A recent Supreme Court ruling is putting the onus onto bankrupt oil companies to clean up abandoned oil wells.
The 5-2 decision ruled that Redwater Energy Corp.'s bankruptcy trustee, Grant Thornton Ltd., could not shirk environmental responsibilities to ensure abandoned wells are safe.
The ruling will impact what creditors of bankrupt companies can retrieve from liquidated assets, with of the proceeds going toward environmental clean-up costs rather than loan repayment.
While the decision is being applauded as environmental stewardship on the one hand, it leaves uncertainty as to whether or not it will become too onerous for smaller oil and gas companies to borrow money and for some, sheds light on a suffering energy industry.
"The first thing that comes to mind to me is that we have a lot more abandoned wells in this province now then a few years ago," said MP Blake Richards.
While careful not to excuse oil companies for environmental neglect, Richards does question how enforcement will play out in practice and looks to the 90,000 abandoned wells across the province as a largely government-created problem that points to a lack of support for the energy sector.
His sentiments are echoed by Airdrie-Cochrane UCP candidate Pete Guthrie, who is concerned that there are so many insolvent energy companies in the first place.
"A healthy industry is essential so companies can thrive and fulfill their environmental responsibilities," said Guthrie, who wants to see the provincial and federal governments more focused on market access and less on imposing more regulations.
"Industry should be responsible and I'm sure that they want to be," he said, adding that while the high court decision is "good news for the Alberta taxpayer" he hopes it doesn't prove to make things more challenging for young oil and gas companies trying to get off the ground.
Banff-Cochrane NDP MLA Cam Westhead, hails the verdict as a win for the environment.
"I'm very pleased that the Supreme Court ruled in favour of the polluter-pays principle, which is critical to Alberta's role as a responsible energy producer," said Westhead.
"The court's decision means Albertans are protected from irresponsible operators and working families won't have to pay for the financial and environmental liabilities left behind when companies walk away from their obligations," he said, adding that the ruling sheds light that while the majority of oil companies are responsible, there are the "few bad actors" in the system.
The Alberta Energy Regulator (AER), the province's sole regulator that keeps energy companies in check, issued a statement that they are supportive of the ruling.
"The AER is steadfast in our belief that the public should not be on the hook for the closure and reclamation costs of insolvent licencees," said CEO Gordon Lambert in a press release posted on the regulator's website.
Shawn Roth, senior communications advisor for the AER, explained that the current inactive well count is at 89,338 and that they regulate around 450,000 wells.
When a company no longer needs a well it must be permanently sealed and taken out of service; this part of the closure process is referred to as abandonment. If a well, pipeline or facility is inactive for longer than between six and 12 months (depending on type of site and potential public or environmental risks) it is considered inactive.
Roth explained thatwWhile the AER works closely with government and industry to develop liability management programs, with a mandate to protect Albertans from oil and gas liabilities, including environmental, the Orphan Well Association (OWA) manages the closure of orphaned oil and gas wells, pipelines, and facilities, and the reclamation of associated sites across the province.
Every year the AER issues an orphan levy to energy companies, in accordance with the Oil and Gas Conservation Act, and transfers the funds to OWA's operating budget. These funds help prevent taxpayers from being hit by closure costs and it is the sole fee collected by the regulator to fund orphan wells.
The OWA released a statement indicating their support for the Redwater verdict.
"We have been scaling up our decommissioning and reclamation program over the last year as a result of the increase in Industry funding through the annual Orphan Levy as well as the loan from the Alberta government. We expect to decommission (abandon) over 700 wells in our current fiscal year. This is a three-fold increase in activity compared to last year and we plan to increase our activity in 2019 as well," the not-for-profit stated in a Jan. 31 press release on their website.
According to OWA's website, there were 74 wells for abandonment in March 2013 and 387 for reclamation.
In March 2018, there were 1778 wells for abandonment and 1085 for reclamation.
To view a map of abandoned oil wells, click on http://www1.aer.ca/onestop/ and scroll down to 'Public Map Viewers' and 'Abandoned Well Map.'
Fracking concerns remain
For Nielle and Howard Hawkwood – ranchers who live north west of Cochrane who have made headlines over the years with reports of hydraulic fracturing "fracking" impacting their personal health and that of their animals and neighbourhoods as a result of the open air flaring that emits chemicals into the air – the Redwater verdict appears to be a step in the right direction.
"It's a good step ... it might prevent some companies from starting drilling," said Nielle, who reports that during peak fracking years in the Lochend area northwest of Cochrane, from 2011-2014, she suffered from significant health problems such as kidney malfunction and hair loss.
Advised by a doctor that these were merely symptoms of aging, Nielle said her symptoms drastically subsided in 2015 – when fracking in the area subsided due to the market.
The Hawkwoods said they remain disappointed and without answers, as the Alberta Energy Regulator has yet to release their report, following area well testing conducted over two years ago.
The ranchers are firm in their belief that the testing revealed dangerous levels of toxins being released during flaring from multi-stage fracking.
They hope to see proactive government solutions such as forcing companies to put tracers in their frack fluid and stopping companies from spreading drill cuttings, which include radioactive materials.
In December, 2018, the grassroots group ACORRDS (Albertans Concerned Over Responsible Resource Development Society), of which the Hawkwoods were among the founding members, was dissolved.
