The Alberta government plans to further scrutinize bad-behaving oil companies that abandon their wells, don’t clean them up and then want to return to produce more oil.
At issue is a requirement known as Directive 67, which deals with how oil companies are licensed when they want to start drilling.
Currently, oil companies can declare bankruptcy and walk away from their wells without having to pay clean-up costs. However, some companies who have done this now want to return to the field and get a license to produce more oil. They’ve even re-applied under different company names to do so.
This is problematic because the government doesn’t want to give these bad-behaving companies access again, Energy Minister Marg McCuaig-Boyd said Dec. 6 when announcing new measures for dealing with the issue.
To change that, the government will give the Alberta Energy Regulator (AER) more authority to scrutinize oil companies that want to come back.
The AER will be able to review the names of company directors who submit applications for licenses. If the directors are tied to any outstanding wells that haven’t been cleaned, the agency can reject their applications.
“Closing this loophole not only ensures Albertans are protected from financial and environmental risk, it also ensures that the vast majority who behave responsibly are protected from those who don’t,” McCuaig-Boyd said.
“The industry is frustrated that a few bad actors are harming the reputation of the whole sector, and I don’t blame them.”
As well, some farmers and ranchers have been frustrated with companies leaving abandoned oil wells, she added.
“It’s a frustration that some farmers have to work around these sites, and then it makes it hard for the good actors in the industry and it becomes a reputation thing,” she said.
AER president Jim Ellis said he’s aware of only two company directors who have gone bankrupt, haven’t cleaned their wells and are vying to come back.
“There are not hundreds and hundreds of companies doing this, but it is an issue,” he said.
The most prolific case involving non-compliance involves a bankrupt company called Redwater Energy Corp.
The AER and the Orphan Well Association are getting the Supreme Court of Canada to review a ruling that lets Redwater walk away from its wells and give any of its leftover assets to creditors rather than using them to clean up their messes.
The AER has argued this allows oil company owners to avoid their environmental responsibilities.
If they don’t clean it up, it’s up to the Orphan Well Association to do it. The association is funded by the industry but has received funds from the government to accelerate clean-up efforts.
As well, McCuaig-Boyd said the Alberta government will continue to lobby the federal government to change the bankruptcy clause so companies can be held more accountable for cleaning up.
“There is a particular section of existing federal laws that allow bankruptcy receivers to just hand back the wells that need cleaning up, and that leaves Albertans and the rest of industry footing the bill,” she said.
“These federal laws override our provincial laws.”
There are 1,861 wells that need to be reclaimed in Alberta, according to the Orphan Well Association. The wells have an estimated value of $100 million.