A new report by parliamentary budget officer Yves Giroux has estimated that the cost to clean up Alberta and Saskatchewan’s oil and gas wells that lack operators – known as “orphan wells” – would hit just over $1 billion by 2025.
The report had identified that roughly 10,000 wells in the two provinces are considered orphans, without operators to assume environmental liability for the structures. Currently, it would cost $361 million to clean them, but the report has warned that the figure could rise to $1.1 billion by 2025 as the number of orphan wells swells by 35% a year.
Giroux’s report also noted that the industry has paid only about $237 million in security deposits. It also noted that the federal government has earmarked $1.7 billion for well cleanup, with half of the amount given to ten energy companies.
The Canadian Press reported that Giroux’s paper does not include any mention of cleanup of pipelines or other energy infrastructure, nor does it state anything about oilsands. The report also does not include liability from the approximately 225,000 wells and Alberta and Saskatchewan that are considered inactive or plugged.
Additionally, the report also does not account for the cost to remediate ongoing contamination from underground chemicals or leaks. According to Giroux, there is not enough data on such cleanups to make an estimate.
Critics have called out the report, saying that it is making a massive underestimate.
“It’s a great disappointment,” said Alberta Liabilities Disclosure Project co-founder and lead researcher Regan Boychuk, who added that the report’s focus on orphan wells is misleading.
Boychuk stated that current legislation forces the industry to fund the cleanup of orphan wells, and that the real danger lies in other wells and infrastructure that are not yet classified as ‘orphan’. He also criticized the report for only looking at publicly traded companies, and for using the same methodology of the Alberta Energy Regulator to ascertain a company’s financial health and define an orphan well.
Boychuk also mentioned that there are roughly 8,000 wells owned by hundreds of insolvent companies that were not included in the report.
A University of Calgary energy economist, Lucija Muehlenbachs, also told The Canadian Press that Giroux’s report was off, saying that the $1.1 billion estimate was just a “teeny, teeny, teeny, teeny fraction.”
“The deal was for any company that goes bankrupt, industry as a whole was going to clean up the mess,” said Muehlenbachs. “That’s the reason we collected very few security deposits.”
Muehlenbachs has noted that the report concludes that taxpayers will be on the hook for payments to clean up the wells.
