Alberta Energy Regulator stands in the way of orphan well clean up: report

A scathing report from the University of Calgary's School of Public Policy says the Alberta Energy Regulator (AER) has a culture of secrecy and confidentialities, which has hampered its ability to clean up inactive and orphaned wells.

The report, titled A Made-in-Alberta Failure: Unfunded Oil, and Gas Closure Liability also accuses the provincial agency of prioritizing its relationship with the oil and gas industry over being accountable to the public.

Report authors Drew Yewchuk, Shaun Fluker and Martin Olszynski say, “It is time for an independent and transparent public inquiry to examine Alberta’s mishandling of the inactive and orphan well problem and to recommend a regime that will effectively meet this challenge."

They say they found no statutory regulations, setting a timeframe for abandonment of wells and say without that legislative timeframe, in almost all cases the work is conducted voluntarily by oil companies, or only when an order is issued.

"Without any form of timeline, yearly, quotas or penalties for noncompliance, closure obligations, became a mirage constantly receding into the distance," says the report.

"In the absence of mandatory requirement, licensees will continually push most or all of their closure work into the future."

 The authors also claim the AER has underestimated total liabilities.

In 2022, the AER estimated inactive liabilities totalled $11.3 billion.

The report says that is unrealistically low - about half of what it should be.

It says as a result, the money the regulator has required industry to set aside is less than two per cent of its total liabilities per year.

The report authors reserve their most harsh criticism for the agency's relationship with the oil and gas industry.

They maintain the industry has significantly influenced the regulators decision making, and that the AER has prioritized its relationship with the oil and gas industry over accountability to the public, and continues to do so.

The AER is the sole agency tasked with maintaining "safe, efficient, orderly and environmentally responsible" development of energy projects within the province of Alberta.

According to the official website, their functions include "allocating and conserving water resources, managing public lands, and protecting the environment while providing economic benefits for all Albertans."

In response to the report, the AER released an update on how much money by the oil and gas sector on closure activity in 2022.

"Direct spending by industry in 2022 was $685 million, exceeding the spend requirement of $422 million by almost 40 per cent," a spokesperson wrote in an email to CTV News on Wednesday.

"Additional funding was also made available from the Government of Alberta’s Site Rehabilitation Program (SRP). Altogether, over $1 billion was spent on closure activities in 2022."

It says the amount of money that licensees must spend on closure work has also increased for 2023 and 2024.

"In 2022, the industry-wide spend requirement was $422 million. The 2023 and 2024 industry closure spend requirement has been set at $700 million."

Alberta has about 230,000 drilled wells that need to be abandoned and reclaimed. Another 90,000 have been abandoned but not reclaimed.

(With files from the Canadian Press)