Alberta’s oil and gas industry, with government assistance, spent nearly $900 million on abandoned and inactive oil and gas well cleanup and closure in 2022—the first year its regulator has reported on well site remediation performance and liabilities across Canada's fossil-fuel energy production hub.
Under a liability management framework, energy industry companies spent $518 million directly on cleanup—exceeding the $315-million spending mandate set by the Alberta Energy Regulator which has been tracking well closure spending since 2019. The total of unremediated wells dropped 9%, to 83,000 from 91,000 in 2021, said its report.
The province's Orphan Well Association, a not-for-profit, industry-funded entity created in the 1990s to manage well closures, as well as a province-funded cleanup program, covered remaining costs for closure and reclamation in 2022.
Canada ranks fourth in global oil production and sixth in global gas output, both largely centered in Alberta—but only about one-third of its estimated 466,000 provincial wells are active, and 10% produce only minimally, said the energy regulator.
The provincial liability management program allows eligible requesters to nominate for closure a well or facility site that has been inactive or abandoned for five or more years. Mandatory quotas specify the minimum amount of money that licensees must spend on oil and gas closure each year.
In 2022, Calgary-based Amethyst Petroleums Ltd. spent $1.6 million on well reclamation, or 375% more than the mandatory requirement, according to the report. It also said that 51 noncompliant licensees missed closure mandates by a total of $3.13 million.
In Dispute
Alberta Energy Regulator CEO Laurie Pushor called the report results “a robust and clear indication that the industry is improving in the cleanup of oil and gas wells, pipelines and facilities.” Provincial Energy Minister Brian Jean said in a statement said the cleanup under the liability management framework “is making a big difference."
But Martin Olszynski, an associate professor of environmental law at the University of Calgary and frequent witness in regulatory hearings, said the record in orphan well remediation "is much worse than is suggested in that report.” He said steps taken by the regulator “have been totally inadequate.”
Under the framework set in 2020, the regulator said the cleanup spend requirement would increase to up to $740 million.
But Olszynski said the regulator has now opted to cap industry’s required spending this year and next at $515 million, ending the scaleup "because it was based on limited data inputs and used many assumptions resulting in a hypothetical scenario.”
Olszynski also disputes Alberta government reliance on the regulator's estimate of total industry liability from abandoned wells at $33 billion, stating that "even at that conservative estimate it would take 40+ years to close the liability gap.”
