Alberta legislation sparks new concern over orphan wells

Hastily passed Alberta legislation has raised concerns about oil and gas well cleanup and landowners’ ability to obtain lease payments.

The Alberta Liabilities Disclosure Project (ALDP) said Bill 12, which was given royal assent April 2, “politicizes wellsite cleanup, tramples landowner rights and still risks leaving taxpayers to foot the bill.”

The bill was passed three days after introduction and with limited debate and legislative assembly attendance due to the COVID-19 pandemic. Among other things, the ALDP said it expands the authority of the Orphan Well Association to manage sites and provides it with an additional $100 million.

The group believes it will also give the OWA the right to enter land without landowner permission and potentially operate abandoned but productive oil and gas wells without providing lease payments to landowners.

Regan Boychuk, lead researcher for the ALDP, said the group has made several recommendations to the federal government, which has said it is preparing a plan to aid Alberta’s troubled energy sector and create jobs.

“It’s been obvious for a few weeks that the federal government is considering aid to put Albertans back to work in the oil patch and the provincial government has been lobbying to shape that. Nothing has been announced yet but it’s widely expected that loans to the Orphan Well Association will be part of that package.”

Alberta’s Bill 12 has implications for how any federal funding to the OWA can be used, Boychuk said. However, the group wants to ensure continuation of the “polluter pay principle” that companies should be held responsible to clean up their own sites.

Dwight Popowich, a farmer near Two Hills, Alta., said a well on his land was operated by Sequoia Resources Corp. from 2008 until the company went bankrupt in 2018. It is not deemed an orphan well but Popowich is no longer getting the $2,500 per year lease payment and must farm around the site, which is in the middle of a field.

He believes Bill 12 will allow the OWA to access his land without permission and potentially reopen the well without paying him compensation.

“We really don’t have a problem with them coming on our land to clean it up. What we have a problem with is coming on our land without talking to us about it,” he said.

“I don’t think any landowner has a problem, if you have an orphan well on your land, of them coming on and taking care of it, remediating and doing all the necessary things to clean it up. But if they’re going to come on our land and start… to produce just like a normal operator, then we expect to treat them like operators.”

That includes lease payments, he added.

The OWA lists 2,789 orphan wells for abandonment, 233 for decommissioning and 3,331 orphan sites for reclamation, plus 914 already reclaimed. Those are figures as of March 23.

In a news release about its concerns, the ALDP suggested Bill 12 incentivizes the offloading of wells to the OWA and unpaid property taxes to rural municipalities will be written off in bankruptcy.

If the federal government does extend loans to the OWA, the ALDP proposed that five conditions be attached:

  • require the OWA to collect the annual levy from oil and gas companies to fully fund cleanup of its entire inventory every year
  • include a short timeline for repayment of any loan
  • match the loan with direct investment in building indigenous capacity
  • finance landowners to reclaim well sites on their own land
  • install independent oversight of federal funds

Tim McMillan, president of the Canadian Association of Petroleum Producers, said in a recent column distributed by Troy Media that the industry is in survival mode and has had to deeply cut expenditures to remain operational.

“What we choose to do today, in terms of support for the energy industry, will determine Canada’s role as a global energy supplier in the future,” McMillan wrote.

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