Back in April 2020, the Canadian Federal government announced $1.7B to clean up orphaned and abandoned wells in Alberta, Saskatchewan, and British Columbia that had the potential to create thousands of jobs.
By July 2020, the Government of Alberta had announced they were developing the Liability Management Framework (LMF) to improve and expedite reclamation efforts for orphaned and inactive wells and infrastructure, in part as a response to the funding. The intent was “to enable industry to better-manage the clean-up of oil and gas wells, pipelines and facilities at every step of development, from exploration and licensing, through operations, mergers and acquisitions, abandonment, reclamation, and post-closure.” according to the Alberta government website. In addition, there was the intent to create employment during the COVID-19 pandemic downturn.
The LMF was designed to “uphold the polluter-pay principle, ensuring that industry is responsible for clean up costs, in a way that is fair and manageable.” The framework was introduced just as Alberta allocated $1 billion in COVID-19 emergency funding to closure activities through the Alberta Site Rehabilitation Program to support employment in oil field services companies in concert with additional funding to the Orphan Well Association. (The two main programs leading the LMF were the Alberta Site Rehabilitation Program (ASRP) and the AER’s Closure Nomination Program.)
Jay Williams, President of the Well Integrity and Abandonment Society (WIAS) provides some valuable context to the state of the industry for service workers back in 2020.
“I think the ASRP was very successful, especially considering what was happening at the time. It was at the beginning of the COVID-19 pandemic and many companies were negatively affected. COVID brought a lot of industries to a halt and the price of oil went negative.”
COVID-19 pandemic shut downs triggered a demand shock in the oil industry, leading to a collapse in oil prices on April 20, 2020. According to Forbes, the May 2020 contract futures price for West Texas Intermediate (WTI) went from $18 USD a barrel to around -$37USD a barrel. Jay Williams credits the ASRP with keeping many service companies working in the field. The end result was that after 2 years of concerted federal and provincial funding, Alberta was able to report a significant decrease in inactive well count for 2022.
According to Jay Williams “The collapse of the price of oil, even if only for a month could have resulted in insolvencies. It wouldn’t have been good for the industry as well as liability clean up. I was working for the service sector during that time and was part of the ENSERVA ASRP committee that was advising government and regulators on the program’s implementation. The ASRP worked and put many people back to work, especially smaller operators. On the service side, we were able to get people working in the field. That was huge.”
By January 2024 the first Alberta Energy Regulator’s (AER) Liability Management Performance Report was released for 2022 showing that as spending increased, the inactive well count in Alberta has decreased significantly. The AER cites the industry’s performance highlights as:
✔ In 2022, $696 million was invested in cleanup efforts, surpassing the required $422 million spend by 65%
✔ Over $1.2 billion was dedicated to closure and cleanup activities
✔ 90% of licensees met their closure quota and played their part in responsible management
✔ The inactive well count decreased by 9% in 2022, going from 91,000 to 83,000
Federal and provincial funds in the LMF and ASRP also accelerated liability management work for First Nations and Metis communities’ service companies. By June 2020, the Alberta Government confirmed $100 million of funding was allocated for Indigenous groups with $85 million in funding allocated to First Nations and $15 million to Metis communities and by Nov 2020, First Nations had secured the Alberta government’s commitment. First Nations and Metis communities were to be in control of decisions on which on-reserve oil and gas sites were to be cleaned up, affirmed by then Alberta Energy Minister Sonya Savage.
“They’re in the best position to understand what’s on their land and which are the priority wells,” Savage said and advised the money would be dispersed during the phase of the program that applied to First Nations and Métis lands.
“It was really gratifying to see that this provincial government is prepared to work with the First Nation communities here in Alberta,” said Stephen Buffalo, President of the Indian Resource Council- which represents more than 100 First Nations, some with oil and gas on-reserve. “It sure took some time, but we just kept giving them a reason not to say no. To me, it just made a lot of sense.”
In 2020, the IRC was also lobbying all provinces to allocate 10 per cent of the federal money they received to First Nations for well clean-up, which would have meant about $150 million in total.
As for other provinces, Saskatchewan’s Ministry of Energy and Resources paid $125 million in instalments to the Saskatchewan Research Council in 2020-21. The money was part of a total of $400 million the province received. It’s reported that Saskatchewan has handed out more than $305 million of the federal cash to clean up 4,300 wells and 500 Saskatchewan companies worked on inactive oil well cleanup in first year of program. Service company owners report that the Saskatchewan program owed its success to quicker application processing.
In Alberta, the overwhelming response from industry may have caused delays but the results reported by the AER Liability Management Performance Report show a positive net reduction of inactive wells. The province approved 37,589 applications, although 3,445 were not completed, creating a lingering question of unspent monies which amount to $130 million and are due to be returned to the federal government.
About a year ago, in March 2023, then Alberta Energy Minister Peter Guthrie in an email to the CBC advised “A few other ministers and I have written to the federal government to keep the left-over funds here in Alberta. We are still awaiting a response.”
At the same time First Nations were also lobbying to keep the funds and direct them to continue remediation of wells on Alberta First Nation and Metis lands. The ASRP created work, capacity and promising careers for First Nation and Metis members and it would make sense to keep that Indigenous work force actively engaged in the industry- workers who are trained up and are now skilled workers.
“It was very beneficial and very positive. So, we’re doing what we can to keep that program going,” Stephen Buffalo said in 2023. “Our community land mass is not getting any bigger, but their populations are. So we have to start looking at protecting the land, cleaning the land, so we can use it for the needs of our communities.”
It is encouraging that last week’s Alberta Budget 2024 includes Indigenous business incentives, such as almost $30 million over three years for the Aboriginal Business Investment Fund (ABIV) (an increase of nearly $8 million), to help fund business startup and expansion costs in Indigenous communities, which can empower even greater success for First Nation reclamation work. In addition, in the coming months, the province will launch two new pilots aimed at helping improve the current reclamation certificate process while maintaining the highest environmental standards. These pilots will test ways to certify portions of reclaimed sites and help reclaim peatlands.
1. The Well Site Reduction Pilot will enable the AER to certify portions of a well site that meet government reclamation standards rather than waiting until the entire site is reclaimed. The optional pilot will be limited to up to 100 applications.
2. The Reclaiming Peatland Pilot will provide a new support tool for well site operators to use when preparing a request to change from peatlands to forest lands. This framework will improve site-specific considerations and logistics related to well or access roads in peatland
It is encouraging to see the recent increases in funds focused on reclamation and Indigenous business in Alberta.
Still the question looms- maybe it would be a good thing to retain the unspent $130 million from the 2020 program for continued clean-up of orphaned and abandoned wells in Alberta, as First Nations and the previous Alberta Energy minister requested last year?
Maureen McCall is an energy professional who writes about issues affecting the energy industry