It Could Take 2,800 Years to Clean Alberta’s Old Oil and Gas Wells

June 12, 2019

To speed the clean up process, regulators would have to mandate a stricter schedule—but that could cost tens of billions of dollars, much of it coming from taxpayers, says Regan Boychuk, oil sands expert and Reclaim Alberta co-founder

To speed the clean up process, regulators would have to mandate a stricter schedule—but that could cost tens of billions of dollars, much of it coming from taxpayers, says Regan Boychuk, oil sands expert and Reclaim Alberta co-founder


It Could Take 2,800 Years to Clean Alberta's Old Oil and Gas Wells

Story Transcript

DIMITRI LASCARIS: This is Dimitri Lascaris reporting for The Real News Network from Montreal, Canada.

As The Real News reported in late 2018, a scandal erupted in Canada late last year thanks to an unintentional leak by Alberta’s Energy Regulator. As reported at the time by the National Observer, Alberta’s Energy Regulator privately estimated the total cost of cleaning up the abandoned oil wells in the toxic tar sands tailings ponds to be as high as an eye-watering 260 billion, far higher than its public estimate of 50 billion. What made this revelation particularly disturbing is that the Alberta government had collected only 1.6 billion in liability security from oil companies, meaning that these massive cleanup costs are almost entirely unfunded and could well fall onto the shoulders of taxpayers long after the oil companies have exploited these resources and distributed the profits to executives and shareholders.

Now, more information has leaked into the public domain, which has heightened fears that the industry and the regulator, who is supposed to be acting as its watchdog, are concealing the true extent of Alberta’s massive cleanup needs. In an exclusive report published earlier this week, The National Observer again reported that a senior Alberta regulatory official warned in a recent private presentation to the industry that it may take more than 2800 years to clean up some of the decommissioned oil and gas wells currently dotting Alberta’s landscape.

Now back to discuss this with us is Regan Boychuk. Regan was appointed to the Oil Sands Expert Group advising the government in Alberta’s 2015 royalty review, and he’s the co-founder of Reclaiming Alberta’s Future Today, an organization raising awareness and advancing solutions to meet the enormous challenges of unfunded oil field liabilities in Alberta. Thanks for coming back onto The Real News, Regan.

REGAN BOYCHUK: Thanks for having me.

DIMITRI LASCARIS: So Regan, what do you make of this new revelation? Is the news that it may take up to 2800 years to clean up some of these wells consistent with what the Alberta Energy Regulator and the industry are telling the public?

REGAN BOYCHUK: Well, it’s the clear implication of the current pace of the cleanup work being done in Alberta. It’s when we might complain that there’s a lot of stuff to be cleaned up and we might like the industry to do more, the industry’s response is going to be, “We already clean up lots of stuff every year.” And it’s true. Some companies clean up hundreds of wells every year. But what the regulators’ internal–its private presentation to industry that the National Observer reported earlier this week was about was looking at the number of wells each company has, and the pace that they’re cleaning them up. And from what I understand from the report, it limited itself only to inactive wells.

So it just looked at how many inactive wells each of the top 15 companies with the most inactive wells had, and then it looked at the pace of their cleanup. And what it found was that at the current pace, it is true they’re cleaning some stuff up, but the pace is so slow it’s going to take either centuries or millennia for them to fulfill their obligation of cleaning up each one of these sites. And it just speaks to the consequences of Alberta not having proper regulatory timelines demanding that this work be done in a reasonable amount of time, and instead left to their own devices. Not surprisingly, the industry said this is a low priority, and assumes it’s going to have millennia to solve this problem.

DIMITRI LASCARIS: And Regan, is there any significant prospect that the companies that have created this mess will be around centuries from now to pay for its cleanup? And if not, what steps should the energy regulator take now in order to ensure that generations of taxpayers are not burdened with these cleanup costs?

REGAN BOYCHUK: Well, we can be absolutely sure that none of these companies will be around in centuries. It’s just an unfortunate but simple consequence of climate change and the need to shift things that they’re not going to be around that long. And so, what the regulator needs to do is it needs to align a realistic lifespan for these companies, and then it needs to adjust that pace of cleanup to coincide, to make sure before these companies disappear into bankruptcy and walk away, that we’ve held them accountable for their legal and moral obligation to return these sites to their original state. And unless we have a regulator enforcing that, we’re going to be left with many, many billions of dollars in liabilities that are going to rot and deteriorate, and the responsibility for which is going to revert back to the taxpayers once the industry dissolves away into eventual bankruptcy.

DIMITRI LASCARIS: In your view, Regan, would be an appropriate amount? And I realize this must be a rather complex determination to have to make. But just generally speaking, ballpark, what would be an appropriate amount of security for the regulator to have collected by now from the industry for these cleanup costs?

REGAN BOYCHUK: Well, I mean, there’s a really simple way to answer that. It’s not the most accurate, but it’s a pretty reasonable measure. We have a regulatory program in place that has a measurement of industry’s health. And when a company falls below a certain threshold, they are required to start putting a security deposit up. And so, in Alberta, that has been extremely lax, where the vast majority of companies haven’t even paid any deposit towards their eventual cleanup. But there is a system in place that imagines, at a certain point, companies will have to start contributing to their deposits. And the way that program is managed in Alberta is contrary to its directives. And what it does, it lets industry off the hook by assuming they’re dramatically more profitable than they currently are. But if we simply applied the existing regulatory directives as they appear on paper with the way they’re supposed to be imposed, what that would mean would be there would be in the tens of billions of dollars in deposits in the bank right now protecting taxpayers from inheriting these eventual liabilities.

But instead, when it comes to the oil and gas wells in Alberta, there’s less than 200 million being held. And that’s a direct consequence of the regulator not following its own directives and saving the industry from even having to pay small deposits on this eventual cleanup. And so, any realistic measurement of a company’s health would result in tens of billions of dollars in security politics being due. And the problem that the industry would face as a result of that is what keeps regulators from enforcing the rules as they are on the books, because it would have major consequences on the viability of these companies. And so, that’s part of the dilemma that regulators and the government have faced, is the industry has amassed so many liabilities it’s become a major challenge about how to hold them accountable when their financial position is so precarious.

DIMITRI LASCARIS: It sounds as though the industry as a whole, or certainly large segments of the industry, are only able to be profitable because they’ve foisted the costs of the cleanup onto the taxpayer, at least provisionally have done so. Is that fair?

REGAN BOYCHUK: That is precisely what’s happened. These companies–any honest accounting of these liabilities would show many hundreds of operators in Alberta are insolvent. Their liabilities vastly exceed any hope of generated assets they can see, but it’s precisely because these liabilities are so poorly accounted for they’re so vastly underestimated. That gives a false sense of the health of these companies, allows them to continue operating on a day to day basis, allows them to take on new debt to continue these operations. But the simple fact of the matter is that outside of the oil sands in Alberta, oil and gas production has been losing money in Alberta for the last decade and there’s about zero prospect of them ever turning a profit again. It’s just a simple fact of the resource basin is extremely mature and depleted. Companies now have to spend so much money fracking that the costs of production exceed the revenue.

And that’s been true outside of the oil sands in Alberta for a decade. And that speaks even more urgently to how quickly we need to deal with this issue, because the industry is not only deeply indebted, it’s unprofitable. And so, we’re running out of time if we’re going to ensure that the polluter pays for any of this. The clock’s running out, this is an urgent issue that demands major reforms. Otherwise, if we continue along the current pace, these problems will be vastly minimized until the industry disappears. And we’ll be left with the consequences, which could very easily reach into the hundreds of billions of dollars in cleanup, that they were responsible for, that they profited from creating, but which they’re going to be allowed to escape by our regulators. And the consequences, both health and environmental and fiscal consequences, will be left to the province and the citizens.

DIMITRI LASCARIS: And finally, Regan, Alberta just elected–as you know–a right wing, very pro big oil conservative government led by Jason Kenney. Do you that–are there any signs at all after these revelations that Jason Kenney’s government is going to move the province in the right direction in terms of protecting future generations from having to bear these cleanup costs?

REGAN BOYCHUK: There’s none at all. This is becoming a growing issue in Alberta. It’s starting to get more and more attention, and as a result of that, it got some attention in the UCP election platform. Not a usual topic to find in there, but they felt the need to address it in their platform and had about a page talking about this issue and discussing some proposals they had that were going to put people back to work and clean up some of these well sites, which is a great thrust. But the methods they chose to go about that amounted to two separate proposals they had for federal tax subsidies. They wanted federal taxpayers to subsidize the industry doing cleanup. And that very well may lead to slightly more cleanup than there would have been otherwise, but it’s very unlikely that would exceed the extent that federal taxpayers are putting money in the producer’s pockets to do so.

And Kenney, shortly after being sworn in as the Premier, met with Trudeau, spoke specifically about these issues, and he came out of that meeting dedicated to leaning on municipalities in Alberta to lower their property taxes. That was his plan to put people back to work cleaning stuff up and to clean up these old wells, is to get local government to lower property taxes, lowering the tax burden on the oil and gas industry in the hopes that that money would be spent on cleanup. So it is on their radar, they are making some proposals, but none of them are in any way promising. And there’s a great deal more that needs to be done to raise awareness about the issue and to push the government to do more, because its current proposals are grossly inadequate. And it isn’t the taxpayers that should be on the hook for any of this. We need to figure out solutions that hold the polluter accountable.

DIMITRI LASCARIS: Well, we’ve been speaking to Regan Boychuk of Reclaim Alberta about new revelations concerning the true cleanup costs and the duration of the cleanup for abandoned oil wells and tar sands tailing ponds in Alberta. Thank you very much for joining us today, Regan.

REGAN BOYCHUK: Thanks for having me.

DIMITRI LASCARIS: And this is Dimitri Lascaris reporting for The Real News Network.