Smoky River Regional Economic Development

Dan Dibbelt
Smoky River Regional
Economic Development

Orphan oil wells and the issue of reclamation

The decline in the economy due to low oil prices has many impacts beyond the obvious ones of a slow economy and loss of jobs.

While the downturn was sudden and extreme the secondary impacts are starting to become obvious and will continue to expand with time.

Besides the economic domino effect on the economy, there is also an environmental impact when the oil industry shuts down.

While most can people see the positive environmental benefits of the decline; less oil exploration and drilling, less movement of oil and consequently less carbon emissions, few people look beyond that.

It is hard to argue against good environmental actions, but you really need to look at the big picture. Is reducing oil production in Alberta really better for the environment?

Despite being a major producer and exporter of oil, predominately in Alberta, Canada also imports oil from countries such as Saudi Arabia, Venezuela, Algeria, Iraq and the United States. Most imported oil is destined for eastern Canada.

Part of the reason is a lack of infrastructure to pipe and refine Alberta oil to eastern Canada.

So while Alberta is criticized for its “dirty oil,” Canada imports more than 800,000 barrels of oil per day from a variety of other countries, most of them with more questionable environmental regulations, not to mention human rights legislation than we have here. But some would believe by ending Alberta’s oil production, the world is a better place.

There is an additional negative side to the decline in the Alberta oil industry, one that can also be expected to steadily grow. They are referred to as abandoned, suspended and orphaned wells.

In the Smoky River region there are more than 450 inactive oil and gas facilities. These facilities can range from an oil well, to a battery, to an oil derrick.

In the case of oil wells, a company may choose to suspend a well when it no longer produces at a satisfactory rate. A suspended well is supposedly suspended for one year, but the company can apply for yearly extensions and they usually do.

Once suspended the well needs to be monitored on a regular basis to ensure there is no contamination of the surrounding soils. This doesn’t always happen.

At some point, a company may decide to abandon a well, which requires the company to seal the well and reclaim the disturbed lands.

Of the more than 400 inactive oil and gas facilities in the Smoky region, only one is listed as abandoned, all the rest are suspended. There are a couple reasons for this.

One new technology may bring new life to a well and enable the company to extract more oil from a well with this new technology.

The second reason is that once a well is abandoned there is a significant cost and process required to seal and reclaim the surrounding lands.

Most people have noticed abandoned gas stations (now mostly empty lots) on street corners in small towns. While there is legislation requiring these lands to be reclaimed, the legislation does not provide timeframes.

Ultimately the reclamation is at the leisure of the company owning the property.

The situation is the pretty much the same for abandoned oil and gas facilities in our rural districts. With the decline in oil, we are witnessing many facilities being suspended, with the hope oil prices will return one day.
The worst case scenarios however, are the energy companies that are going into bankruptcy and in doing so are creating orphaned wells.

Orphaned wells result in the landowner no longer receiving payment from the energy company, and the reclamation of the well no longer being the responsibility of the company that put it there.

Enter the Orphan Well Association, a not for profit organization which operates under the Alberta Energy Regulator, whose mandate is to manage the abandonment of upstream oil and gas orphan wells, pipelines, facilities and the remediation and reclamation of their associated sites.

It is great to know someone is looking after the orphans, but the number of orphans is growing and the reclamation process takes years for every well and I’m not really sure what is better, a producing well being monitored regularly or an idle well sitting on a long waiting list for reclamation.

Many factors need to be weighed before deciding that the environment wins when Alberta oil declines, it’s just not that simple.

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