A trio of university professors from the University of Calgary’s school of public policy are calling for a public inquiry into the Alberta Energy Regulator (AER) and its implementation of Alberta’s orphan well program..In a peer-reviewed paper released on Wednesday, professors Drew Yewchuk, Shaun Fluker and Martin Olszynski accuse the AER of “mishandling” successive programs that have left taxpayers with a $60 billion unfunded liability to reclaim hundreds of thousands of old and abandoned oil and gas wells..Present government policy “perpetuates historic industry influence in its design and implementation, which to date has resulted in a singular focus on minimizing industry’s costs at the expense of reducing environmental risks and protecting the public purse,” they write..“Albertans have watched for decades as the problem of orphan and inactive assets has burgeoned into an environmental and financial crisis. They deserve a full accounting for the policies that have led to this state of affairs and they need unimpeded access to all of the relevant facts and information so that they can better understand the policy choices facing them as residents and taxpayers in the province.”.Since the discovery of the Turner Valley oilfield in 1914, more than a million oil and gas wells have been drilled in Alberta. Today, an estimated 250,000 holes are abandoned or inoperative. ‘Orphan’ wells are those where the original operators are unknown or long since bankrupt..Starting in the 1980s, successive governments have attempted to address the problem by forcing companies to pay into an abandonment fund under a ‘polluter pay’ principle. In 1997, the former Energy Resources Conservation Board (ERCB) required all wells inactive for more than 10 years be legally abandoned..Nonetheless, the number of inactive wells has more than doubled since 2000. The report noted periods of low oil prices since 2014 resulted in waves of bankruptcies that essentially drained the orphan well fund..A case in point was the saga of Lexington Resources, which was forced into bankruptcy by the Alberta government after it failed to meet its regulatory obligations. The net result was it also assumed liability for more than 1,000 wells, 72 facilities and 1,165 pipelines..In 2020, the Kenney government introduced the Liability Management Framework to address the issue but the report argues it only holds $295 million in security against a potential $60 billion in future liabilities..In February of this year, Premier Danielle Smith proposed $100 million in incentives for oil companies to clean up the worst of these abandoned sites — some more than 60 years old — against future royalty payments. .In July, she tasked Energy Minister Brian Jean with “developing a strategy to effectively incentivize reclamation of inactive legacy oil and natural gas sites, and to enable future drilling while respecting the principle of polluter pay.”.According to the U of C, it’s a day late and a dollar short..“The most significant problem with the orphan program is the high volume of closure work in the orphan inventory and inactive sites waiting to be designated as orphans,” it said..“Because industry’s overall goal is to minimize its costs, it is not surprising that a liability management framework designed in close consultation with it appears to have been created around that goal.”.All three authors are vocal critics of the UCP’s energy policies..Fluker unsuccessfully ran for the NDP in Airdrie in the last Alberta election and argued against the Trans Mountain pipeline at the Supreme Court of Canada.
A trio of university professors from the University of Calgary’s school of public policy are calling for a public inquiry into the Alberta Energy Regulator (AER) and its implementation of Alberta’s orphan well program..In a peer-reviewed paper released on Wednesday, professors Drew Yewchuk, Shaun Fluker and Martin Olszynski accuse the AER of “mishandling” successive programs that have left taxpayers with a $60 billion unfunded liability to reclaim hundreds of thousands of old and abandoned oil and gas wells..Present government policy “perpetuates historic industry influence in its design and implementation, which to date has resulted in a singular focus on minimizing industry’s costs at the expense of reducing environmental risks and protecting the public purse,” they write..“Albertans have watched for decades as the problem of orphan and inactive assets has burgeoned into an environmental and financial crisis. They deserve a full accounting for the policies that have led to this state of affairs and they need unimpeded access to all of the relevant facts and information so that they can better understand the policy choices facing them as residents and taxpayers in the province.”.Since the discovery of the Turner Valley oilfield in 1914, more than a million oil and gas wells have been drilled in Alberta. Today, an estimated 250,000 holes are abandoned or inoperative. ‘Orphan’ wells are those where the original operators are unknown or long since bankrupt..Starting in the 1980s, successive governments have attempted to address the problem by forcing companies to pay into an abandonment fund under a ‘polluter pay’ principle. In 1997, the former Energy Resources Conservation Board (ERCB) required all wells inactive for more than 10 years be legally abandoned..Nonetheless, the number of inactive wells has more than doubled since 2000. The report noted periods of low oil prices since 2014 resulted in waves of bankruptcies that essentially drained the orphan well fund..A case in point was the saga of Lexington Resources, which was forced into bankruptcy by the Alberta government after it failed to meet its regulatory obligations. The net result was it also assumed liability for more than 1,000 wells, 72 facilities and 1,165 pipelines..In 2020, the Kenney government introduced the Liability Management Framework to address the issue but the report argues it only holds $295 million in security against a potential $60 billion in future liabilities..In February of this year, Premier Danielle Smith proposed $100 million in incentives for oil companies to clean up the worst of these abandoned sites — some more than 60 years old — against future royalty payments. .In July, she tasked Energy Minister Brian Jean with “developing a strategy to effectively incentivize reclamation of inactive legacy oil and natural gas sites, and to enable future drilling while respecting the principle of polluter pay.”.According to the U of C, it’s a day late and a dollar short..“The most significant problem with the orphan program is the high volume of closure work in the orphan inventory and inactive sites waiting to be designated as orphans,” it said..“Because industry’s overall goal is to minimize its costs, it is not surprising that a liability management framework designed in close consultation with it appears to have been created around that goal.”.All three authors are vocal critics of the UCP’s energy policies..Fluker unsuccessfully ran for the NDP in Airdrie in the last Alberta election and argued against the Trans Mountain pipeline at the Supreme Court of Canada.
