The premier of Alberta is considering implementing a new requirement for oil and gas companies to pay a deposit before commencing drilling on a new well, a practice not enforced in decades and often met with opposition from the industry.
The provincial government is exploring solutions to address the significant number of aging oil and gas wells requiring cleanup.
Speaking at an industry event in Calgary, Danielle Smith proposed that companies should allocate a sum upfront, such as $10,000 per well, to mitigate future environmental liabilities. Smith emphasized the importance of setting aside funds to cover reclamation costs when wells reach the end of their productive life.
Smith highlighted that the deposited amount would accrue interest over time, ensuring financial resources for reclamation once the well ceases production. She expressed optimism about reaching a resolution through ongoing discussions with industry stakeholders.
Resistance from Industry
Currently, there are nearly 250,000 inactive or minimally productive old wells and associated infrastructure in Alberta. Concurrently, the Orphan Well Association (OWA) is faced with a record high number of wells necessitating cleanup, with the organization responsible for reclaiming wells abandoned by bankrupt companies.
Shaun Fluker, a law professor at the University of Calgary, acknowledged the merit of deposit requirements but expressed skepticism about the feasibility of the proposal becoming a reality. He cited historical industry pushback against similar initiatives, including the repeal of a deposit mandate in 1986.
Fluker, co-author of a 2023 research paper on orphan wells, described the current situation as a failure unique to Alberta, emphasizing missed opportunities to prevent the existing challenges.
Some segments of the oil and gas industry have raised concerns about the proposed deposit, citing potential financial strain on smaller companies and an increased risk of bankruptcies.
Elisabeth Besson, spokesperson for the Canadian Association of Petroleum Producers, refrained from commenting until an official announcement is made regarding the premier’s proposal.
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