2 weeks Ago By Cindy Tran
Article content The Rural Municipalities of Alberta says the new government-commissioned report on what to do about the long-standing issue of inactive oil and gas wells does nothing to address concerns it has brought to the table. RMA president Kara Westerlund said none of the 21 recommendations put forward in the report released on Thursday addressed the association’s concerns related to the lack of a clear definition of “mature assets” and “unsupported” property tax estimates. She said it was clear that despite municipalities sitting at the table, “the resounding voice was industry.
” “There were so many concerns with this,” Westerlund said. “There’s still concerns with the recommendations and I want to be very clear — we have been very open with the government about the process and about the concerns that we’ve had from the get-go, and it just felt like it was they weren’t being addressed.” New insurance fund David Yager, a special adviser to Premier Danielle Smith and a Alberta Energy Regulator board member, authored the report.
One of the recommendations he put forward would create a new insurance fund with contributions from industry licensees to cover liabilities related to closed wells. A draft report leaked to the media , said the fund would be at the cost of taxpayers, but the language has since changed to say it would be “managed” by province. There are nearly 80,000 inactive wells scattered across Alberta, with majority situated in rural municipalities.
Energy and Minerals Minister Brian Jean’s office said in a statement the province is still reviewing the recommendations and nothing is “set in stone.” How the government will manage the fund is still being discussed but the statement pointed to examples like the Orphan Well Fund and the Provincial TIER program. “We will not comment on draft documents,” the statement said.
Alberta NDP energy and minerals critic Nagwan Al-Guneid said Alberta taxpayers should not foot the bill left by oil and gas companies. She said the government must uphold the “polluter pays principle” and clearly define how it plans to handle the proposed insurance fund. “It might have been wordsmithed and massaged here and there, but there is no financial model that shows you can pay these massive multi-billion dollar liabilities without funding of some sort,” Al-Guneid said.
“When I see this report, frankly, it comes across as a whole scheme to make Albertans pay for the mess in billions of dollars for bankrupt oil and gas companies.” Rural Alberta home to 88 per cent of orphan wells Rural Alberta accounts for 88 per cent of inactive wells, with nearly 70,000 of the 80,000 total. According to the report there are nearly 275,000 well bores and unreclaimed surface locations, which carry more than $1 billion annually in estimated fixed costs.
According to the report, the RMA has highlighted an infrastructure deficit of $17 billion and critics have argued that the outdated property assessment model fails to account for declining assets. RMA’s Westerlund said the differences between the draft report and the new report are “minor.” Another recommendation by Yager is to enact legislation to create companies to take over wells that would otherwise be surrendered to the Orphan Wells Association (OWA).
Those companies would operate the wells to generate the money needed to reclaim the well sites. “HarvestCo entities ..
. could be used as a new step before the Orphan Well Association surrenders, or as an alternative to insolvency for licensees with commercially viable assets to create funds for closure from sustained end-of-life production,” Yager said. Westerlund said if the government does create new companies, this would come at a cost to taxpayers.
RMA calls for report to be “restarted” Moving forward, Westerlund stressed RMA’s support for the oil and gas industry and said it is a handful of bad actors that needs to be addressed. Westerlund said before a company becomes bankrupt or insolvent, there are clear indications that it is happening, such as not paying vendors. She said there needs to be legislation in place in order to catch companies before they get to that point, to hold them accountable.
“The majority of oil and gas companies that operate in this province are very conscientious of their communities,” Westerlund said. “We’re dealing with kind of an offshoot of an industry that with some strong legislation and regulations, through the AER we can certainly fix this issue.” The RMA has recommended that the report be “restarted” to address concerns surrounding the definition of a “mature asset,” an engagement plan and a focus on mature asset viability.
— With files from the Canadian Press [email protected] X: @kccindytran Bookmark our website and support our journalism: Don’t miss the news you need to know — add EdmontonJournal.com and EdmontonSun.
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