By Cole Parkinson
Last week the provincial government finally made an announcement to address some concerns around the cleanup of oil and gas sites in Alberta.
“Alberta’s government is taking long-overdue action to accelerate the responsible reclamation of oil and gas sites, ensuring a cleaner environment for current and future generations. A new framework to manage oil and gas liabilities – which includes a series of mechanisms and requirements to improve and expedite reclamation efforts – will enable the industry to better manage the clean up of oil and gas wells, pipelines and facilities at every step of the process, from exploration and licensing, through operations, reclamation and post-closure,” reads a press release from July 30 announcing the new Energy Liability Management Framework.
The Municipal District of Taber has continuously brought forward this issue over the past several years and at their last council meeting on July 14, they once again talked about the challenges associated with oil and gas site cleanups. According to administration’s report, there are approximately 20 oil and gas companies along with around 1,300 oil and gas sites in the municipality where lease maintenance is not occurring.
“These include insolvent companies, companies in receivership, companies going through bankruptcy, or companies opting not to undertake maintenance due to challenging economic conditions. The impact on agricultural producers from weeds from these lease sites is significant,” reads administration’s report.
Through the past several years, letters have been sent back and forth between the municipality and Alberta Energy, Agriculture and Forestry, and Environment and Parks as the M.D. inquired about their support in addressing the weed issues landowners are facing as the oil and gas industry continues to struggle.
“I think there is a lot more information with Bill 12 (Liabilities Management Statutes Amendment Act) just coming out but I would suggest we carry on with this resolution. If at the time we choose to pull it because some of the concerns are addressed through Bill 12, but I think we will get more information on (July 30). We have had some preliminary discussions with them,” said Coun. Brian Brewin at the July 14 meeting.
Letters from the M.D. were sent to MLA Grant Hunter, Energy Minister Sonya Savage, and Agriculture and Forestry Minister Devin Dreeshen in late 2019 and early 2020.
“I understand how uncontrolled weeds on oil and gas sites cause problems for local landowners, farmers and the M.D. of Taber. I consulted with my department and the Alberta Energy Regulator (AER) and hope you find the following information helpful in addressing the issue,” reads Savage’s response in June 2020.
The letter also talked about the $1 billion energy stimulus package addressing inactive wells in Alberta and a $100 million loan to the Orphan Well Association as ways the province was looking to address the issue. The new framework presented by the UCP government which includes ‘a series of mechanisms and requirements to improve and expedite reclamation efforts’ is hoping to give the oil/gas industry better management of the cleanup of wells, pipelines and facilities through every step of the life-cycle.
“Alberta has a world-class oil and gas sector that takes responsible resource development seriously. This new approach will further ensure everyone who benefits from development also addresses their ongoing reclamation responsibility in a way that is fair and achievable. By clarifying the rules and improving the process, industry can confidently make long-term investment decisions, which will help the province’s recovery efforts and create jobs, putting thousands of Albertans and Canadians back to work,” said Savage in the press release.
While announced in July, the government stated the framework will be implemented in the next several months. The new framework states it:
•Will uphold the polluter-pay principle, ensuring that industry is responsible for cleanup costs in a way that is fair and manageable.
•Put an improved system in place to assess the capabilities of oil and gas operators to meet their regulatory liabilities and obligations, prior to receiving regulatory approvals.
•Provide practical guidance and proactive support for struggling operators, helping them to manage and maximize their assets, and maintain their operations. Doing so will protect Albertans from the financial and environmental burden of more inactive or orphaned sites – while ensuring operators meet their environmental responsibilities.
•Establish five-year rolling spending targets for reclamation that every active site operator must meet. This initiative includes the AER’s area-based closure program, through which companies work together to share the cost of cleaning up multiple sites in an area.
•Establish a formal opt-in mechanism for landowners to nominate sites for cleanup. These sites must then be reviewed by the regulator, with operators responsible for justifying why a site should not be immediately brought through closure stages, and
•Implement a process to address legacy and post-closure sites – or sites that were abandoned, remediated or reclaimed before current standards were put in place, and sites that have received reclamation certificates and the operator’s liability period has lapsed. A panel will be established to consider how to address this gap, bringing these sites up-to-date with the current environmental requirements.
“From drilling through reclamation, it’s important that industry meets its obligations. Alberta’s Liability Management Framework will ensure oil and gas sites are cleaned up faster, reinforcing Alberta’s reputation as a leader in responsible energy development. The new framework provides clarity and certainty, which will help spur activity in the energy sector and put Albertans back to work when and where jobs are needed the most,” said Jason Nixon, Minister of Environment.
Under the Liability Management Framework, the provincial government will set the policy direction and provide some oversight, while the AER is responsible for administration which includes monitoring progress, working with industry, and enforcement.
“The new Alberta Liability Management Framework provides strong protections for Alberta to enhance the responsible reclamation of oil and gas sites, while ensuring responsible energy development can continue to produce high-paying jobs for Alberta workers and their families. This is an innovative and modern approach to ensure continued focus by companies on their responsibilities to local communities,” said Tristan Goodman, president of the Explorers and Producers Association of Canada.
As of July 2020, 456,729 licences have been issued to drill oil and gas wells in Alberta since the early 1900s. Currently, 96,969 wells are inactive, 70,785 are abandoned, 88,851 are reclamation certified, and 36,773 are reclamation exempt. Of the remaining wells, 162,530 are active and 821 have been drilled but are not producing.
Other groups also touched on their reaction to the new framework.
“The Metis Settlements have long been advocates for responsible resource development. That means ensuring the work of ‘cleaning up’ is central to those operations. I am pleased to hear that Alberta will be taking the necessary steps to ensure that we not only practise responsible resource development but responsible reclamation. This work is critical to ensure our beautiful lands remain for future generations,” said Roechelle Gaudet, vice-president of the Metis Settlements General Council.
“PSAC (Petroleum Services Association of Canada) welcomes the introduction of Alberta’s new Liability Management Framework that will provide certainty to industry and investors while easing landowner and public concerns of a growing inventory,” added Elizabeth Aquin, president and CEO of PSAC. “The new framework will also provide the oilfield services sector that PSAC represents with a predictable and regular stream of closure activity, sustaining jobs and retaining key skills and expertise. PSAC has long advocated for mechanisms for closure activity of orphan and inactive sites to create jobs while providing positive environmental outcomes that demonstrate our responsible resource development. Alberta’s new framework will uphold that trustworthy reputation.”
The framework also includes an expanded role for the Orphan Well Association which enables the association to better manage and accelerate the cleanup of wells, infrastructure and pipelines that do not have a responsible owner.
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While spending 32 years in the world of finance, one of my clients between 1978 and 1986 was cleaning up orphan wells for Imperial oil. At that time there were strict rules and regulations in place, created by the Lougheed government that required the oil corporations to put the land back into the shape they found it before the well was drilled.
They capped the wells off below ground level, removed and replaced all the contaminated land in the are and removed the road into the site. It was very costly to the oil industry but they were required to do it.
Apparently ,we are now told, to help their rich friends become even richer the Klein government eliminated the need for the industry to pay for this clean up and it dumped the costs onto the backs of the people and here we are facing another financial disaster we can thank Ralph Klein for creating for our children to face.