A de-commissioned pumpjack is shown at a well head on an oil and gas installation near Cremona, Alta., Oct. 29, 2016.Jeff McIntosh/The Canadian Press
The industry-funded body responsible for cleaning up Alberta’s abandoned oil and gas wells is getting another $100-million loan from the provincial government, bringing the total taxpayer backstop of the Orphan Well Association (OWA) to $335-million.
The association said the latest loan would help it double its workload to clean up 1,000 extra wells on private land this year, mostly in the southern part of the province. The government said that will create 500 jobs in a sector that has routinely shed employment since 2015, ever since the price of oil tanked and sector investment fled Canada.
The problem of orphan wells has plagued Alberta. When companies go bankrupt, any wells not sold by their trustee will end up under the control of the OWA.
Around 6,500 orphaned sites currently dot the province, waiting for the OWA to clean them up and return the land to predrilling condition. In five years, the association’s total expenditures on decommissioning wells and pipelines and reclaiming sites jumped to $94.4-million from $16.6-million.
Alberta Premier Jason Kenney and Energy Minister Sonya Savage formally announced the interest-free $100-million loan Monday at a well-servicing company outside Edmonton, although the cash was included in last week’s budget.
It comes less than three years after Alberta’s then-NDP government handed over $235-million under a similar plan to accelerate reclamation of abandoned oil and gas wells, create 1,650 jobs and reduce the environmental risks of abandoned wells.
That loan had a 10-year payback period, which the industry planned to cover by doubling the levy it pays to the OWA. Energy officials told The Globe and Mail the association paid back $5.5-million in 2019, with $18-million scheduled for this year and $30.1-million for 2021.
Lars DePauw, executive director of the OWA, said Monday the number of wells the association cleans up this year will be “a dramatic increase” that will be close to the number of wells reclaimed over the past two years.
Ms. Savage said Monday the loan supports Alberta’s polluter-pays principle – which makes oil and gas companies responsible for cleaning up their messes – and will significantly decrease the number of orphan wells across the province.
It’s just one of the tactics the United Conservative government has deployed to try and turn the tide on growing oil and gas liabilities.
Ms. Savage said her government will soon unveil a suite of policies to address the entire life-cycle of wells, from licensing to operations and production, through to abandonment, reclamation and post-closure of sites.
She said the new rules will improve OWA operations, giving it more flexibility in the ownership, control, sale and management of its inventory of orphaned wells so it can be more efficient.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
Emma Graney