Alberta landowners challenge ‘chronic underfunding’ for orphan well cleanup

0:00The cost of everything continues to go up. And that includes the price tag to clean up Albert as Orphan Wells. The latest numbers from the Orphan Wells Association pegs the dollar figure at 1.66 billion. That's a billion dollars higher than it was just five years ago. It's the number of wells that need to be decombitioned, now at 7,300. The ballooning number of wells and cost has now triggered legal action from a group of landowners against the Alberta energy regulator. I'm claiming the AER is undercharging companies, which in turn means the task of getting that clean up done in a timely fashion just isn't happening. It's taking longer and the number of wells are piling up. And so to talk to us about this legal action joy now by a landowner advocate. Welcome back to the program, Mark Doran. Good afternoon, Mark. Good afternoon, Courtney. Thanks for having me on. So let's get to the meat potatoes of this because we know that the regulator has set up a levy

1:00that is going to collect $154 million this year, $144 million this year. I mentioned the price tag about $1.66 billion as things stand right now. Why are you guys choosing now? Why is this the time that you think that something needs to be done to address this? Well, the problem is just getting worse and worse. And last year, I led a group that asked the AER to internally review this yearly levy decision that they make to fund the orphan well fund. And they refused to do so because of procedural reasons. So we decided to take it to the courts. They asked the courts to review this decision to set the levy at $155 million for the current year, which we claim is unlawfully made. Yeah. So give us a sense, I guess in terms of timeline right now, because I know that there are a couple of landowners, specifically, who have been attached to this directly for their circumstances.

2:00What kind of timelines are they expecting when it comes to the wells on their property? Well, it's quite normal for it to take many years for a well that's not being looked after by any company because their cease to exist for the well or the facility to actually name an orphan by the Albert Energy Regulator. That can take up to eight or 10 years. And then once the well is named as an orphan, and the task is given to the orphan well association to close that well, it can take more than 10 years, sometimes up to maybe even 20 years, to actually plug the well or decommission the facility, clean up the site and get a reclamation certificate. So this means that these wells can go without any way looking after them for a very long time. And it also means that delayed cleanup means that taxpayers must pay these landowners for sometimes up to decades for the annual compensation

3:02that they would normally receive in the company they can recover those amounts from the taxpayers. So it's very expensive for taxpayers and these landowners don't believe that they should be paid by the taxpayer, they should be paid by industry for their losses associated with hosting these orphan wells and facilities on their land. So then you must have some sense. I mean, you take a look at where the Levy is set this year. We're talking about $155 million in that pool, 144 the year before. You must have a sense as to what that number should be to be able to address this issue in a timely fashion. What would that look like? Well, the law sets out what that number has to look like. That's why we challenge the AR's decision. So there's three factors, legislative factors under part 11 of the Oil Gas Conservation Act that the AR must have regard to in setting that Levy each year. And those three factors we believe

4:03if they were properly considered would have covered that $166 billion dollar figure that you mentioned. So that's the AR's first task is to set the Levy according to three legislative factors which we submit they're not doing. The second task is to do so alone without influence from industry, government, or the orphan well association. And we know they more or less admit that they do allow these other parties to have input into the decision. And therefore they're giving their exclusive jurisdiction away and this results in a chronic underfunding of the orphan well levy and that's the safety net. So this orphan fund is the safety net to protect taxpayers. Yeah, but so just to clarify, that if we don't properly fund it, then that safety net gets a rip in it, a tear in it if you will. And then all citizens are at risk for covering the closure costs of these orphan wells.

5:04Because here's the thing about this too is that I was reading an interview that you gave on this very topic. And you said that the laws that hold companies responsible for these cleanup costs, the actual laws, you refer to them as the envy of the world, the stuff that's on the books, the tools that are at our disposal if we're using them correctly should be able to address the problem. Is that a fair assessment? God, I think it's very fair. I mean, I do believe they are the envy of the world because many other jurisdictions don't have something like this orphan fund. What occurred here is that in the past, governments and regulators, around the end of the turn of the last century, they wanted to, they wanted to legislate who these companies could sell their unprofitable wells to and they wanted to charge them security deposits. Make sure they put up funding to cover these end of life obligations. And industry said, no, no, let's not do that. That'll hurt our investment. We will undertake as a whole industry

6:05to cover the cost of those of our membership who might fail, who might go bankrupt, et cetera. So that's what happened. They codified this promise. It became part 11 of the oil gas conservation act. So it's not unfair to ask these companies now that there's lots of companies going bankrupt to cover these costs. It's not unfair. It's what they ask for and it is the law. And I say it's the end of the world because many other jurisdictions they simply have to go to the taxpayer to cover these costs. They don't have the choice that we do. We can still make this industry cover these costs and make sure until the last industry member goes bankrupt that no citizen ever has to pay for closure costs of an oil gas well or facility site. I want to get your reaction to a comment that was pointed in your direction on social media from Brian Jean's chief of staff, the energy minister. And I'll read the clip, read what he wrote in response. Where was the equivalent press release

7:06when the NDP had the Orphanwell Levy at less than one third of what it is today and was allowing foreign shell companies with unverifiable balance sheets to buy energy assets. That was the tweet in reply to what you were putting out there on social media. Seems to suggest that to this legal challenge feels to them, to feels to him that it's more political than it is principled. So why now as opposed to 2019? Well, he asked me, where was the complaints and lawsuits, et cetera. I did rate these issues. I have been raising these issues since 2017 when I started participating in government liability management meetings. But this Orphanfund is the safety net if we don't do liability management properly. My ability management is way too difficult for the average citizen to understand. All they need to understand is we have this Orphanfund safety net. In terms of whether this is political, it's absolutely not. We are asking the courts to review a decision made by a regulator and decide whether it's made

8:08according to law or not. We would do the same regardless of who was in charge. Whether he's trying to, you know, he's trying to, you know, say that we're NDP supporters and not UCP supporters, I suppose. But that's just not the case. All kinds of landowners support the political party of their choice. And we would be asking for the Plutorpe principle to be upheld and we would be doing this regardless of which party among others might be forming the government of the day. Well, we're certainly going to be watching this legal action with great interest, certainly as a liability that does continue to grow here in the province when it comes to Orphan Wells. Mark, always appreciate the candid conversation. Always appreciate you having us on to explain this from the land over point of view. Well, there you go. That's a Mark Dorn. One of the voices involved in legal action against the Alberta Energy Regulator,

9:09the group claiming that the AE are under charging energy companies when it comes to basically making sure they clean up their mass after they're done making their mass.