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Energy Regulator — Alberta oilpatch cleanup may cost $260 billion

Global News is reporting that internal documents have come to light showing that Alberta Energy Regulator vice-president Robert Wadsworth said in February 2018 that the estimated cleanup of the Alberta oilpatch is far higher than any liability amount made public by government and industry officials.

“We can continue down our current path until the impacts are felt by the public … or we can start to implement the numerous changes that we now know need to be made,” Wadsworth said in a presentation in Calgary in February.

He said that a “flawed system” of industrial oversight is to blame for the problem – but that ultimately – taxpayers would be on the hook to cover a portion of the costs. The provincial government and the oil industry publicly said the liabilities have been calculated at $58 billion, far less than Wadsworth’s estimate.

Athabasca oilsands in Alberta  Canada.
Athabasca oilsands in Alberta, Canada.
Howl Arts Collective (CC BY 2.0)

At that time, Wadsworth also called on all stakeholders to accept the tougher regulations and to turn away from a system that allows the bigger companies to essentially ignore their liabilities, taking centuries to clean up their toxic well site graveyards
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The AER — in an attempt to soothe any ruffled feathers — says its vice president’s comments were “a snapshot in time of estimated total liability” and based on a “worst-case scenario of a complete industry shutdown.” However, the AER also makes it clear that “industry companies are responsible” for the costs in Wadsworth’s estimate.

The energy industry’s staggering liabilities include the costs companies must assume when shutting down aging and inactive oil and gas exploration wells, facilities and pipelines once they are no longer needed.

An additional and significant part of that liability is the clean-up of toxic tailings ponds from oilsands extraction mines near Fort McMurray. The ponds have sprawled to cover an area the size of Kelowna or about 211.82 square kilometers (81.78 sq miles).

The tailing ponds are used to dump the waste from the mining of the bitumen, a process that normally requires the use of hot water to separate the bitumen from the oily sands beneath the boreal forest in Alberta. What’s left behind is a thick, pudding-like sludge.

File photo: A pipeline under construction from Fort McMurray  AB to the Scotord Plant in Fort Saskat...
File photo: A pipeline under construction from Fort McMurray, AB to the Scotord Plant in Fort Saskatchewan
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The industry’s response
An industry spokesman said that the liability may not be as high as has been suggested. Lars De Pauw, executive director of the Orphan Well Association — an industry-funded group that assumes responsibility for the inactive wells of bankrupt companies – said that the association is getting the work done this year at a cost of 70 percent below the public estimates made by AER.

But as Wadsworth has reiterated in February when he spoke at the Calgary-based Petroleum History Society, the rules are so weak that companies find it easy to delay setting aside money to cover cleanup costs until they are out of business, and then, they have nothing left to cover the costs.

“Even though we have known these programs were flawed, there has been no proactive change to the liability programs,” he said, according to speaking notes accompanying the first presentation. “Until recently, the implications of our flawed system had not been realized.”

“Despite our best efforts, there are liabilities that are no longer owned by a company, or are not addressed by existing liability programs,” Wadsworth said in February. “We must ensure that the costs of these liabilities is retained by industry and not passed on to Albertans.”

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