Bankrupt energy firms add to Alberta’s abandoned well problems, Nearly 150,000 oil wells in the province are inactive or abandoned by Tracy Johnson, Business reporter, June 14, 2016, CBC News
Tony Bruder lives in one of the most beautiful parts of Canada, the deep southwestern corner of Alberta where the Prairies bump into the mountains, on a ranch that’s been in his family for three generations.
Those same three generations have lived with an antique sour gas well that produced for a few years in the 1950s and has since lain dormant, rusting slowly through the seasons.
‘Put your mind to what this might mean for the oilsands.’
–Keith Wilson, Wilson Law Office
“My brothers and I used to climb the tree, that’s what we called it, and shoot gophers,” said Bruder.
That well provides little amusement now that Bruder owns the ranch and has descended into the bureaucratic nightmare of trying to convince either the Alberta Energy Regulator or the various companies that have owned the well over the years to clean it up. [The AER is a legally immune, even for Charter violations, abuser of Albertans directly and an abuse-by-industry enabler. Will AER make companies clean up their billions in pollution and devastation in Alberta? Why? Clean up costs money! Is it Protti’s and the courts’ plan to hang Albertans with the oil and gas industry’s poisoned wasteland?]
A decade ago he and other landowners with dud wells on their property invited a half-dozen employees of the Energy Resources Conservation Board (now called the AER) to look at their well sites.
“We actually toured them around the sites,” said Bruder. “They guaranteed us that something would happen in the next six months. We never heard back from them.” [That IS the AER guarantee!]
Bruder’s problem could worsen
Twin Butte Energy, the company that owns Bruder’s well, is facing insolvency. It has until June 21 to find a buyer or it will be in default of its loans.
If that happens, Bruder is in for a major headache. A recent court decision in Alberta, the Redwater Energy case, ruled that in the case of a bankruptcy, energy companies must use their remaining assets to pay back their lenders before cleaning up old well sites.
- Creditors get priority over environment in Redwater Energy insolvency: judge
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“It effectively neutralizes all the tools that the Alberta Energy Regulator and the province have developed over the past 25 years to ensure a super priority for environmental cleanup,” [All part of the Alberta Wasteland Plan?] said Keith Wilson, a lawyer for landowners in Alberta.
“The Redwater decision occurs in a context where we’ve seen a dramatic increase in the number of non-producing wells with no real potential for production.”
Bruder’s well problem is repeated nearly 150,000 times over in Alberta. As of early June, the province has 69,153 abandoned wells, which means they have been plugged, but not reclaimed, and a further 79,102 wells that have been inactive for more than a year.
Why? It’s a lot cheaper to pay a few thousand dollars a year in lease fees than to pay tens or hundreds of thousands of dollars to seal and reclaim a well.
Albertans can’t force a cleanup
North of Bruder, in Three Hills, Alta., Dave Smithers is dealing with a well left over by a company in bankruptcy. A pumpjack sits on his farmland, partially disassembled. The well is 1,500 metres deep, and then spreads horizontally a similar distance.
“The communication with the company over the past two years has been zero,” said Smithers. [The company made their gravy and lived high, what’s there to talk about?]
Alberta landowners like Smithers have no power to say no to an oil or gas well on their property. Nor do they have the power to compel a cleanup. [Tory and Wildrose voting Albertans created and accepted this abuse for decades]
“Since the the land I own is on top of oil and other mineral rights that someone else owned, I could not say no to them to get through my land to get to their asset underground,” said Smithers.
“Therefore I was always of the understanding that if they ceased to want to be there, they would clean my land up to the way it was when they found it.”
That has not happened. Because of where it is placed on the land, the well spends part of the year in the midst of a pond. The topsoil around the site was never replaced, so the well site is surrounded by clay that runs into the surrounding farmland when it rains.
Smithers said that farmers and energy companies have a history of working well together, but he senses it is starting to shift. [Because there was money, environment and health be damned?]
“But now I see a trend where that relationship is breaking down and giving way to what I see as the strong man wins.”
The ‘strong man’ wins
One of the interesting twists of the Redwater Energy ruling was that ATB Financial brought the case forward with Grant Thornton, the bankruptcy trustee in charge of selling Redwater’s asset. ATB is owned by the province of Alberta. On the other side of the case, was the Alberta Energy Regulator. At its heart, this case was about two arms of government fighting each other. [Where they fighting? Or was/is it a sweet set-up to give more “subsidies” to the oil and gas industry?]
- Politicians and industry disappointed no federal funding for orphaned oil wells
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Dave Mowat, the chief executive of ATB, said that the Redwater case was launched for clarity, so that lenders would know if they have appropriate security in place before making loans. But he said he also sees the other side of the story.
“I think there’s an issue with abandoned wells in Alberta, period, said Mowat. “It’s important to me as a citizen of Alberta. I want something that works going forward. [What about going back and cleaning up the mess already there?] I could potentially see some sort of negotiation to come up with something that works for the province and works for the companies and their banker.” [But NOTHING for the landowner?]
However, this case is expected to set a precedent with bankruptcies where the lender is not owned by the province. For that reason, the AER is appealing the decision.
Think of the oilsands
Right now, wells of bankrupt companies end up in the Orphan Well Association, which is funded mostly by industry and has seen its inventory of wells quadruple in the past two years. It has 768 on the list now to be abandoned and 755 to be reclaimed. It reclaimed roughly 100 last year.
With the Redwater decision, the association is set to be overwhelmed, said Barry Robinson, a lawyer with Ecojustice.
He thinks companies should pay a cash deposit up front
‘The orphan well program isn’t going to be able to afford this,” said Robinson.” I think the decision just clarifies the problem, the regulator is not holding enough security for most of these abandoned wells. [Of course not! Isn’t that the intent of the Orphan Well Program? Con Albertans into assuming the risk, and costs, letting companies take the profits and run? Where has Ecojustice been all these years of greed, devastation and poisoning in Alberta?] Deposits and timelines are the answer.”
Wilson thinks that a change in the federal bankruptcy law is in order to fix the problem, so that environmental cleanup is made a priority.
“Put your mind to what this could mean for the oilsands.” [Or open your mind to possibility that leaving Canadians hung with the tarsands devastation was the plan with the federal bankruptcy act!]
As of 2015, the provincial government held $1.6 billion in reclamation bonds to clean up the oilsands — that’s against $21 billion in estimated [Likely not even a remote tenth of the actual costs] clean-up costs. Alberta’s auditor general raised concerns last summer that the province wasn’t holding enough on deposit. [Also part of the plan? Emphasis added]
[Refer also to:
2016 06 08: Meet Alberta’s Radioactive Ranchers: Nielle and Howard Hawkwood. Timing is everything. Why did AIMCo (ATB/Heritage Fund connected) announce $200 Million (bailout?) investment in “Quite leveraged” Calfrac on same day NDP Rural Caucus try to get Nielle Hawkwood’s frac ban resolution on floor of NDP’s Annual Convention?
2016 05 27: “Where does the buck stop?” AER to appeal ruling on oil, gas cleanup obligations. Chief Justice Wittmann found Alberta’s oil and gas licencing regime to be unconstitutional relating to money, but not in Ernst’s “valid” constitutional claim against AER relating to drinking water contamination by oil and gas ]