UPDATED: Smith, Jean insist no public dollars to clean up tens of thousands of ‘mature’ oil and gas wells

Government officials are insisting that no public dollars will be used to clean up tens of thousands of inactive wells that critics say could cost more than $100 billion to properly reclaim them all.

Amid the distraction of the deepening trade war, Alberta Premier Danielle Smith and Energy and Mines Minister Brian Jean quietly released the results of a blue ribbon panel designed to come to a consensus on how to tackle a problem almost as old as the oil industry itself.

Dubbed the ‘mature asset strategy’, the report outlines 21 recommendations it says strikes a balance between concerns from the oil industry and municipalities.

Among the recommendations are the establishment of oil and gas companies to produce seized assets and use the revenues to fund clean up, under the presumption that it sidesteps the issue of using public dollars.

The so-called ‘HarvestCo’ would assume the tenure and license of wells and assets that would otherwise be surrendered to the (Orphan Well Association) so that the economic value of these assets can be used for closure.”

Apart from direct intervention on the part of government in the oil industry, it begs the question of whether using oil and gas itself to pay for cleanup is in fact using public money to do it.

During the UCP leadership campaign, Smith drew fire for suggesting that royalties could be used to incentivize companies to clean up wells they are legally obligated to do.

It’s pitted oil companies who say the rules are too onerous versus rural landowners and communities who just want them cleaned up.

Energy Minister Brian Jean reinforced that message Thursday, saying Alberta is committed to ensuring companies clean up their wells but will not bail them out.

“Supporting the work of cleaning up orphan wells and implementing a new mature asset strategy will complement the efforts that Alberta is already taking to help accelerate the clean up of inactive wells and sites across Alberta,” he said in a statement.

“That said, I am committed to ensuring that no taxpayer dollars go to private companies to clean up their wells.”

As of December 2024, there were 78,000 inactive wells in Alberta compared to 97,000 in 2020 when the new liability management framework was introduced under the former Kenney government.

The problem is almost as old as the oil industry itself: when wells stop producing, companies are legally required to clean them up. But when firms go bankrupt, their liabilities often fall into legal limbo, leaving thousands of inactive wells scattered across Alberta. 

Officially, the government says it will cost about $30 billion to fix the problem, but estimates have ranged as high as $100 billion.

Compounding the issue, rogue oil companies owe rural municipalities some $250 million in unpaid back taxes, with more than $67.8 million in the 2024 fiscal year alone.

Operators of the wells claim a combination of low oil and gas prices and stricter government oversight is forcing companies into bankruptcy, and pushing the Alberta Energy Regulator (AER) to assume responsibility for them.

While some landowners wait years for cleanup, oil companies argue they are being squeezed by rising regulatory costs, including new financial requirements to ensure future cleanup obligations are met.

“Companies can’t afford to clean up their wells if they go broke trying to follow the rules,” said an industry executive who asked not to be named. “But if the government lets them walk away, landowners get stuck with the mess.”

The process has been led by industry veteran David Yager via a sole-sourced contract as ’Special Advisor to the Premier’ while he is a current member of Alberta's Energy Regulator (AER).

“Alberta’s energy industry has changed faster this century than anyone expected,” he said. “We need to manage where we’ve been to figure out where we’re going.”

But critics call it an “egregious” conflict of interest. 

“He's supposed to be an arms length and independent regulator of the industry, not help draft its bailout schemes,” a spokesman from the Coalition for Responsible Energy told The Western Standard.

“Albertans should be concerned about the lack of transparency and limited stakeholder consultation in this process, run by oil and gas representatives for the benefit of oil and gas companies.”

“Ultimately, unless there is anything in the final Mature Asset Strategy report that upholds the ’polluter pays’ principle and enforces the existing obligation for oil and gas companies to pay for decommissioning and cleanup, then the report deserves to be outright objected.”

The issue has dogged Alberta Premier Danielle Smith since before she took office. During her 2022 United Conservative Party leadership bid, she floated the idea of using royalty credits — effectively a public subsidy — to incentivize cleanup efforts. The proposal sparked fierce backlash from both taxpayer advocates and environmental groups, who called it a giveaway to oil companies.

In addition to cleanup costs on depreciated wells, companies must now put up larger financial deposits—so-called “security payments”—to cover future cleanup liabilities under stricter provincial rules.

The Alberta Energy Regulator (AER) reports some progress in tackling the problem, noting that the number of inactive wells has dropped from 97,000 in 2020 to 78,000 as of late 2024.

Industry-funded cleanup spending exceeded regulatory requirements last year, reaching $770 million, and the number of fully reclaimed sites has jumped by 44% year-over-year.

But with thousands of wells still sitting idle and some companies struggling to meet new financial obligations, there is no easy fix.

“It’s frustrating,” said a landowner near Red Deer who has been waiting more than a decade for an abandoned well on his property to be cleaned up. “These companies made their profits and walked away, and we’re left dealing with the consequences.”

On March 26, the Alberta Surface Rights Federation wrote a letter to the Premier and its members outlining their concerns over the process and that it doesn’t go far enough — or alternatively, too far.

“During our participation, we emphasized the importance of repairing the relationship between landowners and the energy industry, as this is crucial for the ongoing development of both renewable and non-renewable energy resources in this province,” wrote ARSF president William Heidecker.

“Unfortunately, aspects of this report do not meet this expectation and may, in fact, exacerbate the deterioration of relations.”