The Alberta government says it’s taking aim at the growing number of orphan oil and gas wells in the province by raising the levies collected from the oil and gas industry.
The announcement, made in Thursday’s budget, says the province will increase the amount of money collected from the oilpatch for orphan well decommissioning to $69 million in 2020-21. That’s up from $60 million last year.
According to the latest figures from November, there are 3,406 orphan wells scattered around the province, usually on the properties of rural landowners.
A well is considered orphaned when a company goes bankrupt and there are no buyers for the assets.
There are another 94,000 inactive wells in the province, with the worry that many of these may become orphaned as their owners struggle — and taxpayers could be left with the bill.
Nikki Way, a senior analyst at the Pembina Institute, an environmental think tank, said Alberta needs more resources to address a growing problem but called increase to levies a “Band-Aid” solution.
“Increasing the levy and the additional loan money for the Orphan Wells Association is unfortunately a necessary step,” Way said.
“But we also need to get to the bottom of the problem and we need policy reform to prevent it from growing bigger.“
Way said Albertans need three things: the facts about the size of the liability the problem poses, regulated timelines for cleaning up wells, and some kind of upfront bond that ensures there’s money to clean up wells if a company fails.
If the province doesn’t address the root of the issue, she said, “it’s going to become a bigger and bigger burden on Alberta’s financial resources.”
Neither the Canadian Association of Petroleum Producers or the Explorers and Producers Association of Canada could provide comment Friday.
The United Conservative government said it is also considering increasing a loan to the energy industry to clean up orphaned oil and gas wells by up to $100 million.
In 2017, the previous NDP government loaned $235 million for the same purpose, with the cash flowing to the Orphan Well Association (OWA), which is administered by the Alberta Energy Regulator but funded by energy companies.
The 2017 loan was to be paid back over a decade by industry, with the interest covered by $30 million from Ottawa.
The UCP government said Thursday it was considering extending the repayment period as part of their strategy.
The OWA, according to budget documents, says the UCP plan would create an additional 500 jobs in the oilfield and environmental service sectors.
The provincial government also announced it will provide the Surface Rights Board with $1.7 million to address the backlog of applications made by landowners who aren’t receiving compensation payments for the oil and gas wells on their land.
A spokesman for Alberta Municipal Affairs said there are about 5,000 claims in the queue for the board because of a large increase in applications in recent years.
The money will go to hiring 15 administrative staff with the goal of catching up on the work by March 2021.