The estimated cost of cleaning Canada’s orphan oil and gas wells
The cost of cleaning up orphaned oil and gas wells across Canada could skyrocket between 2020 and 2025, says a new report from Canada’s parliamentary budget officer.
Provincial regulators require oil and natural gas companies to close inactive or abandoned well sites. But when there is no known financially viable operator capable of addressing the closing of their wells, the wells are deemed orphaned.
Concerns have been growing over the number of abandoned oil and gas wells, mainly across Alberta and Saskatchewan. Since many of these wells are located on or near farms, ranches and forests, leaks from these aging wells could contaminate soil and water in the surrounding areas.
The report by the Office of the Parliamentary Budget Officer provides an independent estimate of the cost of cleaning these orphaned wells.
“As the number of orphan wells increase, so does the expected cost for cleaning up environmental liabilities. Our estimated cost of cleaning oil and gas wells, on a national level, is expected to rise from 361 million in 2020 to 1.1 billion by 2025,” Yves Giroux, parliamentary budget officer (PBO), says in the report.
This estimated cost of cleanup, which only applies to onshore conventional oil and gas production and does not include clean-up costs of oil sands, results in a drastic increase between 2020 and 2025.
Currently, only 35% of all wells in Alberta and 39% of all wells in Saskatchewan are active. This is the lowest share ever recorded.
On top of that, inactive and plugged wells make up roughly 37% of all wells.
The number of orphan wells in Alberta has gone up from 700 in 2010 to 8,600 in 2020, according to the report.
Through the COVID-19 Emergency Economic Response, the federal government has allocated $1.7 billion to cover the estimated clean up. PBO believes this should be “sufficient,” however, “current provincial allocations give rise to an outstanding risk in the medium-term that the projected liability could persist if funding continues to be allocated to firms that do not have acute financial risk,” the report reads.
Infographic by Office of Parliamentary Budget Officer
Feature image by iStock.com/mysticenergy
