An organization defending landowner rights in respect to orphaned wells is calling out Premier Danielle Smith’s pilot project to deal with the chronic issue.
The province is considering a program to incentivize oil companies cleaning up about 170,000 inactive well sites in Alberta, many of them decades old. The Liability Management Incentive Program would make $100-million available for companies to credit against royalties for cleaning up these sites.
“These are the worst of the worst sites, and when you think about it, how many companies do you still know of from the 1950s, ’60s and ’70s that are still around today?” said Premier Danielle Smith on her QR Calgary radio show “Your Province, Your Premier” on Saturday morning. “What has happened is the polluter who created the problem is no longer around anymore, and yet these liabilities kept on getting carried forward along with producing assets. And now we’re left with somebody holding the bag who may not have been responsible for the initial liability.”
She said the program has its genesis in the federal government’s billion-dollar Site Rehabilitation Program. This program is coming to an end and the province is looking to maintain that momentum.
She said the worst sites are the 4,300 flare pits across the province which have sat abandoned for upwards of 60 years, largely due to the environmental liability.
Daryl Bennett, a director with both the Action Surface Rights Association and the Alberta Surface Rights Federation, said the energy minister told them a very different story during an hour-long meeting Thursday. He said they were told the program would direct these funds to oil companies to clean up their own inactive wells that they are already required to do, not the orphaned wells for which there are no owners.
He also said the land property rights tribunal has begun to cut back on the amount of compensation landowners are receiving for having orphaned wells on their property. Bennett said landowners had been receiving about $3,000 per well per year from the Orphan Wells Association, but with the passing of the Red Tape Reduction Act, owners have begun to be informed by the tribunal that compensation is dropping sometimes by as much as $2,000 per well. They have been told this is about stewardship of taxpayers dollars. Meanwhile, the appeal process has been shortened and the threshold for the province lowered.
Bennett estimated the savings to be about $5 million a year.
“From what we’ve seen of the pilot project, on which wells will qualify and the restrictions and requirements, we’re fine with that. It looks like it’s a pretty good program. It’s not just handing money out free and the company’s gonna go waste it. There’s some strict requirements,” he said. “But industry should have been doing this on their own, and how can you give industry the money when you’re taking it with the other hand away from landowners?”
They are currently fighting the tribunal in court cases on this issue.
For a regular well, Bennett said cleanup costs about $100,000, but the older wells can be more problematic, with costs that can hit $1 million to $3 million each. Most of the affected landowners have multiple orphaned wells on their property and the land is not useable again until it is restored.
Bennett said the Orphan Well Association has sought to buy land outright due to the cost to fix the well sites individually. He added some landowners have resorted to putting solar projects on the land to allow the land time to restore itself.
The program was previously called RStar and was pushed by Smith when she was a lobbyist with Alberta Enterprise Group. She said on Saturday that she has heard for 25 years about the problems of getting these bad well sites cleaned up. According to The Canadian Press, Smith quoted a consultant who says $20 billion in RStar credits would create 366,000 jobs and $8.5 billion in royalties, a forecast debated by analysts.
On Saturday, NDP Energy Critic Kathleen Ganley panned the idea of using this program to deal with the orphaned well issue.
“This is Danielle Smith doing the bidding of those who put her in power and serving private interests instead of the people of Alberta,” she said in an emailed statement. “Royalties belong to the people of Alberta and future generations. Giving this money away will squander the energy price boom we are currently experiencing and is fiscally irresponsible. It amounts to a massive transfer of wealth from Alberta families to companies who don’t need it.”
The premier said the program still has to go through cabinet and caucus. She said the province as regulators have a responsibility to deal with this mismanaged historical problem.
Twitter: @JoshAldrich03
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