Orphan well concerns reignited in Alberta
Burnt child dreads fire.
It’s an old adage that explains why Jason Schneider, Reeve’s elect of Vulcan County, Alta., is nervous about his province’s renewable energy boom.
Like many in rural Alberta, Schneider still resents the way local government held their bags when an oil price crash almost a decade ago resulted in billions of dollars in unfunded liabilities being borne by bankrupt fossil fuel companies were left behind.
In Vulcan County alone, the landscape is littered with hundreds of ownerless wells in need of cleaning, and the community itself owes more than $9 million in back taxes unpaid by bankrupt oil and gas companies.
As a result, it’s hard for Schneider to look at countless giant wind turbines or solar panels without fearing a repeat of Alberta’s orphaned well crisis or who will fix it if something goes wrong.
“These are major industrial developments and the cost of reclamation will be significant,” he said.
“We can see the warning signs and are being ignored.”
In rural Alberta, there is growing concern about the long-term impact of the province’s renewable energy boom, the speed and scale of which has been overwhelming.
Alberta, a province that not so long ago was largely dependent on coal for power generation, is now home to more than 3,800 MW of wind and solar capacity, with 1,350 connected to the grid in the last 12 months alone. An additional 1,800 MW of capacity is currently under construction, putting the province on track to meet or exceed the 2016 target of generating 30 percent of all its electricity from renewable sources by 2030.
In Schneider’s Vulcan County, which is home to both the nation’s largest solar farm and one of western Canada’s largest wind farms, renewable energy developments now account for more than 40 percent of the local tax base, displacing oil and gas as the primary source of revenue for local government .
But while many in rural Alberta are welcoming the economic activity, and farmers and ranchers enjoying the additional income that housing solar panels or wind turbines can bring, others are sounding the alarm.
For example, Alberta’s rural communities recently passed a resolution urging the provincial government to protect taxpayers from costs associated with the possible shutdown of renewable energy infrastructure.
In particular, the association wants the government to order the collection of securities for recovery from developers before a project goes ahead. That way, if a developer goes bankrupt and walks away, the municipalities won’t foot the bill.
“What we have learned, and what Alberta residents have learned, is that the cheapest way out of reclamation is through bankruptcy,” said Paul McLauchlin, Alberta Rural Communities President.
“Some of these solar systems are installed by one company and sold to another company… I spoke to a gentleman who is a fifth time owner and his solar system has been there maybe two years. So we see that small business owners are these, and whether they have the wherewithal to claw back that’s really what’s driving this conversation.”
In Alberta, the Orphan Well Association is an industry-funded organization tasked with decommissioning old oil and gas infrastructure and restoring the land to its former state. (It’s currently in arrears, despite a $1 billion cash injection from the federal government in 2020 and $335 million in provincial loans.)
But there’s no equivalent for the renewable energy industry, although renewable energy companies must map out how they plan to cover decommissioning and recovery costs before they can get the green light on their project.
For a property owner, however, entering into a wind or solar lease is entirely voluntary. That’s very different from oil and gas, where Alberta law doesn’t allow property owners to turn down companies trying to develop the fossil fuels that lie beneath their land’s surface.
Evan Wilson, director of policy and government affairs for the Canadian Renewable Energy Association, said that since solar and wind leases remain private civil contracts between the developer and the landowner, it is the responsibility of the landowner to ensure some type of provision is included Mitigation of risks related to the end of life of the project.
But he added that many companies offer landowners some form of reclamation commitment, either in the form of a letter of credit or a bond.
“Landowners have the ability to veto these projects that are built on their land,” Wilson said.
“So that puts a lot of pressure on our members to make sure landowners are comfortable with the conditions.”
Sara Hastings-Simon, an expert on energy, innovation and climate policy at the University of Calgary’s School of Public Policy, said it’s understandable that local authorities have concerns.
But she said it was odd that there were moves to push through new regulations for the renewable sector when the scale of the orphan well problem showed that the oil and gas regulatory system could use an overhaul as well.
According to the Alberta Energy Regulator, there are currently more than 83,000 inactive oil and gas wells in the province and nearly 90,000 others that have been sealed and decommissioned but not yet fully remediated.
A report released last year by Parliament’s Budget Officer estimates that the cost of cleaning up abandoned wells in Canada will reach $1.1 billion by 2025.
“Obviously we have to make sure that all of our industrial development is done in a way that doesn’t pass the cost on to the public,” Hastings-Simon said.
“But it would make a lot of sense for the province to look at energy development holistically, rather than just picking which one might have more growth at the moment.”
This report from The Canadian Press was first published on January 29, 2023.