The Alberta government remained focused this week on berating Prime Minister Justin Trudeau for not doing enough to fix what ails the province’s beleaguered oil industry.
And oil companies were only too happy to pile on, reiterating their criticism of Ottawa’s proposed Bill C-69, which they insist will just add to the regulatory burden they say is already hampering the construction of pipelines and savaging profits.
A lot less was said, however, about the disturbing findings published in a Globe and Mail investigation last weekend that revealed an economic and environmental disaster looming on the not-too-distant horizon. And that crisis comes in the form of tens of thousands of wells, all inactive and many long since abandoned, with no evident plans for properly sealing them.
A booming trade of unprofitable oil and gas wells in Western Canada is allowing companies to evade cleanup costs. And it’s going virtually unchecked by regulators. Who will pay to clean it up?
The Globe and Mail
The Globe’s investigation uncovered that oil and gas companies sell these distressed assets for next to nothing to smaller, far less capitalized companies that are more than happy to drain whatever revenue life there may still be left in them. The big companies are thrilled to shed hundreds of millions of dollars in clean-up costs off their books. If the junior buyer goes bankrupt, as is often the case, then it’s taxpayers who are on the hook for those remediation costs.
Wells that aren’t properly sealed can leak methane – a potent greenhouse gas – into the atmosphere. These wells can also contaminate soil and water, and pose a threat to fish and livestock. Until the well is properly contained, the land it sits on is effectively useless.
Right now, there are 122,456 inactive wells in Western Canada (many for five years, others stretching to decades) and of that total three-quarters are in Alberta. The cost to properly contain the current backlog of defunct sites and potential future ones is forecast to be as much as $27-billion. The Alberta government has collected less than $2-billion in security to protect taxpayers against these liabilities. This differential represents a nightmare scenario.
Internal documents recently released by the Alberta Energy Regulator estimate clean-up costs for the province’s broader oil industry at $260-billion – which is nearly five times greater than the number it had been previously using in public. Any way you slice it, it’s a huge issue, and one that no one wants to talk about – certainly not the industry.
Discharging your environmental duties to someone else is not a good look - but in some ways you can’t blame these companies. If governments aren’t prepared to police the trading of junk assets, then companies will take advantage of that lack of oversight.
In the U.S., there are far stricter rules governing inactive wells. In Texas, for instance, companies can only keep a well idle for one year. After that, they can apply annually for extensions that require security bonds. The regulations are intended to discourage companies from delaying their environmental obligations or dumping them on someone who can’t meet them.
Not up in the Great White North. Here, it’s a free-for-all.
There is a complete lack of transparency around the level of risk facing taxpayers in all this – taxpayers who are going to be left holding the bag to the tune of multiple billions of dollars. But the government of Alberta, for one, isn’t going to say peep to an oil industry under siege. Can you imagine Premier Rachel Notley saying: “We are going to toughen up the rules around inactive wells and it’s going to cost you money.”
First, the industry would find a way to blame Justin Trudeau. Second, it would revolt until the idea was discarded.
Since The Globe broke this story, the Alberta government has made a few vague commitments to start looking at the situation. The governments of British Columbia and Saskatchewan are being similarly non-committal about cracking down on oil companies and ensuring taxpayers don’t get stuck with their clean-up bills.
Right now, governments seem content to kick this problem down the road, and let the next generation deal with their incompetence and shameful lack of courage to do the right thing.