Money allocated by Canada for orphan well clean-up may not be enough

January 25, 2022

The cost of cleaning up Canada’s orphaned oil and gas wells will reach C$1.1 billion by 2025 and the money allocated by Ottawa for the job may not be enough, the parliamentary budgetary watchdog said in a report on Tuesday.

Canada is the world’s fourth-largest oil producer and sixth-largest natural gas producer and its western provinces are dotted with hundreds of thousands of disused oil and gas wells. Some of those wells are orphans, meaning the companies that owned them have gone bankrupt or ceased to exist.

In April 2020, the federal Liberal government said it would invest C$1.7 billion in cleaning up abandoned oil and gas wells, helping provide jobs for energy sector workers whose industry contracted sharply during the COVID-19 pandemic.

Parliamentary Budget Officer Yves Giroux said that while at face value Ottawa’s contribution should cover the clean-up costs, the energy-producing province of Alberta was allocating money to firms not in serious financial trouble.

If this practice continued, it would present “an outstanding risk in the medium-term” that the federal government’s allocation would not be enough, he said.

In Alberta alone, the provincial Orphan Well Association had an inventory of 2,460 wells needing to be abandoned, or decommissioned, and 5,361 sites needing reclamation work at the end of last year.

 

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