Alberta’s plan to manage inactive oil wells now leaves taxpayers off the hook

A revised version of a government-commissioned report on Alberta’s inactive oil wells has suggested a new approach to managing the issue. The original draft of the report, authored by David Yager, raised concerns about the province potentially shouldering the financial burden of reclaiming abandoned wells. However, the updated report now recommends establishing an industry-funded insurance program to cover liabilities related to closed wells, with the program to be managed by the province rather than backed by taxpayer funding.

The report, which contains over 20 recommendations for addressing the approximately 80,000 inactive oil and gas wells in Alberta, also proposes the creation of companies tasked with taking over inactive or declining wells. These companies would use profits from resource extraction to fund cleanup efforts, potentially preventing these wells from falling under the responsibility of the Orphan Well Association in the event of bankruptcy.

Energy Minister Brian Jean’s office has indicated that no final decisions have been made regarding the implementation of these recommendations. However, they have suggested that the new companies would be funded by the industry, similar to the government’s emissions reduction fund that collects carbon taxes from polluters.

Critics of the report, including Opposition NDP energy critic Nagwan Al-Guneid and spokesperson for the Coalition for Responsible Energy, Phillip Meintzer, have expressed skepticism about the proposed changes. Al-Guneid emphasized the need for clarity on how the province plans to “manage” the insurance fund to ensure that taxpayers are not left footing the bill for cleanup efforts. Meintzer, on the other hand, questioned the feasibility of creating companies solely responsible for operating inactive wells, citing the potential lack of profitability and revenue generation.

Yager’s report also suggests transitioning Alberta’s reclamation criteria from a zero-risk framework to a risk-based approach, which would evaluate environmental risks against operational costs and expected benefits. This shift aims to ensure responsible ecological outcomes by deploying resources effectively where they are needed most.

With nearly 500,000 licensed oil and gas wells in Alberta, only about 50,000 are currently active. Companies are obligated to clean up or reclaim wells once they are no longer profitable. Despite over $1 billion being spent on reclaiming inactive wells in 2023, a report from the Alberta Energy Regulator revealed that only five percent of inactive wells were reclaimed, with 54 companies failing to meet closure spending requirements.

As the government continues to review the recommendations outlined in the report, stakeholders are keen to see how Alberta plans to address the challenge of inactive oil wells while ensuring environmental responsibility and financial sustainability.