Alberta seizes abandoned oil and gas wells amid concern over cleanup costs

The Alberta government on Thursday ramped up efforts to tackle the growing problem of abandoned oil and gas wells after it ordered the seizure of roughly 2,500 wells, pipelines and facilities from Sequoia Resources Corp., a now-defunct oil and gas firm that went bankrupt in 2018.

The Alberta Energy Regulator (AER) issued a Reasonable Care and Measures (RCAM) which requires the OWA to immediately take over the orphaned sites for closure.

“Our top priority is to protect the public and the environment while ensuring the safe closure of upstream oil and gas infrastructure left behind by companies no longer in business,” AER president and CEO Laurie Pushor said in a statement Following the seizure.

The move comes as Alberta grapples with a growing backlog of abandoned oil and gas wells, many of which were left behind by struggling companies unable or unwilling to fulfill their cleanup obligations. 

Abandoned and orphaned oil and gas wells pose a major financial and environmental challenge for Alberta. Critics estimate that fully cleaning up  aging energy infrastructure could conservatively cost taxpayers up to $33 billion if companies fail to meet their legal obligations.

The OWA, an industry-funded organization, is responsible for managing these orphaned sites, but critics warn that its current funding model is insufficient to tackle the full scale of the problem.

Among the 2,500 Sequoia sites transferred to the OWA, about 550 have industry partners, known as working interest participants (WIPs), which are still legally responsible for a portion of the cleanup costs. The AER said those companies are expected to pay their fair share or assume direct responsibility for decommissioning specific sites.

Sequoia collapsed in March 2018 after struggling with financial losses and regulatory pressures. The company’s oil and gas properties, once producing 5,150 barrels of oil equivalent per day, have been shut down for nearly seven years. 

But despite the shutdown, Sequoia continued to collect millions in revenue from third-party road use fees, raising questions about how bankrupt energy firms manage their remaining assets while avoiding cleanup responsibilities.

The Alberta government has pledged to hold industry accountable for its environmental liabilities. However, some industry insiders warn that tougher regulations and financial penalties could discourage investment in Alberta’s energy sector at a time when it is already facing global market pressures.

Indeed, it's not clear if receivers received any bids for Sequoia's properties by a July, 2024 deadline or if potential buyers were scared off by those abandonment liabilities.

The Western Standard reached out to the company's operations manager -- Issac Newton as per its website -- but received no response.

While industry spent approximately $900 million on cleanup efforts in 2022, advocates argue that the current pace of decommissioning is too slow to prevent long-term environmental damage and financial liability.

“The backlog of orphaned wells is growing, and if Alberta doesn’t act decisively, taxpayers will be left with the bill,” said one environmental policy expert.