Alberta’s premier has suggested the implementation of a new policy that would require oil and gas companies to provide a deposit before commencing drilling on a new well. This proposal, which has not been enforced for many years and has faced opposition from the industry, aims to address the increasing number of abandoned oil and gas wells in need of cleanup.
During a recent industry event in Calgary, Danielle Smith proposed that companies set aside $10,000 per well upfront to cover future reclamation costs. She emphasized the importance of companies allocating funds in advance to ensure that adequate resources are available for cleanup once the wells reach the end of their productive life.
Smith highlighted that the deposited amount would accumulate interest over time, ensuring that sufficient funds are available for reclamation when the wells cease production. She expressed optimism about reaching a resolution on the matter through ongoing discussions with industry stakeholders.
Currently, there are approximately 250,000 inactive or minimally productive wells in Alberta, with the Orphan Well Association (OWA) facing a significant backlog of wells requiring cleanup. While some experts view Smith’s deposit proposal positively, others remain skeptical about its feasibility, citing past industry resistance to similar initiatives.
Although Alberta previously mandated a deposit requirement for new well licenses until 1986, the idea was eventually abandoned. Shaun Fluker, a law professor at the University of Calgary, described the current situation with orphan and inactive wells as a failure unique to Alberta. He emphasized the importance of industry cooperation to prevent further environmental challenges.
Some industry groups have raised concerns about the potential financial burden on smaller companies and the risk of increased bankruptcies associated with the proposed deposit policy. Elisabeth Besson, a spokesperson for the Canadian Association of Petroleum Producers, stated that official comments would be reserved until an official announcement is made.
Critics, including Dwight Popowich, chairman of the Polluter Pay Federation, believe that the proposed $10,000 deposit is insufficient to address the extensive cleanup required for orphan wells. Popowich advocates for higher annual fees imposed on the industry to expedite the reclamation process.
The OWA, primarily funded through an annual levy determined by the Alberta Energy Regulator (AER), has witnessed an escalation in orphan well numbers, prompting expectations of a levy increase. Regulatory changes and recommendations, including the potential implementation of closure funding mechanisms, have been proposed to address the orphan well crisis in Alberta.
The report, which involved consultations with Indigenous groups, landowners, and industry representatives, highlighted the necessity of establishing deposit requirements for drilling new wells to ensure responsible end-of-life practices in the oil and gas sector.
