Alberta’s multibillion-$ orphan well problem prompts AG probe but does he have the power, integrity, ethics, diligence and courage to dig deeply in, or will he just tickle dust on CAPP ‘n AER’s nose? Besides, AG is decades too late, the problem has been years in intentional making

From ASRG FB Page:

Emmanuel Logos:

Well, this story is most certainly causing a stir. Even in South Africa for some reason. Just got a call from a South African reporter wanting more information on the story. Says this story is of great interest to his environmentalist readers. Go figure.

I look at that photo of the pad lock and think WOW, this is someone’s idea of well site security! No Emergency Response Plan in place and no one to call if there’s a problem. I guess I’ll be calling Ghost Busters if there’s an emergency.

A few of the comments to the CBC article below:

William Lee

Orphan Wells, didn’t he do Citizen Kane? [Ha, brilliant! Roaring laughter!]

Barry Pattern

What a surprise!

This is an old trick. Put up the minimum, declare bankruptcy and leave the mess for the government to clean up. Wait until the oil companies are finished with the oil sands. They will walk away from a huge mess when they’re done.

Is it any wonder why BC does not want a pipeline?

Bob Prowse

UCP/Kenney will have to FIRE the auditor general !

How dare some Gov’t Bureaucrat question how Kenney’s beloved campaign contributor’s conduct their Oil & Gas Business !

John Smith


Raymond Williams to @John Smith:
A better test would be off the casing vent – that’s the one that matters.

Morgan Arthurson

Kenney and the UCP just used public sector workers’ pension to give to smaller oil and gas companies to buy a bunch of abandoned wells from bigger oil and gas companies; then these smaller oil and gas companies claimed they could not afford to pay to clean up these abandoned wells and that they could not pay their taxes as well. Remember how all those huge semis drove all over the country to ‘protest.’ Canadian taxpayers should not have to pay for the oil and gas corporations.

Morgan Arthurson Reply to @Lance Sorensen: The Alberta oil and gas industry were done in by the global market. Albertan taxpayers should not have to pay the profits of these companies.

Dave Johnson

You can walk away from a polluting well, but not your student loans. Guess we know who are writing the rules.

Morgan Dubracus Reply to @Dave Johnson: dont have to pay taxes either. Cant get blood from a stone is how Kenny put it.

Doris Wrench Eisler

Instead of pressuring oil and gas companies to clean up after themselves, the UCP reduced their taxes from 12 to 8% and loaded the clean-up costs onto the tax[payers backs. They are consummate elitists.

Peter Kelly

This IS Conservative politics and policy. You asked for it and wholeheartedly vote for this time and time again…. Albertans should have always had a provincial sales tax that set aside money for the cleanup they all knew they get saddled with. Putting business before people and the environment is the benchmark of Conservative Policy… and it has to end. [AMEN]

Louis L’Amour

Meanwhile, Kenney has just given the oil and gas companies a $6 billion tax break by lowering royalties from 12% to 8%.

Alberta’s looming multibillion-dollar orphan wells problem prompts auditor general probe, There are 3,406 deserted oil and gas wells in the province, with growing concern about more joining the list by Inayat SinghCBC News, Jan 23, 2020

This oil well near Two Hills, Alta., has been inactive since 2012, and its owner, Sequoia Resources, ceased operations in 2018. Dwight Popowich, who owns the land, wonders who will clean it up. (Kyle Bakx/CBC)

1213 comments [as of 7pm, jan 23, 2020.]

Alberta’s energy minister is faulting the previous government for allowing the number of oil and gas wells left behind by bankrupt companies — known as orphan wells — to grow to the point where the province’s auditor general is now examining how the problem got so big.

“Considering the previous NDP government took no action on the issue, it is unfortunate that the auditor general now has to intervene,” Sonya Savage said in an email Thursday. 

The comments from the United Conservative Party minister came after CBC News reported on the audit earlier on Thursday. 

There are currently 3,406 orphan wells scattered around the province, usually on the properties of rural landowners, where they lie untended.

There are another 94,000 inactive wells in the province, with the worry that many of these may become orphaned as their owners struggle — and taxpayers could be left with the bill.

The auditor general’s office will look at whether the province is doing enough to prevent wells from becoming orphaned in the first place, and whether it is prepared for more to be added to the list due to ongoing pressure on Alberta’s energy economy.

“We will be focusing on both whether the government — and specifically the Alberta Energy Regulator — has the systems and processes to assess whether orphan oil and gas sites are being managed and reclaimed efficiently and economically in the best interests of Albertans,” said Val Mellesmoen, spokesperson for the Office of the Auditor General of Alberta. 

Meanwhile, the government is also reviewing its own processes to deal with orphan wells. Savage says the government will be proposing a suite of new regulations “covering the entire lifecycle of wells in the first quarter of the year.” [Ya, Make Canadians Pay, and deregulate more to let more foreign owned companies gang rape Alberta.]

The Alberta Energy Regulator (AER), an arm’s-length [?????? Why is CBC reporting untrue crap like this? AER is 100% funded by and controlled by the industry it is supposed to regulate, that’s hardly “arm’s-length.”] agency of the provincial government that oversees the energy industry and its activities, has a liability management system that is supposed to make sure companies that are permitted to drill have a healthy enough bottom line to pay for cleanup later on.

If a company’s estimated assets fall below the cost of its environmental liabilities, the AER can [But doesn’t] collect and hold what’s effectively a security deposit to make sure there’s money on hand for cleanup if the company later walks away from the well.

But the regulator has been using a formula based on out-of-date commodity prices that has inflated the assets of many companies. As a result, companies were not asked to put down large enough security deposits for future cleanup.

[and, worse, AER’s estimate for liabilities is likely low.]

The province’s own estimate of the eventual cleanup bill for every oil and gas well in Alberta is $30 billion, while the AER only holds $227 million in financial security.

… Alberta has asked the federal government to help pay for cleaning up orphan wells. In a November 2019 letter sent by Alberta Finance Minister Travis Toews to Bill Morneau, his federal counterpart, the province asked Ottawa for funding and tax instruments to encourage investment in well reclamation.

“This system is just not sustainable,” said Lucija Muehlenbachs, an economist at the University of Calgary who specializes in the energy industry.

“It’s not functioning, so it will have to be completely thrown out the window. But it’s many years too late.”

The AER uses a liability management rating, or LMR, to determine whether a company has enough money to clean up its wells down the line. If the company’s estimated assets — calculated based on the amount of resources in its wells — are less than the estimated cost of cleaning up the wells, the company has to pay a security deposit.

But the AER has been using commodity prices from 2008-2010, back when oil prices were much higher, to estimate the value of assets. Even though the regulator assesses these assets every month, because of its use of old commodity prices, many companies that should be putting up security deposits have not had to. 

And simply adjusting the calculation now to account for current prices isn’t an easy fix, according to the AER, because it could force struggling companies into bankruptcy.

“In many cases, this would have negative consequences for those already facing financial difficulties, and increases the risk that end-of-life obligations would not be addressed,” AER spokesperson Shawn Roth said in an email.

Landowners left in the lurch

Meanwhile, landowners who agreed to lease their land to oil companies so they could drill wells were promised the companies would clean up after the wells were done producing and restore the surface of the land to its original state.

Instead, many are left with inactive wells that nobody is monitoring, let alone cleaning up and closing.

Dwight Popowich has been left in limbo and unable to sell his land while it has an inactive well left behind by a company that ceased operations in 2018. (Kyle Bakx/CBC)

Dwight Popowich has an oil well on his property near Two Hills, Alta., about 100 kilometres east of Edmonton, that was drilled in 2008. It stopped producing in 2012, and its owner, Sequoia Resources Corp., stopped operating in March 2018No remediation work has been done on the well.

Popowich is waiting for the well to be transferred to the Orphan Well Association, which is an industry-and government-supported group that is trying to manage orphan wells. But, in the meantime, no one is monitoring the well on his property.

“We don’t know if it’s safe. We don’t know if it’s leaking. Nobody’s showing up to even take a look at it,” Popowich said.

Sequoia held licences for 2,300 wells when it ceased operations in 2018.

For Popowich, the well has become a financial headache in addition to an environmental problem. He wanted to subdivide his land and sell off half of it to help pay for his retirement. But the well is in the way.

“Nobody wants to buy the land if they have to deal with a well that’s in limbo,” he said.

A better way

Across the border in North Dakota, as oil prices declined, the state saw a growing number of inactive wells, but it has not experienced the same problem with orphan wells as Alberta.

North Dakota has strict timelines in place to deal with inactive wells. If a well stops producing for as little as three months, it’s immediately flagged. The state also collects a bond from companies upfront — $50,000 US if the company is drilling one well — and can use that money to pay for plugging and remediating wells. 

North Dakota, which is the second largest crude oil producer in the U.S. after Texas, has only 1,683 inactive wells — and not one of them is an orphan.

The head of North Dakota’s regulator says a combination of a bond system and plugging and reclamation fund is essential for preventing orphan wells.

“You’ve got to start somewhere,” said Lynn Helms, director of the North Dakota Department of Mineral Resources.

Alberta, on the other hand, does not have any timeline for how long a company can leave a well inactive. This has raised concerns that many of the approximately 94,000 inactive wells in Alberta may become orphaned before their owners clean them up. 

Looking ahead

Alberta’s industry knows the liability management system needs to change, and the AER and provincial government have said they are reviewing the program. [Sure, 30 more years of review with zero clean up, zero increase in funds, more tax cuts for industry, more billions of dollars in profits for companies and 1000 times more intentional bankruptcies enabled by our courts for those companies to happily walk away. ALBERTA AUTHORITIES ARE FRAC’ING SHAMELESS CORRUPT COWARDLY IDIOTS] The AER says a new system would gather more company-specific information to gain a more holistic view of whether a company can meet its environmental obligations. 

But the government and regulator have to tread lightly on an industry that’s struggling.

“We want to see progress on the file, but you have to manage the unintended consequences,” said Brad Herald, vice-president of Western Canada operations for the Canadian Association of Petroleum Producers. [Media must start to find some integrity and backbone, and quit quoting corrupt CAPP!!]

“You don’t want to create more defaults. There are a lot of companies struggling. We are empathetic to that.”

Refer also to:

Report ‘buried’ by Alberta government reveals ‘mounting evidence’ that oil and gas wells aren’t reclaimed in the long run, A previously unreleased report obtained by The Narwhal shows a government division — soon to be scrapped by premier Jason Kenney — raised red flags about the province’s failing system for wellsite cleanup by Sharon J. Riley, Jan 23, 2020, The Narwhal

Canada, the world’s stupidest “petro” (fascist) state: Oil giants pay billions less tax in Canada than abroad

Herr Lecturer, Journalist Andrew Nikiforuk, warns $260B worth of oil and gas industry liabilities could be dumped on taxpayers. “Most companies that have gone into fracking are short of cash, highly indebted and barely making a go of it.”

Auditor General David Wilke nicely slaps AER and Alberta Environment (oil & gas industry’s lapdogs) for some Hanky Panky but who will investigate decades of the “regulators” covering-up endless crimes and public health harming pollution by oil and gas companies? And when?

Kenney stealing $16.6 Billion from Alberta teachers to give yet more corporate welfare to polluting oil & gas & frac bankrupters via AIMCo? Includes revealing comments by Diana Daunheimer.

Kenney warns Albertans to brace for major cuts while giving massive tax cuts to rich corporations. CitizenWhoPaysTaxes: “Mom… how come we can’t have any nice things? Shut up son and wave to the nice Mr Kenney.”

All in the Protti Family? What are the connections between law-violating CSIS, law-violating Encana, propagadist big oil lobby group CAPP, law-violating EUB/ERCB/AER and the big banks?

2015: Letter by Ronalie Campbell: Frac Prosperity Prentice Style: Take $30 Million from Education, Give Hundreds of Millions (how many Billions?) to Oil and Gas Industry (and zip in royalties)

Failing grade, Auditor general slams Alberta Energy’s way of tracking royalties

Study/review not needed of the 100s of billions of dollars in oilfield liabilities. Complete overhaul of petroleum ownership and its structure is needed, and to send AER, groups, CAPP, CSUR etc packing!

Study is not needed! Action is needed! Simple solutions abound! Here’s one: Immediately require bonds are paid upfront, in full, to be held in trust, before any new approvals are given, especially to notorious bullies/law violating aquifer frac’ers like Encana. Another: disallow the big brute companies from selling off their polluting, aging wells/facilities to little nothing players sure to bankrupt themselves soon as they finish sucking a few million out. Make the brutes produce their wells/facilities til they are done, especially in all the formations they soured by hydraulic fracturing and water injection for enhanced recovery. And make the brutes clean up. The big companies are sitting on billions in cash, and are causing most of the liabilities by selling off their no longer massively profitable assets to fly by night junk operators who fully intend to walk from clean up. These actions could be quickly and easily implemented by any govt that gave a damn.

Once a well/facility is appropriately cleaned up, abandoned, landowner satisfied and signs off on it, company gets their money back. Easy peasy.

All landowners forced into enduring the abusive, polluting industry on their private properties must also be fully paid in advance sufficient funds to be held in trust to fully deal with the inevitable clean up with additional emergency funds for the many things that go wrong, eg frac quakes damaging a driveway, home or barn foundation; aquifer gets contaminated; water well is destroyed; spills, on or off lease; health and or soils/crops harms; etc. Problem solved. The endless crooks will not be able to operate under appropriately protective measures, and will leave, good riddance. Alberta will be much better off without them. Grossly over paid CAPP and other industry lobby groups will cry like the spoiled babies that they are. Let them cry.

Most important must do! Stop funding and get rid of Synergy Alberta and all it’s gunky evil tentacles and groups. Stop funding so called environmental, but really just enabling “controlled opposition” NGOs. Stop the mega millions given to Lies & Propaganda funding. Use the money to start cleaning up. So Super Simple.

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