Doc shines light on dark side of Alberta oil & gas: orphan wells

·7 min read
The job of cleaning up orphan wells, there are thousands across the western provinces, is underway. (CBC - image credit)
The job of cleaning up orphan wells, there are thousands across the western provinces, is underway. (CBC - image credit)

A new documentary asks the question, which may be an uncomfortable one for some Albertans, what happens when a symbol of wealth becomes a sign of decay?

Gillian McKercher was an engineer with ConocoPhillips until she was laid off in 2016. She took that opportunity to pivot towards one of her passions: storytelling.

"As a daughter of oil and gas, I always find myself coming back to the energy industry," McKercher explains in her new documentary, Orphaned.

"I am fascinated by it and I want to make amends."

And she's not alone. Oil and gas runs through the family blood, including her father, Brent McKercher, a geologist since the late 1980s.

"In Canada alone, there are at least 475,000 conventional oil and gas sites that need to be cleaned up, at an estimated cost of $40-billion to $76-billion," Gillian said.

"This is a non-partisan issue. Many companies can't afford to take care of their liabilities; they will go bankrupt. So where is the money and the labour going to come from? How can the public keep the oil industry accountable to clean up. What about orphaned wells? Wells that no longer have an owner because its company went bankrupt. Who will clean them?"

CBC
CBC

The senior McKercher explains how the sites came to be.

"Some people raised money and probably didn't have the expertise or experience to successfully run an oil and gas company," Brent said.

"They certainly do want to get rich and be successful, but they don't have the skill set. If that happens and the company goes bankrupt, I don't know if they were bad actors or just poor managers."

Alberta is at the heart of the problem because it produces about 80 per cent of the oil in Canada.

Between 2014 and 2020, 4,432 orphan wells were cleaned up. In 2021, there's more than 2,600 that require attention, but many more sites will be considered orphaned once bankruptcy proceedings work their way through the legal system.

AER declines comment

The Alberta Energy Regulator, AER, manages activity in the province, interpreting law, in principle, to find a balance between public interest and industry. It's also the parent of the Orphan Well Association, OWA.

The OWA is funded by industry levies and loans from the provincial and federal governments. OWA executive director Lars DePauw says it's important to understand the terminology.

Abandoned, means a wellbore left in safe condition. Inactive, means a well that is capable of producing but is not doing so currently. An orphaned well occurs when there is no company to manage, and pay for, the decommissioning work.

The AER declined multiple requests for interviews for the documentary, but a former manager did agree to talk.

"We started to see the OWA numbers increase in 2014. It wasn't a change in policy or regulation, it's because the price of oil collapsed," former AER EVP operations Mark Taylor said.

A University of Calgary legal expert says energy companies are focused on today's profit, sometimes at the expense of long-term liabilities.

The companies "don't want to incur the current cost on their balance sheet of those obligations," Nigel Bankes explains.

"If the price of oil crashes, then all of a sudden you have got very few assets of any value and your liabilities haven't changed."

Brent said it's acceptable for the public to be upset, as companies in the past have raked in massive profits, along with taxpayer subsidies.

"What's going to happen? Who is cleaning this stuff up? But we are. The government is. Government has some liability there, too, because when a company went bankrupt, nothing was done. It's an 'everyone' problem."

And it's that total cost approach, from breaking ground to remediation, that Taylor says is needed to separate the good business models from the bad.

$1.7B in federal help

"Will tougher rules and forcing companies to spend a certain percentage of their cash flow every year to work on their inactive wells, cause some companies to go insolvent? I would say probably they will," Taylor said.

"But that's more of a problem of them not having a good business case than it is for the province saying, 'You have to start looking after the mess you are creating.'"

He adds that, it's hardly an industry that can't afford to collectively clean up after themselves.

"There are still trillions of dollars of oil and gas left in the ground. In general, the industry is not broken. They are not sitting on a house of cards with way more in liabilities than they are ever going to have the ability to pay."

In addition to the 2,600 orphan wells needing cleanup this year, a staggering 100,000 wells are inactive, that will also require attention.

Last year in the spring, the federal government committed $1.7-billion for site clean up in the three western provinces.

CBC
CBC

More than 2,000 of those sites are on First Nation land, 400 of which are on the Frog Lake First Nation in central Alberta.

"Frog Lake's best days, it was producing 10,000 barrels a day. Today we are probably 250 barrels a day," Chief Greg Desjarlais said.

"The majority of us have been accustomed to this life: of oil and gas, of land disturbance, of revenue sharing, and becoming millionaires overnight, at one time, eight years ago."

'I believe there is good and bad' says Elder

A Frog Lake Elder, Agnes Abraham, married into the nation in the 1960s, so she knows what the land looked like before and after development.

"I believe there is good and bad," Abraham said of industrial development.

The landscape changed dramatically, she said, and now's the time to restore it.

"I think they should grow whatever was lost, at least some of it. That's what I want. That's what I am hoping for."

CBC
CBC

Casadaya Marty is a student and a young person focused on change.

I think the bigger picture is looking seven generations ahead of yourself. It's a scary time to be us. What if there's no clean water? What if that runs out? We rely so much off of the land as Indigenous people. We've made a livelihood off of it and it's how we have survived, hundreds of years ago."

One of her peers, Kierra Saddleback, says the problem of orphan well cleanup will require collaboration.

"People with different perspectives need to be in this conversation to get to the answer. It's something that needs to be done together. You can't put all of the work on one person."

'Intergenerational equity'

Marty and Saddleback are focused on intergenerational equity.

U of C legal prof Bankes, explains the concept.

"It means, among other things, that we leave to our children and grandchildren a world, an Earth that is inhabitable and worth living in," he said.

"In the context of orphan wells, I think it simply means that you don't boot off to the next generation the cost of abandoning all of those wells when the prior generation has reaped all the rewards."

Daryl Bennett is also focused on leaving a positive legacy. He's a farmer and the director of the Action Surface Rights Association.

"In my perspective, it's getting worse in the regulatory side because the government perspective seems to be, we need all this economic development," Bennett said.

"We don't care what you do, just get out there and build something so you are creating jobs and paying taxes. It seems the boards are overlooking more things and making it easier for industry to come in and do what they want to do."

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