer that these things are not on their lands," Bennett said. "It adds insult to injury when these companies just decide not to pay the rent."

Bennett's group is asking farmers to fight back against delinquent companies by safely shutting valves and cutting power.

"We are just advocating that landowners exercise their legal rights," he said. "If we have a legal order stating that those companies are supposed to shut down the wells and they refuse to … what other alternative does the landowner have?"

A decommissioned pumpjack is shown at a well head on an oil and gas installation near Cremona, Alta. The Alberta Energy Regulator has issued an order against privately held oil and gas company Sequoia Resources Corp. after it warned it is ceasing operations "imminently" and won't be able to live up to cleanup obligations on thousands of wells and pipelines in the province. (Jeff McIntosh/Canadian Press)

An industry in decline

When an energy company stops paying landowners their annual fees, landowners can apply to the Surface Rights Board for payment through Alberta's general revenue fund. That system is supposed to be a temporary fix, while the government tries to track down the company and recoup those funds.

But Regan Boychuk says that's hardly been the case in practice. Barely any of that taxpayer money is recovered.

"They don't even try to collect it. They just pay it," he said. "Those annual payments have increased tenfold over the last number of years, and there's a two- to five-year backlog. There's likely tens of millions of dollars in claims just stuck in the backlog."

Boychuk believes the conventional oil and gas industry has no prospect of ever being profitable again.

"Every company operating outside of the oil sands in Alberta, at least their Alberta operations, is insolvent. They have more financial and environmental debt than they can ever realistically expect to generate in profits," he said. 

But despite the state of the industry, Boychuk says the Alberta Energy Regulator has been propping up financially unstable companies by relying on a skewed liability rating system. 

That, he says, is because the Regulator has been taken over by the industry. "It was a fraud from day one, written by industry itself and it's been in place for 20 years."

'There is a rural uprising'

The AER and the government have cautioned that, if they don't tread lightly, the system could cause many more small companies to fold. But Boychuk believes Albertans should in no way fear those bankruptcies.

"We shouldn't worry about insolvent companies that are just looting the dregs of our companies going broke. We should welcome that and use it to stimulate a reclamation boom to clean this stuff up," he said. "That's the silver lining of this issue. There's an enormous opportunity in cleanup. 

"It can put everyone back to work. It requires no retraining, no relocation. There's almost no capital expenditures … We can have full employment in the energy sector for decades to come."

Daryl Bennett added that much of this cleanup can take place as part of a larger energy transition in the province.

"One thing that our group is looking at is the fact that you can put small solar projects on a lot of these abandoned sites because they already have access roads. They already have power poles going in and there's room on the grid. There's a lot of benefits."

"We're still going to be involved in energy but maybe we need to start to transition from the oil and gas back into renewables," he added.

Bennett also said that the United Conservatives would be wise to take heed of the brewing discontent among rural Albertans — the majority of whom tend to vote for the UCP and have historically been among the biggest supporters of the oil and gas industry.

"I get calls almost every day from landowners that aren't getting paid, that are upset. And a lot of them have said, 'We voted these guys out once before. We can do it again,'" Bennett said.

"There is a rural uprising ... and that dissent is going to grow if they don't find a way to solve some of these problems."

Click 'listen' above to hear the full conversation.