Alberta’s rising stock costs of abandoned and idle oil and gas wells are falling unfairly on landowners and taxpayers, says a University of Calgary report.
“The landowners have been left behind,” said Braeden Larson of the university’s School of Public Policy. “Landowners have eliminated these burdens that have risen with the number of wells that have grown in this crisis.”
Larson and co-author Victoria Goodday use industry and government data, as well as previous research, to highlight turbulent trends in Alberta’s troubled conventional oil spill.
More than half of Alberta’s wells no longer produce oil and gas but have not been recovered. This includes 97,000 wells that have not been properly closed and another 71,000 that have been closed but not cleared.
And exit speed is accelerating.
The report says that idle wells increased by more than 50% between 2015 and 2020. Alberta’s Energy Regulator expects another 6,014 from them in 2021.
More than half have been inactive for more than a decade, and even relatively new wells, after closing, have less than a fifth of chance of re-stimulation.
More and more they are simply deserted. Over the past six years, the number of orphaned wells has increased, says the report.
I stopped paying the rent
Many businesses have stopped paying rent to landlords, the paper says. Almost always, the audience picks up the bill.
In 2018, the Surface Rights Board, which handles disputes between landowners and energy companies, ordered payments of $ 6.4 million of general revenue. In 2014, the bill was less than one-tenth.
The number of rent recovery applications in 2019 was 10 times higher than the average between 2004 and 2014. In 2018, questions to the board were twice the number of complaints resolved.
“(It’s) sometimes a year or two before a landowner can even file his case before the Surface Rights Council,” Larson said.
Rural Alberta Councils say the amount of upcoming property taxes from the oil well tripled between 2019 and $ 245 million.
The impact of idle or inactive wells on property values has never been calculated, the report says.
The payments are not purely monetary.
The provincial energy regulator found that about 10% of inactive wells and 7% of abandoned wells were leaking. Farmers and runners complain about poor management of the weeds that contaminate their crops and pastures.
Alberta Energy spokeswoman Jennifer Henshaw said the united Conservative government had taken “the boldest steps in generations” to tackle the problem.
The government is introducing new rules this year to ensure companies that take over old wells have the resources to make up for it, he said.
“The new framework will begin to reduce the list of inactive and orphaned wells throughout the province, accelerating the timely restoration of land.”
The Canadian Petroleum Producers Association is backing this move, said spokesman Jay Averill.
“Accelerating the dismantling and restoration of disused wells and associated sites remains a priority for our industry.”
The province has increased the loan to the industry-funded group that deals with orphan wells, Henshaw said.
He has directed $ 375 million in federal funds to close wells, pipelines and other facilities. And the regulator has introduced new programs to encourage companies to work together to close groups of wells.
Those programs are useful, the report says. But they tend to favor the industry by encouraging spending in areas where most wells can be cleaned, rather than targeting the most dangerous or the longest dormant wells.
“Some landowners who may have had their property sitting on their land for a considerable amount of time can be ignored,” Larson said. “It’s a side effect.”
Larson recommended further cost research and policy changes, including introducing deadlines for companies to clean their wells, as is done in other jurisdictions.
“Past legislation and legislators could not see a future where the number of inactive and orphaned wells would become such a huge crisis,” Larson said. “Now it’s an opportunity that we have the ability to focus on solutions.”
That’s an understatement, says Regan Boychuk of the Alberta Disclosure of Liability Project, an independent group that has been studying the issue for years.
“A year ago, before COVID, rural Alberta was on fire (over the issue). Landowners threatened to sabotage.”
He points out that the report estimates that total responsibility for untapped wells is $ 338 million. Regulator estimates, which include other energy facilities like pipelines, put the number between $ 58 and $ 260 billion.
The real problem, says Boychuk, is that Alberta’s conventional oil aging and depletion are not profitable in today’s energy market.
“This industry can’t pay its mortgage. If the people who run these things don’t have the resources to clean it, they shouldn’t be managing it.”