Internal documents suggest Alberta Energy Regulator underestimated oil well liability

EDMONTON -

Internal documents from Alberta's energy regulator suggest the province's environmental liability for hundreds of thousands of oil and gas wells could be nearly triple the figure the agency announced earlier this week. 

In a report released Wednesday, the Alberta Energy Regulator said the cost of cleaning up the province's 466,000 wells would be $33.3 billion. That figure is derived partly from estimates of what it would cost to remediate individual wells in different areas of the province, contained in a 2015 document called Directive 11.

But in 2018, the agency produced discussion papers on something called the Closure Liability Assessment Model, designed to create "greater understanding and transparency of liabilities," one of the papers indicates. 

Those documents were obtained under Freedom of Information legislation by University of Calgary researcher Drew Yewchuk and provided to The Canadian Press. They provide a different estimate of the costs faced by industry and, potentially, Alberta taxpayers. 

For almost every region of the province, the documents suggest Directive 11's estimates of what it would cost to clean up a well are too low. 

The documents suggest that for the boreal region, Directive 11's estimates are 65 per cent too low. In the parkland, they're 173 per cent short. Costs for the foothills region were underestimated by 334 per cent, and the figure for the alpine was 675 per cent shy. 

In total, the documents suggest the liability estimates derived from Directive 11 that inform Wednesday's report were low by 263 per cent.

The documents suggest the total cost of well cleanup to be about $88 billion. 

The documents also estimate liabilities not included in Wednesday's report. 

They point out the province has 59,000 abandoned and inactive oil and gas facilities that need remediation. They could add an extra $1.4 billion for pipeline closures — although that figure seemed in doubt.

"True status of 'operating' pipelines not known," the documents say. 

As well, the documents say Directive 11's determinations of where the wells were located were also inaccurate, affecting its estimate.

"Large differences existed in the distribution of sites," they say. "(It's) necessary to project costs to the population of sites to account for true distribution of wells within reclamation regions and enable accurate estimation."

Those documents never saw the light of day.

"The … Leadership Committee decided to delay public implementation … due to implications of recognized higher liabilities from investors and public (too much change too soon)," the documents say. 

Regulator spokesman Renato Gandia said in an email the documents relied on "limited data inputs and used many assumptions resulting in a hypothetical scenario." 

Gandia said the regulator is moving toward using data collected from industry on closure spending for specific activities and pieces of infrastructure. 

"This approach is now collecting specific information to eventually replace the current methodology in Directive 11. When we have sufficient data reported (actual spend values for different types of closure work), the new methodology will provide a much more accurate figure."

But Yewchuk said the 2018 estimates are still the most up-to-date figures the regulator has. 

"There's always going to be a possibility of getting better information. You have to act on what you have," Yewchuk said. "The information they're still relying on is worse than this stuff."

Eight energy companies were involved in the 2018 program, which analyzed data from 4,302 reclamation sites — although the documents note complete information only existed for 23 per cent of those sites.

In a Wednesday interview with The Canadian Press after the report was released, the regulator’s manager of liability management, David Hardie, said the watchdog couldn't say if the number was an underestimate or an overestimate. 

Yewchuk said the regulator has to level with Albertans about the costs of cleaning up after the industry that has floated their economy for generations.

"This is internal evidence saying costs are going up. And the (regulator) has known they were going up," Yewchuk said.

UCP RESPONDS

In a statement issued Friday afternoon, Brian Jean, the province's minister of energy and minerals, issued the following statement to CTV News:

"These are long-standing issues that I have been following for many years. Our government intends to make progress on dealing with liability management and increasing reclamation of legacy oil and gas sites," the statement read.

"We believe that we can enable future oil and gas development and all the benefits they bring while also making sure that oil and gas sites are properly cleaned up. This is an item that the premier put in my mandate letter and my ministry will have more to say on this later in 2024.

"We are making great progress on this file. In 2022, the number of inactive wells in Alberta decreased from 91,000 to 83,000 -- a reduction of nine per cent. More than $1.2 billion was spent on clean up and closure work in 2022. This includes the amount spent by industry as well as the federal COVID-relief funding spent through the Site Rehabilitation Program.

"In 2022, industry spent approximately $700 million to clean up their liability -- exceeding the closure spending requirements of the AER by 65 per cent. In 2022, a mandatory closure spending quota was introduced by the AER, requiring industry to spend at least $422 million."

IMPACT ON LANDOWNERS

Zorka Millo is a farmer out of Taber and says there are about five orphan wells on her property.

“The problem is, we have an irrigation system here. How can we go over these things?” said Millo. “The oil company is gone, who are we going to chase?”

She has lived on her property since 1961 and has had to spend over $300,000 due to wells that have been abandoned for over 10 years. She wants the government to do more to handle the issue.

“In between the big machines is dangerous, in case somebody runs into them,” she said. “They should be removed.”

 ‘NOT SURPRISED’: LANDOWNERS GROUPS

Daryl Bennett is the director of the Action Surface Rights Association, a group of landowners that helps “fellow landowners understand and navigate” government and industry when dealing with the energy sectors.

“We've been telling the Alberta Energy Regulator government for a number of years that the liability is far more than they had estimated,” said Bennett. “I'm not surprised at all, the figures are triple what they had estimated.”

The Polluter Pay Federation, a landowners group that has tried to push back in the past on the estimates for liabilities the regulator has provided.

“There's no question that they knew none, zero. So why are we being misled by a body to the biggest administrative regulator in the country with arguably the widest, broadest, and biggest mandate to protect the public and public safety? And they're simply not carrying out their mandate?” asked vice-chair Mark Dorin.

This report by The Canadian Press was first published on Jan. 19, 2024.

(With files by CTV Calgary's Tyler Barrow)