https://www.cbc.ca/news/canada/calgary/alberta-oil-gas-well-cleanup-alberta-liabilities-disclosure-project-1.5216707
Critics and industry clash over accuracy of Alberta well cleanup cost
estimates
One energy company alone faces $11.9B in costs to clean up well sites:
Alberta Liabilities Disclosure Project
The Canadian Press · Posted: Jul 18, 2019
An Alberta coalition that says oil and gas producers are lowballing how
much it will cost to clean up their well sites is being accused by the
head of the Alberta Orphan Well Association of overstating those numbers.
The Alberta Liabilities Disclosure Project — a coalition of landowners,
scientists, environmentalists and others — on Thursday published a list
of producer companies with estimates of how much it would cost each to
remediate Alberta oil and gas properties if the job had to be done
immediately.
Those costs are much higher than the companies' estimates because they
are assuming they will have decades of cleanup time, the coalition said,
while calling on the province to release independently verified
estimates of liabilities.
"When companies report their liabilities at discounted rates, without
also reporting what it would cost to do the cleanup today, it makes them
look — on paper — healthier than they are," said Regan Boychuk, the
ALDP's lead researcher.
"But their numbers assume the companies have decades they may not
actually have."
Estimates seem higher than actual cleanup costs: OAW
But the OWA — an organization funded by industry that steps in to clean
up wells when their owners either can't or won't — says the cost
estimates from the coalition seem much higher than actual costs his
organization incurred to clean up 800 inactive oil and gas wells last year.
"With all the work we did last year, the average cost on the abandonment
side, or decommissioning, as we call it, was $34,000 per well and
$27,000 to reclaim a site," said Lars DePauw, executive director of the OWA.
"I don't know how they came up with their numbers."
Boychuk said his group's assumed average cleanup cost per well is
$229,000, a number based on an internal Alberta Energy Regulator study
obtained through freedom of information laws.
The numbers given by DePauw may be accurate but they are for cleaning up
"cheap, easy, quick wells," such as shallow gas wells with no associated
hazardous gases, Boychuk said.
DePauw, in response, said OWA's job list last year included a mixture of
both simple and complex wells, pointing out that the OWA did as many
cleanups in one year as it has in the past 20 years.
Cleanup costs were far below targets set by the Alberta Energy
Regulator, he said, thanks to growing expertise and the use of
area-based programs that allow for greater efficiency.
CNR alone could face $11.9B cleanup, coalition estimates
Calgary-based Canadian Natural Resources Ltd. was singled out by the
coalition as facing by far the largest bill at $11.9 billion to clean up
73,000 oil, gas and bitumen wells in Alberta.
In its news release, the coalition adds that is "more than double the
$5.3 billion in worldwide asset retirement obligations reported in
CNRL's audited financial statements."
However, in its Annual Information Form submitted to Canadian regulators
in March, CNRL reports its undiscounted worldwide ARO is $12.3 billion.
When asked about that, Boychuk said the coalition worked with a U.S.
specialist who consulted American regulatory filings, which didn't
include the undiscounted amount. He said many companies reduce their
apparent liability by spreading it out over decades.
He said CNRL should be "applauded" for reporting the undiscounted
estimate as many companies do not, but noted the number for all of the
company's assets in Africa, the North Sea and oilsands mining almost
matches his group's estimate for its Alberta wells alone.
Top 10 companies by well cleanup costs
The following companies would have to pay the most to clean up their
wells, according to the coalition's elist:
Canadian Natural Resources Ltd.: $11.9 billion
Husky Energy Inc. $2.17 billion
IPC Alberta Ltd.: $2 billion.
Imperial Oil Ltd.: $1.7 billion.
Torxen Energy Ltd.: $1.7 billion.
Obsidian Energy Ltd." $1.5 billion.
Cenovus Energy Ltd.: $1.4 billion.
Canlin Energy Corp.: $1.4 billion.
Paramount Resources Ltd.: $1.2 billion.
Taqa North Ltd.: $994 million.
Energy company says its estimates followed industry practices
Husky spokesman Mel Duvall says the company used accepted industry
practices to estimate its worldwide abandonment liabilities as of the
end of 2018 at $2.4 billion, with the majority of those costs related to
properties in Alberta and Saskatchewan.
"We take our asset retirement obligations seriously and abandon and
reclaim in excess of 1,000 wells a year," he said.
In April, the coalition estimated the total cost to clean up all of
Alberta's oil and gas wells was $40 billion to $70 billion.
In an email, the AER said its official energy cleanup estimate of $58.65
billion is split into $28.35 billion for coal and oilsands mines and
$30.2 billion for oil and gas wells, facilities and pipelines.
It says the total security held for mining as of June 2018 is
approximately $1.46 billion and the total for oil and gas is about $224
million.
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