Archives for 2019

Action Surface Rights Members,

As you are well aware, ASRA has been greatly concerned with the proliferation of inactive and Orphan Wells over the last couple of years. In fact we intervened at the Supreme Court of Canada in the Redwater affair to make sure that any leftover assets of Bankrupt Operators went to reclaim surface leases first before money went to pay off bank loans.

We have also been concerned about the types of surface leases that landowner have been signing for large Solar and Wind projects as the content of those leases are not regulated and Industry Operators are not currently required to utilize land agents in their dealings with landowners.  Many of those types of surface leases contain clauses highly detrimental to landowners.

ASRA is currently supporting Renuwell Solutions and the MD of Taber as they partner to investigate the potential of putting small scale solar projects on abandoned, or orphaned, surface lease sites.  This feasibility study is funded by a grant from Alberta’s Municipal Climate Change Action Centre (“MCCAC”) and will attempt to navigate the requirements that the Alberta Energy Regulator, the Orphan Well Association, Alberta Environment and the Surface Rights Board may impose on these types of projects.  A template will be developed, which other municipalities can also use, to satisfy the various regulatory agencies requirements and to obtain the needed distribution power company’s approval.

These types of projects will likely benefit landowners by securing annual lease payments by eliminating the requirement  to make annual applications to the SRB, paying some municipal taxes, lowering power costs for irrigation (and possibly reducing electrical distribution and transmission costs as well), preserving agricultural land, providing a more secure power supply, allowing more time to remediate contaminated surface leases and utilizing existing lease access roads, power connections and surface disturbances.  It has been projected that a 2.5 acre solar site could provide enough electricity to run 30 quarter section pivots.
These small solar projects will result in much lower disturbance that large industrial scale projects and we do not think that neighbouring landowners will see any increase in noise and light pollution, weed issues, traffic and dust, fire threats, glare, interruption of farm use of roads, environmental/wildlife problems or reclamational issues.  They will be hooked up to the existing power grid and will not require new transmission lines or substations.

Renuwell and the MD of Taber are hosting a series of Open Houses (see attachment) the last week of May in various communities in the Taber area and we would appreciate it if you could either attend an Open House or respond to this email by detailing any concerns that you might foresee about these types of small solar projects being placed on abandoned, or orphaned, surface leases sites.

Thank you,

Daryl Bennett
Director Action Surface Rights Association 

By Andy Blatchford
The Canadian Press
April 9, 2019

Canola farmers whose livelihoods have been targeted by China in its feud with Canada say it’s time for the federal government to be aggressive at the political level in its fight against a growing number of agricultural trade barriers around the world.

Several producers told two parliamentary committees Tuesday that China’s recent rejection of Canadian canola-seed shipments is only the latest trade disruption that’s hurt the country’s agriculture sector.

They reminded MPs in Ottawa about a number of major trade obstacles faced by Canadian agricultural exporters in faraway markets like India, Italy, Vietnam and Saudi Arabia.

“Canada can feed the world but not if our government does not act strongly on our behalf, removing non-tariff trade barriers, enforcing existing trade agreements and removing political roadblocks,” Alberta canola farmer Stephen Vandervalk told the House of Commons agriculture committee.

Citing concerns about pests, China has rejected canola-seed imports from Canada and has suspended the licences of two major Canadian exporters.

The moves to cut off the critical Canadian export have been widely viewed as China applying economic pressure on Canada in response to the December arrest of senior Huawei executive Meng Wanzhou in Vancouver at the behest of the United States.

Any extended canola dispute with China, which imported $2.7 billion worth of canola seed from Canada last year, would deliver a painful economic blow to producers, the supply chain and the wider Canadian economy.

The price of canola has fallen since the dispute started last month. The late-winter timing of the disruption has been particularly difficult because it’s forced many farmers to suddenly rethink the planting decisions vital to their businesses.

On Tuesday, producers made it clear to MPs at the committees that even with the urgency around the China conflict, the pain is not only about canola. Canadian farmers, they said, are staring at other big trade hurdles in world markets.

Several of the witnesses mentioned issues that have affected Canada’s durum wheat exports to Italy, wheat sales to Vietnam, pulse exports to India and feed-barley shipments to Saudi Arabia.

Saskatchewan grain farmer Mehgin Reynolds (who is seeking a Conservative party nomination) told MPs that, for instance, her four-year crop rotation includes lentils, barley, canola and durum wheat — all products that face obstacles on foreign markets.

“The frightening reality is that almost every crop being grown in Canada is currently struggling with one trade barrier or another,” Reynolds said.

The Liberal government has insisted it wants to find a scientific solution to the canola dispute, in keeping with China’s insistence that the problem is tainted seeds.

The Liberals have established a working group that includes officials from Richardson International Ltd. and Viterra Inc. — the two exporters that have had their licences to sell canola revoked by China — and representatives from the governments of Alberta, Manitoba and Saskatchewan. Agriculture Minister Marie-Claude Bibeau has requested to send a delegation of experts to China to examine the issue. She’s said officials are exploring options to support farmers by expanding existing programs.

Canola producer Mark Kaun told the committee it’s time for the Canadian government to start playing “hardball.”

“There’s a pile of imports that come into this country from China — and maybe some of their ships should sit and wait in the water,” Kaun said. “Canadian canola is contaminated — it’s contaminated with political dirt and bureaucracy.”

“This is a political issue plain and simple. Political problems need political solutions,” agreed Vandervalk, who’s also vice-president representing Alberta with the Western Canadian Wheat Growers Association.

“If we must play the game of grain inspections, so be it. But in the meantime Canadian grain farmers are the ones paying the price for the political failings.”

If companies can’t pay, taxpayers could be on the hook.

Scattered across Alberta are more than 300,000 oil and gas wells. About 167,000 of them are inactive and abandoned wells that a coalition of landowners, researchers and former regulators call a “ticking time bomb” that will eventually leak, polluting farmlands, forests, waterways and even playgrounds.

Oil and gas companies are legally required to clean up these wells through a reclamation process, but there is no timeline for when they have to do so. And an increasing number of companies can’t pay the cleanup cost.

Ahead of next week’s provincial election, the coalition called the Alberta Liabilities Disclosure Project has released internal documents from the Alberta Energy Regulator that show the estimated cost of cleaning up these wells is between $40 and $70 billion.

That’s much higher than the regulator’s publicly disclosed number of $18.5 billion for the cleanup of oil and gas wells, excluding steam-assisted oil sands production.

The coalition is calling on all political parties to commit to releasing independently verified estimates of Alberta’s environmental liabilities, if elected.

“For decades, we’ve looked the other way as the number of aging oil and gas wells threatening farm lands and drinking water continues to grow,” Regan Boychuck, lead researcher for ALDP, said in a news release. “The Alberta Energy Regulator hasn’t come clean on how much it will actually cost to deal with this mess, but our new data raises the floor of the debate. We need the government to tell Albertans the truth, so we can make a plan to deal with this ticking time bomb.”

The NDP has promised in its platform to “implement clear timelines for when companies need to clean up their abandoned oil and gas wells and require them to justify delays in reclaiming sites.”

Jason Kenney’s UCP platform says the party would create “a framework to reclaim abandoned wells in Alberta.” The party says it will “streamline” the process for abandonment and reclamation to “reduce costs” and “increase the rate” at which wells are abandoned. It also says it will work with AER and industry to ensure liabilities are covered without discouraging new investment. The party also promises to ask the federal government to provide tax incentives to encourage reclamation.

In their platform, the Alberta Liberals propose an “oil patch cleanup bond” to make companies pay, and say they will set timelines for reclaiming well sites.

In 2018, the Toronto Star, National Observer and Global News obtained an internal presentation from the regulator that estimated the cleanup cost of all mining, oil and gas wells and pipelines at $260 billion—much higher than the AER’s public estimate of $58 billion.

The regulator later walked back that number, saying it was “based on a hypothetical worst-case scenario” and it was trying to “hammer home” the liability message to the oil and gas industry.

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A Supreme Court ruling now forces firms to clean up abandoned wells before paying creditors. That doesn’t solve much.

By Andrew Nikiforuk
4 Feb 2019 | TheTyee.ca

How will Alberta find the billions of dollars needed to clean up its inactive pipelines, wells, plants and oilsands mines as the oil and gas industry enters its sunset years? Photo: Premier of Alberta Flickr.

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.

Technically the 5-2 court decision will make it easier for provinces to prevent insolvent companies from selling assets to pay creditors while dumping the cleanup bill onto taxpayers.

That’s been a big problem in Western Canada, where lower provincial court decisions have allowed bankrupt firms to pay off banks first and ignore their cleanup obligations under provincial laws.

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.

“The industry is not making enough money to pay for these liabilities. Outside of the oilsands sector, companies aren’t making much profit and are losing money.”

Keith Wilson, an Edmonton property rights lawyer who represents landowners, says the court decision still leaves huge unfunded liabilities that could fall on taxpayers.

“It is a known fact that the oil and gas industry has made some of the biggest profits in commerce in history. The money was there, but the companies never put some aside to deal with their liabilities and governments allowed them to do that with their eyes wide open,” said Wilson.

Finding the money to retire aging wells and pipelines is not just an Alberta nightmare, but also a global challenge.

For example, the cost of decommissioning ocean platforms, pipelines and wells in the North Sea — an estimated $46 billion Canadian in 2017 — will exceed Britain’s remaining tax revenues from the industry.

According to the Financial Times, Wood Mackenzie, an energy research group, has forecast that the cleanup of North Sea oil infrastructure (some 250 fixed installations, 3,000 pipelines and 5,000 wells) will become a “significant annual expenditure for government rather than a provider of income.”

A recent report even charged that Britain’s Oil and Gas Authority has underestimated the cleanup cost — now pegged at $130 billion — and that the final cost will probably come in at $140 billion.

At least half of that will be borne by taxpayers, suggest critics, despite legislation saying the industry must clean up its own messes.

The scale of the problem is even greater in Alberta, as a public presentation by a senior official with the Alberta Energy Regulator revealed last year.

Robert Wadsworth, the regulator’s vice-president of closure and liability, laid out the cost of cleaning up aging oil and gas infrastructure during a talk to the Petroleum Historical Society last Feb. 28.

Wadsworth’s presentation indicated the full cost of cleaning up old gas plants, inactive wells, aging pipelines and oilsands tailing ponds wasn’t $58 billion — the official number usually cited by Alberta officials — but probably closer to $260 billion. That’s three times the provincial debt of $71 billion.

Wadsworth also said the liabilities are underfunded and the collection of security funds from industry is “insufficient.”

When news outlets revealed the contents of Wadsworth’s presentation last year, Alberta’s regulator reacted strongly.

In a public statement the regulator, which is funded solely by industry, apologized for any confusion that the $260-billion estimate may have created.

It said the estimate was based on a “hypothetical worst-case scenario” and “was created for a presentation to try and hammer home the message to industry that the current liability system needs improvement.”

“Using these estimates was an error in judgment and one we deeply regret,” added the regulator statement.

Canada’s Ecofiscal Commission, a group started by economists in 2014 to help put a price on pollution, noted that the regulator might not have endorsed the $260-billion figure but “hasn’t disavowed it either.”

“Regardless of whether the $260 billion was a good estimate of the worst-case scenario,” wrote lead researcher Jason Dion with the commission, “the [regulator] clearly believes there is a risk of costs exceeding its official estimates. Albertans deserve to know more.”

That appears to be what Wadsworth tried to do with his presentation. His analysis had everything to do with Alberta’s flawed system for dealing with liabilities in the oil patch.

Wadsworth’s presentation said taxpayers could be on the hook for $260 billion given two basic problems: the lack of a targeted program with timelines to retire inactive wells and “increasing unfunded liability.”

Unlike many U.S. jurisdictions, neither Alberta nor B.C. has any specific requirements to clean up wells in a timely fashion while companies are still solvent. (Both provinces now say they are working on regulations to impose timelines on well site cleanup after decades of regulatory inactivity.)

Alberta also requires no specific security deposits for inactive oil and gas well cleanups.

Wadsworth characterized the system for monitoring liabilities as “deeply flawed.”

Alberta’s Liability Management Rating program, for example, has kept track of growing liabilities compared to assets for about 800 companies in the oil patch for nearly two decades, but it doesn’t collect money for cleaning up liabilities until the companies are “already showing declining financial capacity,” said Wadsworth.

In 2005, for example, it calculated that more than 33,000 inactive wells and 9,322 unreclaimed facilities created a liability of $9.4 billion, with a $20-million security deposit. The same program has watched as liabilities have grown exponentially. There are now more than 80,000 inactive wells and related liabilities worth $31 billion, with a security deposit of $226 million.

“With no timelines for cleaning up inactive wells, the government has incentivized companies to do nothing,” said Wilson.

Saskatchewan has the same problem. It has 24,000 inactive wells that will cost at least $4 billion to plug and reclaim, but industry only has a $134-million fund to do it.

The Alberta Energy Regulator also has little confidence in the unaudited numbers in its program because the liabilities are reported by industry.

Fixing these flaws with bigger security deposits and timely abandonment measures should have happened decades ago under Alberta’s Conservative governments, but no politician acted on the problem.

“Historically, even though we have known these programs were flawed, there have been no proactive changes made. Why has there been no political will to make changes?” Wadsworth asked in his presentation.

“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,” he said.

In his presentation, Wadsworth also broke down Alberta’s growing liabilities.

Using data from the National Energy Board, he calculated that reclaiming 400,000 kilometres of pipelines under provincial lands represented a $30-billion liability. (Unreclaimed pipelines can contaminate groundwater with toxic compounds, cause land subsidence, lower land values and make it impossible for farmers to obtain credit.)

Cleaning up more than 400,000 wells (only about half are active and most are producing a marginal 10 barrels of oil a day) would cost $100 billion. (Inactive wells can leak methane, radon and carbon dioxide to the atmosphere or groundwater.)

The oilsands, including nearly 200 square kilometres of toxic tailing ponds and mountains of sulphur, presented the highest liability of $130 billion, according to Wadsworth’s presentation.

The total liability of $260 billion, said Wadsworth in his presentation, was a “rough estimate” and was expected to grow as more data becomes available.

Alberta’s orphan wells have become a liability crisis.

The liability nightmare for cleaning up oil and gas infrastructure extends to other provinces and states.

Just about every oil- and gas-producing state in the U.S. has reported a growing backlog of abandoned wells left by bankrupt operators with insufficient funds for cleanup.

Energy Industry Legacy: Hundreds of Abandoned Wells Leaking Methane in Alberta Communities

A recent study found that current security bond amounts are lower than the average cost of plugging orphaned wells in 11 of the 13 states analyzed.

Inadequate funding, said the researchers, meant that “the state must draw on other revenues to cover the costs of plugging, and the public must bear the environmental cost of wells that remain unplugged due to a lack of state funds.”

Unlike Alberta, most U.S. states require companies to pay a cleanup bond before they are allowed to drill. But the bond amounts, which ranged from $10,000 to $100,000, are too low to cover the cost of plugging and reclamation.

In B.C., the Oil and Gas Commission holds only $100 million for the eventual cleanup of 27,000 wells and pipelines, a job that could cost billions.

Like Alberta, B.C. uses the same Liability Management Rating program in which operators don’t pay any security monies for reclamation until their deemed liabilities exceed their deemed assets — a system that ignores the rising volatility of oil and gas prices.

To date the B.C. regulator has collected $100 million, largely in the form of letters of credit. The B.C. auditor general is currently investigating the program.

Even the program’s 2017 annual report expresses doubt about the program’s adequacy given the impact of low prices on companies.

In Alberta, the biggest obstacle to reforms remains the province’s divisive and oily politics, says Edmonton lawyer Wilson.

“The NDP and the United Conservative Party are now in competition for being the biggest cheerleaders for industry. The NDP won’t do anything because they are afraid that the UCP will use it as an example that they are against the oil and gas industry,” he said.

As a result, neither party is serving the best interests of the environment or taxpayers, said Wilson.

Last year, Alberta Premier Rachel Notley responded to Wadsworth’s calculation of a $260-billion liability by saying the situation couldn’t be addressed immediately.

A Bold Clean-Up Plan for Alberta’s Giant Oil Industry Pollution Liabilities

“It’s a problem that has accrued over, I guess now we’d be talking 47 years, but it’s not one that happened overnight and, unfortunately, it’s not one that we can fix overnight,” she told reporters.

Wilson said the problem is “not only monumental but complicated.”

“If the government implemented a five-year timeline for cleaning up nearly 200,000 inactive wells, a large part of the industry would go bankrupt.”

Alberta has only two options remaining, said Boychuk, who has asked the province’s auditor general to investigate the regulator for its handling of oil patch liabilities.

“We can either have a jobless, revenue-less crash into bankruptcy where industry walks away from a gargantuan mess with their pockets stuffed full of profits from our resources, or we can have a transition where insolvent producers are put out of business and remaining production funds, largely from the oilsands, are used for a necessary cleanup that could employ thousands of workers in the energy sector for decades.”

Canada Press
3 days ago

OTTAWA – The Supreme Court of Canada says the trustee for a bankrupt Alberta energy company cannot simply walk away from unprofitable wells on agricultural land without having to clean up.

The high court’s 5-2 ruling overturns an Alberta Court of Appeal ruling that upheld a 2016 decision in the Alberta Court of Queen’s Bench that effectively allowed a bankrupt energy company to sever its connection with unprofitable and unreclaimed wells when the company’s assets were sold off to creditors.

The Supreme Court ruled Thursday that the bankruptcy trustee, Grant Thornton Ltd., cannot walk away from its end-of-life obligations to render abandoned wells environmentally safe.

© Provided by thecanadianpress.com The Supreme Court of Canada is shown in Ottawa on January 19, 2018. The Supreme Court of Canada is set to rule today on whether energy companies can walk away from unprofitable wells on agricultural land without having to clean up behind them. THE CANADIAN PRESS/Sean Kilpatrick

The ruling turned on the conflict between federal bankruptcy law and provincial jurisdiction over the environment and energy sector.

Chief Justice Richard Wagner, who wrote of behalf of the majority, said that a key section of the federal bankruptcy law “does not empower a trustee to walk away from the environmental liabilities of the estate it is administering.”

Wagner said Parliament might want to re-examine the provision “given the confusion caused” in this case.

Alberta’s provincial energy regulator ordered the trustee for Redwater Energy Corporation to comply with end-of-life requirements to render the abandoned properties environmentally safe.

The company’s trustee did not comply, and filed its own counterclaim that included a challenge to the regulator’s action, citing the paramountcy of federal bankruptcy law.

Since the case went to court, an estimated 1,800 wells representing more than $100 million in liabilities have been abandoned.

Alberta’s energy regulator and the Orphan Well Association, an industry-funded group that cleans up wells that have been left unreclaimed, appealed the ruling to the high court.

A group with the support of thousands of farmers also wanted to see the high court reverse the decision.

The Action Surface Rights Association intervened in the case because it believes rights of landowners have been overlooked in the case.

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Lethbridge Herald

By Letter to the Editor on January 30, 2019.

Our provincial NDP government is clearly attempting to ram as much solar and wind power as possible onto our electrical grid before likely losing this spring’s election. They are doing this using an auction format to give the process the appearance of competitiveness. After each auction, Rachel and others gleefully announce that the successful green bidder’s kilowatt hour prices are becoming very close to what existing conventional generators are paid. That exaggeration wouldn’t be true even if the power provided by these new intermittent and unreliable sources was remotely similar to that from existing sources. The many hidden costs surrounding green energy are rarely discussed.

A few details must be understood to fairly compare solar/wind power to what is called “base-load” generation (coal, gas, hydro, nuclear). Base-load power is constantly and reliably available to customers 24/7 and efficiently utilizes transmission line capacity because it typically provides at least 90 per cent of its name-plate capacity when required. Solar and wind generators, by comparison, can’t be relied upon to provide any needed power at a point in time. Every night, solar production dies completely as well as supplying minimal output in Alberta’s winters or on cloudy days. An average of 15 per cent of name-plate capacity is typical of annual solar output in Alberta.

Wind power is similarly unreliable and averages 25 per cent of its designed output throughout the year. But both require an overbuilt transmission and infrastructure capacity to occasionally handle 100 per cent of their maximum output. As a result, green power transmission assets are severely under-utilized through the course of the year. This represents huge, wasteful fixed costs charged to our energy bills. Check one of your recent electrical statements to see how these fixed charges already exceed kWh costs.

And one last critical point is that as new expensive wind and solar generators are built, not one kW of existing generation can be retired because it has to be there as a backstop for times when green energy produces next to nothing as it often does. This effectively is a pointless, politically motivated duplication of electrical generation assets that will cost us dearly!

Lynn Thacker

Bow Island