This situation has been a growing problem for the province despite legislation giving a regulatory agency more powers to ensure they’re put out of service in a timely way, according to a new report released on Thursday by B.C. auditor’s general.
The report, titled The B.C. Oil and Gas Commission’s Management of Non-Operating Oil and Gas Sites, found the province has more than 10,000 inactive wells — sites that no longer produce oil and gas — and that 7,474 of them had yet to be dismantled, filled or capped for environmental remediation purposes.
Auditor General Carol Bellringer said the “decommissioning and restoration are the operator’s responsibility, but in cases where sites are ‘orphaned’ by bankrupt or absent operators, the BC Oil and Gas Commission (OGC) becomes responsible for the work.
“Decommissioning an inactive well reduces the likelihood that oil, methane gas and saline water will move up through the well into freshwater aquifers, surface water, the ground or the atmosphere,” says the 54-page report
CBC Canada is reporting that Bellinger has raised concerns over energy companies in B.C. not being required to decommission and restore well sites when they are abandoned unless they are “explicitly ordered to do so,” suggesting that the province may not have the proper tools to deal with the problem.
Security-deposit fund short millions of dollars
The B.C. Oil and Gas Commission racked up a whole list of deficiencies, with one in particular garnering attention. The amount of money in the security-deposit fund (Orphan Fund) did not cover the growing restoration costs. In 2016/17, the Orphan Fund was short $16.6 million, and in 2017/18 it was short $13.1 million.
So in addition to not collecting enough security deposits, the OGC failed to demand that operators decommission inactive wells in a timely fashion due to “gaps” in legislation. Apparently, B.C. had some weak legislation that allowed companies to slip through, but since 2018, the B.C. government has amended legislation giving it more power to ensure the cleanup of inactive well sites.
Bellringer said that despite the changes, she’s not yet convinced they’re enough to tackle the problem. This is because the total estimated restoration costs of all oil-and-gas wells in B.C., operating and not operating, was $3 billion as of February. And that figure is rising.
According to the auditor general, it costs an average $370,000 to cement and reclaim a well. With 326 orphaned wells awaiting cleanup, this will cost the agency over $120 million. The fund’s operating budget for 2017/18 was $5.3 million.
Bellringer also cited a recent Supreme Court case that ruled that energy companies must clean up their well sites before paying back creditors in the case of insolvency or bankruptcy. In this case, the court ruled an Alberta company could not walk away from unprofitable wells on agricultural land without cleaning them up.
In another failure, the report noted that the OGC had “failed to identify significant environmental risks posed by 3,721 ‘legacy sites’ restored prior to 2004 that could be leaking methane or hydrocarbons into groundwater and the atmosphere.”
“I think the report pretty much speaks to a massive problem,” said David Suzuki Foundation researcher John Werring, who has monitored oil and gas well sites. “The OGC has known about this problem for years but instead of taking steps to protect the public interest, they have been bending to the will of industry.”
