Alberta's oil companies are not being charged near enough to cover the cost of cleaning up orphan oil and gas wells, says a new report.
Coalition for Responsible Energy (C4RE) commissioned a report by liabilities regulation expert Drew Yewchuk that says this year's $144.5 million levy to oil and gas companies for the orphan well fund will cover less than a quarter of actual cleanup costs.
The Orphan Well Association (OWA) is funded by industry and is responsible for cleaning up wells and other energy industry infrastructure if owners become bankrupt or insolvent and cannot meet cleanup and reclamation obligations. Alberta Energy Regulator (AER) sets the annual levy that must be approved by the province.
It is a system meant to shield taxpayers from picking up the cost of cleaning up the energy industry's mess.
C4RE says that by OWA's own estimates there were $862 million worth of cleanup costs on the books as of 2023-24, leaving a $715 million shortfall based on the $144 million levy. That math does not include the estimated billions of future cleanup costs for inactive wells, many of which are likely to be added to OWA's list in future years, says C4RE.
Red Deer resident and C4RE member Mark Dorin said the "orphan fund exists to protect Albertans from bearing the costs of a reckless industry, but it only works if the AER sets an appropriate levy and forces these companies to pay whey they owe.
"It's time for Albertans to hold our government and our regulator accountable to protecting taxpayers, landowners and the environment and ensure they make polluters pay," said Dorin, who is also a founding member of another group Polluter Pay Federation, which has pressured the government and regulators to hold oil and gas companies accountable for their messes.
Yewchuk's report calls for the levy to be increased to cover the full $862 million liability to address the "alarming pattern of under-funding at the industry-controlled Orphan Well Association as a result of of successive annual levies that were insufficient to to cover existing cleanup costs."
C4RE has also filed two appeals against the AER, a regulatory appeal and a formal request for reconsideration on behalf of Two Hills-area landowner Dwight Popowich. The filing argues the orphan well levy is too low to cover the cost of the backlog, including a well on his property drilled by bankrupt Sequoia Resources and which may not be cleaned up for years. Sequoia's bankruptcy added 2,500 wells to the OWA's inventory.
Energy and Minerals Minister Brian Jean said in a statement that every oil- and gas-producing jurisdiction is facing the cleanup issue and the province is "committed to addressing this challenge head on while ensuring the polluter pays principle."
The orphan well levy was increased this year to $145 million from $135 million. The program has decommissioned more wells in the last five years than at any time in its history, and the OWA closed 622 sites in 2023-24, a 44 per cent increase over the previous year.
