Redwater Energy Supreme Court decision

2019-01-31

in Canada, Economics, Law, Politics, The environment

A bit of good news: Supreme Court rules energy companies cannot walk away from old wells.

The fossil fuel industry has huge future cleanup costs, including the UK’s North Sea platforms, and of course Canada’s bitumen sands. The CBC story notes:

Alberta has been dealing with a tsunami of orphaned oil and gas wells in the past five years. In 2014, the Orphan Well Association listed fewer than 200 wells to be reclaimed. The most recent numbers show there are 3,127 wells that need to be plugged or abandoned, and a further 1,553 sites that have been abandoned but still need to be reclaimed.

The industry functions by socializing costs and privatizing profits: for instance, imposing climate change on everybody while directing revenue to shareholders, staff, and executives. The post-productive phase for oil, gas, and coal projects can be a major opportunity to divert costs that should legitimately be borne by the corporation onto the public.

{ 3 comments… read them below or add one }

. February 5, 2019 at 4:06 pm
. February 5, 2019 at 4:07 pm

“A Supreme Court of Canada ruling that bankrupt oil and gas companies must clean up their abandoned wells before paying creditors might sound like good news, but it doesn’t solve a growing crisis in Western Canada’s aging oil patch.

Just how will an increasingly indebted industry, hobbled by low energy prices and rising costs, find the up to $260 billion needed to clean up its inactive pipelines, wells, plants and oilsands mines as it enters its sunset years?

To date permissive provincial regulations have created the problem by only requiring industry to set aside $1.6 billion for the job.

That potentially leaves more than $200 billion in unfunded liabilities for taxpayers.”

. February 5, 2019 at 4:07 pm

“As a result, a number of firms in Alberta walked away from more than 1,800 inactive wells and dumped more than $110 million worth of liabilities onto the lap of the provincial regulator over the last three years.

The province’s Orphan Well Association, a non-profit supported by annual $30-million industry levies to prevent taxpayers from footing the cleanup bill, is now so overwhelmed that it was rescued with a $300-million loan from the province and federal government.

The Orphan Well Association handled 74 orphan wells (properties with no legal or financial owner) in 2012. Now it has a backlog of 3,000 wells, with each well averaging $300,000 for plugging and reclamation.

“The court decision doesn’t solve the underlying problem,” noted Regan Boychuk, an independent researcher with campaign group Reclaim Alberta who has tried to highlight the scale of the problem and advocates for an independent reclamation trust funded by security deposits and solvent oilsand companies to address the liability crisis.”

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