Canada’s COVID-19 & Orphan Well Opportunity

By Bri Conn

As part of the COVID-19 economic recovery plan, the Government of Canada announced a $1.7 billion dollar project to clean up orphaned and abandoned wells in Western Canada [1]. Alberta was home to upwards of 95,000 inactive wells and 69,000 abandoned wells as of March 2020, and Saskatchewan and British Columbia also house a growing number of orphaned wells [2]. The federal aid is being advertised as a way to help the energy industry in these provinces, which is struggling as oil prices are being hit hard by the pandemic, and both public interest and investment are beginning to move away from the fossil fuel sector.

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What are orphan wells?

Oil and gas companies drill wells in locations containing oil reserves, in many cases on privately owned land. Most Canadian landowners have surface rights to their land, however the rights to exploit mineral reserves below their property is controlled by the provincial government [3]. These mineral rights can be sold to private companies, who can then negotiate with the landowner to place a well on their property. The process of erecting a well typically takes 2 years, before the well can start its 30-40 year lifespan of operation [4].

Companies can let their wells become ‘inactive’, if they are deemed not presently economically viable to operate, and ‘abandoned’ once they are permanently plugged, cut, and capped [5]. The abandonment process results in the well being sealed thoroughly to prevent toxic gases or substances from being released. Once a well is abandoned, the process of reclaiming the well site to its natural state can begin.

Orphan wells are pieces of oil infrastructure that no longer have legal or financial owners. Oftentimes, if an oil and gas company goes bankrupt, it is no longer responsible for properly abandoning and reclaiming its well sites. In Alberta, responsibility for these wells then falls to the Orphan Well Association (OWA).

The OWA is an industry-funded group who decommissioned over 2,200 orphan wells between 2002 and 2018 in Alberta. Current projections estimate that the OWA will inherit at least 12,000 new well sites, as many oil and gas companies are being hit hard by the pandemic’s economic impacts [6]. Part of the new plan Prime Minister Trudeau announced includes a $200 million dollar loan to the OWA to expand their operations and begin chipping away at the immense amount of orphan wells in Alberta.

What environmental issues are orphan wells contributing to?

Aside from being a nuisance to private landowners, inactive and orphan wells can also pose hazards to the environment and human health. Unplugged wells can begin to leak methane over time, a potent greenhouse gas. Additionally, the supportive infrastructure of wells can begin to break down when they are taken out of operation, increasing the risk of groundwater and soil contamination [7]. Farmers report that the land around their wells are yielding lower crops, and some are experiencing large swaths of land that are no longer viable [2]. The longer an orphan well is left unremediated, the greater the risk of crude oil and heavy elements contaminating the site.

How should Canada proceed?

The $1.7 billion aid package to the provincial governments of Alberta, British Columbia, and Saskatchewan, as well as to the OWA is a big step in the right direction for Western Canada to begin cleaning up the orphan well problem. However, significant action must also be taken by the oil industry itself, to clean up its legacy of negligence in this area. It is troubling that the public is being made to pay for decades of industry malpractice that has led to the current reality. Government funding packages mean that the costs are being pushed onto taxpayers, as opposed to the polluters and companies who abandoned these sites. Projections estimate that it may take upwards of $8 billion to remediate orphan wells in Alberta alone [7]. An ideal solution would see the oil and gas industry companies be held responsible for funding the abandonment and remediation of all orphaned wells in Western Canada.

Orphan wells will undoubtedly continue to be an issue in Western Canada, as we continue the transition away from a fossil fuel economy. It is imperative that we begin to hold companies accountable, and target the source of the problem before it is too late.

References

[1] D. Anderson, “$1.7B to clean up orphaned and abandoned wells could create thousands of jobs.” CBC News, April 17, 2020. [Online]. Available: https://www.cbc.ca/news/canada/calgary/federal-oil-and-gas-orphan-wells-program-1.5535943. [Accessed: 19-Oct-2020].

[2] S. Riley, “11 things you need to know as Trudeau announces $1.7 billion to clean up ‘festering’ orphan and inactive wells.” The Narwhal, April 17, 2020. [Online]. Available: https://thenarwhal.ca/11-things-trudeau-1-7-billion-clean-up-festering-orphan-inactive-wells/. [Accessed: 19-Oct-2020].

[3] Canadian Association of Petroleum Producers, “Mineral Rights.” Canadian Association of Petroleum Producers Mineral Rights, [Online]. Available: https://www.capp.ca/explore/mineral-rights/. [Accessed: 19-Oct-2020].

[4] Canadian Association of Petroleum Producers, “What to Expect When You’re Expecting a Well.” Canadian Association of Petroleum Producers Overview for Landowners, [Online]. Available: https://www.capp.ca/wp-content/uploads/2019/11/What_to_Expect_When_You%E2%80%99re_Expecting_a_Well-250098.pdf. [Accessed: 19-Oct-2020].

[5] D. Jaremko, “Understanding inactive and orphan wells in Alberta; Efforts to address orphan and inactive wells accelerating before Ottawa's funding pledge.” Canadian Energy Centre, April 21, 2020. [Online]. Available: https://www.canadianenergycentre.ca/understanding-inactive-and-orphan-wells-in-alberta/. [Accessed: 19-Oct-2020].

[6] E. Graney, “Number of new orphan wells in Alberta on pace to hit 12,000.” The Globe and Mail, October 6, 2020. [Online]. Available: https://www.theglobeandmail.com/business/article-number-of-new-stranded-oil-gas-wells-in-alberta-on-pace-to-hit-1200/#:~:text=Alberta's%20Orphan%20Well%20Association%20stands,facilities%20left%20stranded%20by%20operators. [Accessed: 19-Oct-2020].

[7] E. Macintosh, “California has an orphan well problem. Here's what Alberta can learn from it.” Canada’s National Observer, January 29, 2020. [Online]. Available: https://www.nationalobserver.com/2020/01/29/analysis/california-has-orphan-well-problem-heres-what-alberta-can-learn-it. [Accessed 20-Oct-2020].