A Made-in-Alberta Failure: Unfunded Oil and Gas Closure Liability
DOI:
https://doi.org/10.11575/sppp.v16i1.77468Abstract
Alberta policy on inactive and orphan oil and gas wells is a massive regulatory failure characterized by a historical lack of transparency, excessive regulatory discretion, and regulatory capture — three deficiencies long since identified and understood in the scholarship as undermining the effectiveness of environmental laws and policies. The current policy to deal with the problem, the 2020 Liability Management Framework, fails to address these structural problems and is consequently unlikely to substantially reduce inventories of orphan and inactive assets. It is equally unlikely to uphold the polluter-pays principle, which states that the entity that pollutes the environment is responsible for cleaning it up. It is time for an independent and transparent public inquiry to examine Alberta’s mishandling of the inactive and orphan well problem and to recommend a regime that will effectively meet this challenge.
The inactive and orphan oil and gas well problem is an immense environmental and financial crisis that has been unsuccessfully dealt with by various policies over several decades. Approximately 230,000 drilled wells in the non-oil sands sector need to be abandoned and reclaimed, while 90,000 others that have been abandoned still await reclamation. The industry has continually delayed this closure work, resulting in a current liability estimate of at least $60 billion—and quite possibly double that amount. This liability is largely unfunded as industry has not set aside enough (or any) money to pay for it, while successive governments over many decades have failed to require industry to post security in any meaningful amounts. In the absence of significant and immediate legal and policy reforms, the coming years and decades will see the enormous environmental, social, and economic costs of this regulatory failure fall on the province’s taxpayers.
The new Liability Management Framework’s components include mandatory spending to reduce the inactive inventory, assessment of licensee risk and capacity, and an orphan program. On their face, these are steps in the right direction. However, persisting high levels of secrecy, discretion, and nearly exclusive industry influence put the framework’s goals in doubt. Under the new framework, the Alberta Energy Regulator (AER) will not disclose financial information on licensees or even the general state of the oil and gas industry. The new framework also still relies heavily on AER discretion to trigger closure obligations and fails to legislate timelines or quotas for closure work. Provisions for external scrutiny are minimal, impeding meaningful democratic oversight. Finally, the framework perpetuates historic industry influence in its design and implementation, which to date has resulted in a singular focus on minimizing industry’s costs at the expense of reducing environmental risks and protecting the public purse.
Albertans have watched for decades as the problem of orphan and inactive assets has burgeoned into an environmental and financial crisis. They deserve a full accounting for the policies that
have led to this state of affairs and they need unimpeded access to all of the relevant facts and information so that they can better understand the policy choices facing them as residents and taxpayers in the province.
Downloads
Published
Issue
Section
License
The following is the copyright statement of SPPP.
Copyright © <Author name> <year>. This is an open-access paper distributed under the terms of the Creative Commons license CC BY-NC 4.0, which allows non-commercial sharing and redistribution so long as the original author and publisher are credited.
Publication Copyright and Licensing
The following guidelines and information, provided in six sections, are intended for authors (the “Author”) who are invited to write a paper (the “Work”) for The School of Public Policy Publications (the “Publisher”). The rights and responsibilities conveyed in the SPP Author Agreement will only apply once your paper is accepted for publication. At that point in the publication process, you will be asked to download the form and return a signed copy via e-mail to spppublications@ucalgary.ca. Please review the below information to ensure agreement with SPPP policies.
Section 1: Author’s Grant of Rights
In consideration of the Publisher’s agreeing to publish the Work in The School of Public Policy Publications, the Author hereby grants to the Publisher the following:
1.1 The irrevocable, royalty-free right to publish, reproduce, publicly display, publicly perform and distribute the Work in perpetuity throughout the world in all means of expression by any method or media now known or hereafter developed, including electronic format;
1.2 The irrevocable, royalty-free right to use the Author’s name and likeness in association with the Work in published form and in advertising and promotional materials related to the Work; and
1.3 The irrevocable, royalty-free right to license others to do any or all of the above.
Section 2: Prior Publication & Publication by Others
2.1 The Author agrees not to publish the Work, or authorize any third party to publish the Work, either in print or electronically, prior to publication of the Work by the Publisher.
2.2 The Author agrees not to publish the Work in any publication outlet which is substantially similar to The School of Public Policy Publications for a period of six (6) months after publication of the Work in The School of Public Policy Publications. Substantially similar is defined as a non-subscription, open-access publication outlet with a similar mandate/vision and intended audience.
2.3 Should the Author publish or distribute the Work elsewhere at any time or in any alternate format, the Author agrees to contact The School of Public Policy Publications to inform them of the subsequent publication.
2.4 Should the Author publish or distribute the Work elsewhere at any time or in any alternate format, the Author agrees to make reasonable efforts to ensure that any such additional publication cites the publication in The School of Public Policy Publications by author, title, and publisher, through a tagline, author bibliography, or similar means. A sample acknowledgement would be:
“Reprinted with permission from the author. Originally published in the The School of Public Policy Publications, http://www.policyschool.ca/publications/.”
Section 3: Editing and Formatting
The Author authorizes the Publisher to edit the Work and to make such modifications as are technically necessary or desirable to exercise the rights in Section 1 in differing media and formats. The Publisher will make no material modification to the content of the Work without the Author’s consent.
Section 4: Author’s Ownership of Copyright and Reservation of Rights
4.1 Nothing in this agreement constitutes a transfer of the copyright by the Author, and the copyright in the Work is subject to the rights granted by this agreement.
4.2 The Author retains the following rights, including but not limited to, the right:
4.2.1 To reproduce and distribute the Work, and to authorize others to reproduce and distribute the Work, in any format;
4.2.2 To post a version of the Work in an institutional repository or the Author’s personal or departmental web page so long as The School of Public Policy Publications is cited as the source of first publication of the Work (see sample acknowledgement above).
4.2.3 To include the Work, in whole or in part, in another work, subject to Section 2 above and provided that The School of Public Policy Publications is cited as the source of first publication of the Work (see sample acknowledgement above).
4.3 The Editors and Editorial Board of The School of Public Policy Publications requires authors to publish the Work under a Creative Commons Attribution-NonCommercial 4.0 International licence (CC BY-NC 4.0). This license allows others to distribute, remix, tweak, and build upon the Work for noncommercial purposes, and ensures the Author is credited for the original creation. This onward licensing is subject to section 2.4 of this agreement, which further ensures that the original publisher is credited.
Section 5: Author’s Warranties and Undertakings
The Author warrants that:
5.1 The Author is the sole author of the Work, or if a joint author, the Author has identified within the Work the other authors, and holds the copyright, either solely or jointly, and has the power to convey the rights granted in this agreement.
5.2 The Work has not previously been published, in whole or in part, except as follows:
5.3 Any textual, graphic or multimedia material included in the Work that is the property or work of another is either explicitly identified by source and cited in the Work or is otherwise identified as follows:
5.4 To the best of the Author’s knowledge, the Work does not contain matter that is obscene, libelous, or defamatory; it does not violate another’s civil right, right of privacy, right of publicity, or other legal right; and it is otherwise not unlawful.
5.5 To the best of the Author’s knowledge, the Work does not infringe the copyright or other intellectual property or literary rights of another.
5.6 The Author will indemnify and hold Publisher harmless against loss, damages, expenses, awards, and judgments arising from breach of any such warranties.
Section 6: The Reuse of Third-Party Works
The Publisher requires that the Author determine, prior to publication, whether it is necessary to obtain permissions from any third party who holds rights with respect to any photographs, illustrations, drawings, text, or any other material (“third-party work”) to be published with or in connection with your Work. Copyright permission will not be necessary if the use is determined to be fair dealing, if the work is in the public domain, or if the rights-holder has granted a Creative Commons or other licence. If either the Author or Publisher determines for any reason that permission is required to include any thirdparty work, the Author will obtain written permission from the rightsholder.
