Alberta’s oil industry has been in economic turmoil for a while now—as has any industry, business, or individual with connections to the oil sector. The 2014 drop in oil prices essentially ground oil and gas to a halt, leaving a lot of businesses in a lurch. But while the ongoing recession continues to weigh heavily on everyone’s minds, there is one concerning piece of fallout from the recession that is catching everyone off-guard. Abandoned oil wells are popping up across Alberta, and that could mean trouble for taxpayers.
Oil is a finite, non-renewable resource, which means oil wells do have the potential to run out, and when that happens, oil drilling industries have specific protocols they need to follow to ensure the oil well is sealed up in such a way that it is safe.
When an oil well runs out of oil, or when it is no longer capable of meeting productive capacity, that oil well gets sealed up. In fact, it is the responsibility of the oil and gas well owners to ensure that well is sealed up before the company moves on to the next location, and the government requires companies to maintain enough assets or funds to properly decommission their own sites.
The problem is that the ongoing recession hit fast enough, and has maintained its detriment long enough, that many of the smaller businesses are being forced to shut down production without the necessary funds in hand to decommission their wells.
The result? Abandoned, or “orphaned,” oil wells are cropping up across Alberta.
Of course, the oil industry didn’t leave itself without a backup plan in the event of such an emergency. The oil industry funds an Orphan Well Association, a group that “reclaims” non-producing, unwanted, and abandoned wells. The Association seals up the non-producing wells and restores the site’s surface using funds from the oil and gas industry.
The procedure helps to mitigate the financial risk that can result from leaving the sites open and vulnerable to environmental catastrophe on a massive scale. It is an issue that was well planned-for—or so the industry would have us believe. But the problem is that the current economy is putting a lot of continuing strain on oil and gas companies, and as many of them are being forced to shut down as a result, the number of orphaned wells in the area is skyrocketing.
What is being referred to as an “unprecedented number of corporate failures” has led to a more than 40 per cent increase in the number of orphaned wells the Orphan Well Association has to reclaim. Some earlier statistics showed that as early as March, a list of 770 wells that needed to be sealed had increased to 1,100, and the list of 540 well sites in need of surface restoration had jumped to 744.
Many are concerned that this unprecedented increase in abandoned oil wells will expose the flaw in a system that may have been poorly equipped to address the problem in the first place.
A report from the Alberta Energy Regulator shows that, since 1963, there have been more than 440,000 wells drilled in the province, and only 67,000 have been sealed up through the oil and gas industry’s abandonment process. Close to 105,000 have been both abandoned and reclaimed. Many of the remaining wells are still in use, but tens of thousands still need to go through the abandonment and reclaiming process—and the number is rising as more and more companies are forced to fight a losing battle with the economy.
And that may mean the responsibility to procure the necessary funding required to seal up the orphaned wells falls to the taxpayers instead.
