Levy charged to Alberta oil companies too low to cover orphan well costs: report
A new report is warning the annual levy charged to Alberta oil companies to fund the cleanup of orphaned oil and gas wells remains too low to keep up with the rate of surrendering.
The report, written by former University of Calgary Public Interest Law Clinic lawyer Drew Yewchuk, says this year's levy rate combined with low rates in previous years is leading to an estimated funding shortfall of $1.2 billion.
The levy funds the Orphan Well Association, a non-profit entity overseen by industry and regulator officials and tasked with reclaiming wells that are orphaned when oil and gas companies go bankrupt.
The association says it currently has more than 3,700 wells on its books that need to be decommissioned and reclaimed, which could cost more than $860 million.
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Alberta's Orphan Well Association says it has more than 3,700 abandoned well that need to be cleaned up, but a new report says the annual levy oil companies are charged to fund the cleanup is far less than what it will actually cost. Global News
Yewchuk's report says the $144 million in levies the Alberta Energy Regulator recently approved to be collected this fiscal year continues the trend of underfunding for the Orphan Well Association.
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Since the association will also need to repay more than $300 million in federal and provincial government loans over the next 10 years, Yewchuk says Alberta's orphan well situation will only get further out of hand.
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A spokesperson for the energy regulator says it hasn't seen the report and was unable to comment on it.
2:01
University of Calgary study looks at abandoned oil well burden in Alberta
Another study, produced by the University of Calgary's School of Public Policy in May 2021, put the number of inactive and abandoned wells much higher.
That study estimated there were 97,000 inactive wells in the province and 71,000 abandoned wells.
With files from Global News.
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