Article by Jeffrey Jones, The Globe and Mail
DECEMBER 3, 2021
The site of an abandoned well to be closed by the Alberta Orphan Well Association is pictured near High River, Alta., on August 12, 2020.Todd/Korole
The fortunes of the oil patch have turned to levels not seen in more than half a decade as oil and natural gas become hot commodities again. There’s a lot of talk in Alberta about the energy sector getting its mojo back, and Premier Jason Kenney’s UCP government is doing a lot on that.
This is no surprise. As announced this week, a The revenue shock from the industry goes a long way in reducing the government’s deficit forecast for this fiscal year by two-thirds from the initial budget estimate of $18.2 billion.
But bubbling in the background is the familiar discontent among landlords and environmental advocates about the unpredictability of the industry and how it is being directed to dividends and share buybacks rather than the quick cleanup of idle and spent wells that have been a legacy of the past boom. Is. Then taxpayers stepped in last year to provide $1 billion in stimulus money to help them tackle the mess they didn’t create.
Abandoned oil and gas wells put undue burden on landlords, taxpayers: Study
This is a long-standing problem that the UCP has inherited and, to its credit, has taken steps to solve it. This week, the Alberta Energy Regulator (AER) finalized a much-needed reassessment of its regulations aimed at reducing multibillion-dollar environmental liabilities and preventing companies that can’t clean up from securing assets.
But the new rules are hit and miss.
Overhauls include new financial checks on companies and their ability to handle future costs of adding and retrieving old sites. It is long overdue.
Based on the regulator’s own estimates, however, a new quota system for industry spending at abandoned sites could take decades to help reduce the backlog that tops 95,000 inactive wells. There will be more sectors That time will stir and, again, put pressure on the industry’s ability to pay bills for cleanup.
These sites dot the province. In fact, there are far more passive wells than active ones. The issue is controversial for industry and Albertans whose properties require cleaning up of old wells. Many wells have been in suspended animation for years.
Controversially, the AER has avoided setting limits on how long wells can remain idle, as do many other jurisdictions. For example, if wells in Texas have been closed for more than a year, operators must apply for extensions that require a security bond. Alberta briefly had a five-year limit in the 1990s, but that ended under industry pressure.
Alberta should ease barriers that discourage businesses from reusing abandoned oil wells: report
AER now has 40 measures to consider when deciding whether a company has the means to cover future cleanup costs, especially if it is also acquiring assets. These include company records with past work and compliance with regulations, as well as financial health and years remaining for cash-generating assets. The regulator may also demand a security deposit to mitigate risk, and is updating that policy.
Earlier, the main criterion was the calculation of assets versus liabilities. The system allowed actions and promises by applicants of future funding instead of meeting that limit. Still, the result was the occasional bankruptcy court and scads of useless wells added to the orphan list.
So what about that backlog? AER has initiated industrywide spending of at least $422 million in 2022 and $443 million next year to be devoted to cleaning up waste wells. The future amount is projected to increase by 5 percent annually until 2026. Every company must meet a mandatory annual target.
These are certainly tougher standards than in the past, but they work quickly if global demand for oil and gas eases in the projected transition to clean energy sources in the coming years, as more wells run out. will not complete.
AER chief executive Laurie Pusher has said it aims to work through the backlog at 4 percent to 5 percent annually. At that rate, just tackling the current list could take two decades or more, says Sarah Hastings-Simon of the University of Calgary’s School of Public Policy. Meanwhile, the energy sector is increasing free cash flow and not directing massive amounts of money into capital expenditure, she explains. Here’s A Fair Use For Some Of Them extra coin.
The companies were under pressure to continue cleaning up during the years of industry turmoil. It makes sense, then, that he should now make a bigger contribution to solving a problem that should have been dealt with earlier as part of his acceptance to drill
The site of an abandoned well to be closed by the Alberta Orphan Well Association is pictured near High River, Alta., on August 12, 2020.Todd/Korole
The fortunes of the oil patch have turned to levels not seen in more than half a decade as oil and natural gas become hot commodities again. There’s a lot of talk in Alberta about the energy sector getting its mojo back, and Premier Jason Kenney’s UCP government is doing a lot on that.
This is no surprise. As announced this week, a The revenue shock from the industry goes a long way in reducing the government’s deficit forecast for this fiscal year by two-thirds from the initial budget estimate of $18.2 billion.
But bubbling in the background is the familiar discontent among landlords and environmental advocates about the unpredictability of the industry and how it is being directed to dividends and share buybacks rather than the quick cleanup of idle and spent wells that have been a legacy of the past boom. Is. Then taxpayers stepped in last year to provide $1 billion in stimulus money to help them tackle the mess they didn’t create.
Abandoned oil and gas wells put undue burden on landlords, taxpayers: Study
This is a long-standing problem that the UCP has inherited and, to its credit, has taken steps to solve it. This week, the Alberta Energy Regulator (AER) finalized a much-needed reassessment of its regulations aimed at reducing multibillion-dollar environmental liabilities and preventing companies that can’t clean up from securing assets.
But the new rules are hit and miss.
Overhauls include new financial checks on companies and their ability to handle future costs of adding and retrieving old sites. It is long overdue.
Based on the regulator’s own estimates, however, a new quota system for industry spending at abandoned sites could take decades to help reduce the backlog that tops 95,000 inactive wells. There will be more sectors That time will stir and, again, put pressure on the industry’s ability to pay bills for cleanup.
These sites dot the province. In fact, there are far more passive wells than active ones. The issue is controversial for industry and Albertans whose properties require cleaning up of old wells. Many wells have been in suspended animation for years.
Controversially, the AER has avoided setting limits on how long wells can remain idle, as do many other jurisdictions. For example, if wells in Texas have been closed for more than a year, operators must apply for extensions that require a security bond. Alberta briefly had a five-year limit in the 1990s, but that ended under industry pressure.
Alberta should ease barriers that discourage businesses from reusing abandoned oil wells: report
AER now has 40 measures to consider when deciding whether a company has the means to cover future cleanup costs, especially if it is also acquiring assets. These include company records with past work and compliance with regulations, as well as financial health and years remaining for cash-generating assets. The regulator may also demand a security deposit to mitigate risk, and is updating that policy.
Earlier, the main criterion was the calculation of assets versus liabilities. The system allowed actions and promises by applicants of future funding instead of meeting that limit. Still, the result was the occasional bankruptcy court and scads of useless wells added to the orphan list.
So what about that backlog? AER has initiated industrywide spending of at least $422 million in 2022 and $443 million next year to be devoted to cleaning up waste wells. The future amount is projected to increase by 5 percent annually until 2026. Every company must meet a mandatory annual target.
These are certainly tougher standards than in the past, but they work quickly if global demand for oil and gas eases in the projected transition to clean energy sources in the coming years, as more wells run out. will not complete.
AER chief executive Laurie Pusher has said it aims to work through the backlog at 4 percent to 5 percent annually. At that rate, just tackling the current list could take two decades or more, says Sarah Hastings-Simon of the University of Calgary’s School of Public Policy. Meanwhile, the energy sector is increasing free cash flow and not directing massive amounts of money into capital expenditure, she explains. Here’s A Fair Use For Some Of Them extra coin.
The companies were under pressure to continue cleaning up during the years of industry turmoil. It makes sense, then, that he should now make a bigger contribution to solving a problem that should have been dealt with earlier as part of his acceptance to drill
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