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Inactive oil/gas wells continue to be problem

Posted on March 30, 2017 by Vauxhall Advance

By Trevor Busch
Vauxhall Advance

The scale of the problem of inactive oil and gas wells in Alberta is an issue that largely flies under the radar, and remains a situation that needs to be rectified if the problem is to be addressed.

“In Alberta today, there’s roughly 89,000 inactive oil and gas wells,” said Brent Nimeck, an independent researcher who spoke recently at the Action Surface Rights Association annual general meeting in Taber. “Currently in Alberta there’s no legislation that says we have to clean these wells up or do anything with them. Once they’ve been listed inactive they can stay in such a state indefinitely.”

Nimeck, who has worked in the industry for 25 years, asserts a fraud is being foisted on the province’s citizens with regard to the status of these inactive wells.

“Some of these wells are up to 60 years old, and have been sitting idle for 60 years. Oil companies like to say we’re going to wait for the price of oil to come back up and we’re going to open them back up, but that’s actually just a lie. The cost of reclaiming wells, to abandon them, to bring them back to the natural state that they were before usually exceeds the cost of drilling a well. With no legislation in place, there’s no incentive for these companies to deal with these wells. They’re content to let them sit inactive, and all they really have to do is make their monthly lease payment to you guys (landowners) and everybody is happy.”

Contamination from wells that need to be properly reclamated and sealed is a growing problem in Alberta, according to Nimeck.

“But unfortunately, oil and gas wells break down over time. It’s a known fact, about 15 per cent of these wells through the weakest estimations and reporting of the AER (Alberta Energy Regulator) are all admitted to leak. It’s safe to say all of these are leaking in some capacity, whether it’s gas to surface, brine into aquifers, hydrocarbons to surface — it’s an irreversible contamination that these wells are doing today, and they’ll continue to do so until we actually physically reclaim them, pull that pipe out of the ground, and seal them properly. This is 90,000 wells out of the 450,000 wells that we have in the province today.”

While the Orphan Well Association does what it can with limited financial resources, they are only scratching the surface of the problem.

“The Orphan Well (Association) you always hear about in the media, it’s currently looking at 1,500 wells. Rachel Notley is asking the federal government to give us half a billion dollars to deal with the 1,500.

“But that’s basically like ignoring the herd of elephants in the room. This has been going on for decades. The price of oil has fluctuated over time, but this has been allowed to happen by previous governments for decades, and oil companies are fully aware of all of this — they go along with it because it saves them hundreds of billions of dollars of expense.”

If oil companies claim they will bring inactive wells back into production, this is largely a lie contravened by statistical evidence, added Nimeck.

“So they also say we’re going to wait until the price of oil comes back up and we’re going to return these wells back on, because that’s all we’re waiting for. But that’s actually one of the biggest lies being told today. (Only) 0.02 per cent of wells are reactivated after 10 years, so you can see that virtually no wells have ever been turned back on. When the oil is gone, it’s gone — that’s the reason we shut wells off, it’s not that the price isn’t there. These guys will sell oil and gas no matter what, that’s their whole goal is to sell. If it’s not available, they can’t sell it. That’s why there’s no reactivation of these wells.”

Some industry groups have acknowledged the problem and the need for a solution, but little has been accomplished so far.

“The Canadian Association of Petroleum Producers, they understand this stuff better than anybody, they helped orchestrate this fraud,” said Nimeck. “In 2015, they actually wrote a letter to the royalty review panel and said the Orphan Well program is not designed to handle more than a few hundred wells, it’s just kind of a fancy front. The growing liabilities that these wells in Alberta represent need to be addressed, we need to take a hard look at it, develop a funding strategy, a mechanical strategy on how we can actually deal with these wells. They wrote a letter to the government saying we need to do a full study.”

Political foot dragging in Edmonton is hampering efforts with a plan.

“Nobody did that study. We’ve asked the energy minister personally, we’ve talked to the highest levels of government for this study, and they just put it under the carpet,” said Nimeck.

Orphan wells are also escalating at an alarming rate in today’s depressed energy sector.

“The scale of the problem of orphans is tiny compared to inactive wells. Right now there’s 1,600 wells in the Orphan Well program. With the addition of Lexin that’s going to double it. So in the past three years, we’ve seen a 3,000 per cent increase in orphan wells in the province. You can pretty much guarantee there’s an old well sitting doing nothing on all of your properties,” said Nimeck.

Pipelines are also a growing issue, but little is being done to address this problem in Alberta.

“Pipelines have seen a 2,500 per cent increase in liabilities as well. In 2015 the year end report from Orphan Well actually said we don’t consider pipelines a priority because we don’t have any money for it. So although they’re going up and up, we’re actually doing nothing about it because all of the money has to go to wells. So they’re basically picking their battles of where they can spend their money. The Orphan Well is completely funded by the oil industry — so it’s not that it’s at taxpayer expense — but oil companies just don’t want to spend more money to deal with the problem. They’re literally just dealing with peanuts. The Orphan Well Association, in 15 years, has only dealt with 700 wells. Today we’ve got 1,600 wells, so that’s going to take 30 plus years at this rate,” said Nimeck.

If the Orphan Well Association is unable to handle the scale of the problem facing Alberta, taxpayers may be presented with a mountain of liability in future, according to Nimeck.

“Through its own admission, the Orphan Well program doesn’t work. It’s not designed to handle these kinds of well increases. That’s our last protection as taxpayers. If the Orphan Well program doesn’t work, these wells have to be cleaned up. If they start leaking on your property, or oil comes out, or it’s on fire, taxpayers have to pay for that. So if this program doesn’t work, we’re in big trouble.”

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