An advocate for Alberta landowners says the glut in oil prices is leading to a growing number of smaller energy companies going under, exacerbating the issue of already ballooning numbers of abandoned oil and gas wells in the province.
On Friday, representatives for Alberta landowners met with the NDP’s rural caucus in Strathmore to discuss the issue, although no new plans are in the works just yet.
“It’s a serious situation that’s coming and I cannot see a way out of it unless we actually start making industry clean up their wells,” said Don Bester, president of the Alberta Surface Rights Group which represents landowners from across the province. “Instead of drilling new wells, maybe they should be putting some money into reclamation.”
Bester said many companies are taking care of orphan wells, but the number who can’t afford to or just don’t live up to their responsibilities is rising.
“These wells can sit there for ten years and continue to contaminate potential groundwater sources,” he said. “It just isn’t going to happen in the future, it’s been happening for the last ten years and there isn’t enough cash within the government’s holdings that they’ve collected for this stuff through the orphan well levy to even begin to clean them up.”
Since oil was first discovered in Alberta more than 100 years ago, more than 400,000 oil and gas wells have been drilled and licence status counts indicate nearly 170,000 of them are inactive.
A well is considered inactive after it hasn’t produced anything for 12 months. At that point, provincial rules require companies to either suspend or safely turn off the well and a company can choose to abandon it by taking steps to prevent any leakage. The company is then also required to restore the land impacted by the well.
According to Bester, the concern for Alberta landowners who have lease their land to oil and gas companies, is not just environmental but also financial.
“Because of the low oil prices, we have a lot of junior companies that are going bankrupt and that is leaving landowners on the hook for annual rental payments,” he said.
Currently, when a company cannot or does not pay its leasing fees to landowners, a plaintiff can take their case to the Surface Rights Board to have a hearing and if successful, will receive payment from the province. But Bester said that process needs to be amended since hiring a lawyer is too costly in many cases and that there is not a clear enough precedent for what warrants government compensation.
One such example is the case of Alberta landowner Doug Lemke. When the company that owned a well on his land went bankrupt in 2013, he was left with an abandoned well on his land no compensation for it. He applied to the board to try and recoup missed payments, but it said that money owed before the bankruptcy could not be paid because the company was in bankruptcy protection.
“We’ve got active companies that are not in bankruptcy that have stopped paying their lease obligations,” Bester said, adding that the problem is “mushrooming.”
Earlier this year, Saskatchewan Premier Brad Wall proposed an idea that would see the federal government pay for oil and gas workers, who have lost their jobs since oil prices crashed, to clean up abandoned wells.
“‘It’s corporate welfare as far as I’m concerned,” Bester said as he spoke about the plan Wall has proposed to Prime Minister Justin Trudeau. “The governments of Alberta and Saskatchewan have reaped the profits of royalties, the oil and gas companies have reaped the profits of production from those wells- why should all the taxpayers of Canada pay for a cleanup?”
Global News contacted Alberta Environment and Parks Minister Shannon Phillips but she was unavailable for comment on the weekend.
With files from Max Hartshorn, Francesca Fionda, Mia Sheldon and Vassy Kapelos