Alberta Spends $518MM on Well Cleanup in 2022

Alberta’s oil and gas industry in 2022 spent $517.9 million (CAD 696 million) on cleanup, exceeding the $314 million (CAD 422 million) expenditure requirement by 65 percent.

That’s according to the 2022 Liability Management Performance Report by the Alberta Energy Regulator (AER), the first report in a planned annual publication on “how the conventional oil and gas sector is managing the closure and cleanup of oil and gas wells, pipelines, and other facilities across the province”, the AER said in a recent news release.

According to the report, more than $0.89 billion (CAD 1.2 billion) was spent in total on closure and cleanup activities in 2022. The figure includes industry spend and closure activities funded by the Government of Alberta’s Site Rehabilitation Program (SRP) and the industry-funded Orphan Well Association (OWA). In addition, 90 percent of licensees were compliant with their closure quota, leaving 51 noncompliant licensees with an outstanding amount of $3.13 million (CAD 4.2 million) in missed closure quotas.

The report aims at improving transparency of the industry’s management of conventional oil and gas liabilities as well as developing performance measure baselines and ongoing assessments of the industry as a whole and licensees specifically, the AER said.

“The results of this report are a robust and clear indication that the industry is improving in the cleanup of oil and gas wells, pipelines, and facilities”, AER president and CEO Laurie Pushor said. “While this report is showing significant improvement, continued focus and effort is required to ensure the sustained downward trend in reducing inactive well count in the future”.

Industry operators are continuing to work on the backlog of inactive infrastructure. In 2022, the inactive well count decreased by nine percent from 91,000 to 83,000. Industry members are submitting closure spend data for 2023, with a deadline of March 31 to complete their reporting. The 2023 report will be released before the end of 2024, the agency said.

As part of the new Liability Management Framework, the AER implemented the Inventory Reduction Program in 2022, which includes an industry-wide spend requirement and mandatory closure spend quotas for licensees in the oil and gas sector who have inactive liability, according to the release. Mandatory closure-spend quotas specify the minimum amount a licensee must spend on closure work each year. The industry closure-spend requirements for 2023 and 2024 were each set at $520.88 million (CAD 700 million).

In November 2023, the government of Alberta announced a program aiming to help develop carbon capture, utilization and storage (CCUS) projects in the province by providing major industries with up to 12 percent of new eligible project costs.

The Alberta Carbon Capture Incentive Program (ACCIP) will help businesses in multiple industries, such as oil and gas, power generation, hydrogen, petrochemicals and cement, reduce their emissions by incorporating CCUS technology into their operations, the government said in a statement Tuesday, adding that CCUS is “currently the only viable option available for these industries to significantly reduce their emissions”, according to an earlier news release.

Provincial funding will be available once the federal government has legislated its CCUS investment tax credit and related operating supports, such as contracts for difference, according to the release. The ACCIP will build on the federal investment tax credit proposed by the federal government in its 2021 budget. The government is currently working on program specifics with more details expected to be available in the spring of 2024.

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