Alberta landowners launch legal challenge over amount of money collected to clean up orphan wells

Alberta landowners launch legal challenge over amount of money collected to clean up orphan wells

Group alleges Alberta Energy Regulator underfunding clean-up fund

A group of landowners and landowners’ rights groups has filed legal action against the Alberta Energy Regulator (AER), arguing that the agency is undercharging oil and gas companies for the handling of orphan wells, which in turn extends the amount of time it will take to clean them up.

Orphan wells are oil or natural gas wells left abandoned after an operator goes bankrupt.

Those wells require clean-up in order to prevent contaminants from leaking out and damaging the environment The process of dealing with them and restoring the surrounding land is called reclaiming.

The AER sets an annual levy to be covered by industry. That levy goes to the Orphan Well Association, the entity that manages the reclaiming of the wells.

For 2026/27, the regulator set the levy at $154 million, up from $144 million the year prior.

But the judicial review application, filed Tuesday, argues that levy should be much higher, and alleges the AER is “improperly funding” the association to sufficiently reclaim wells in a timely manner.

The environmental legal charity Ecojustice is representing the landowners. Susanne Calabrese, managing lawyer for the group’s Alberta office, says last year, two of the applicants, along with the Coalition For Responsible Energy, filed an internal challenge against the levy amount.

But she says that challenge was dismissed on procedural grounds, prompting them to take the challenge to court this year.

As cleanup costs mount, oilpatch may be forced to pay deposit before drilling new wells

“There's almost double the amount of orphans currently in its inventory than the Orphan Well Association has ever cleaned in its entire history of existence,” said Calabrese.

“So we're getting to a point where it's becoming completely unsustainable.”

The Orphan Well Association's website lists more than 7,300 wells in its inventory that need to be decommissioned. That number jumped earlier this year when the AER overturned more than 4,000 orphan wells to the association after Long Run Exploration Ltd. filed for receivership.

The latest estimate from the association puts the cost of cleaning up the wells at $1.66 billion.

Cost to clean up orphan wells in Alberta reaches all-time high

“It will take decades to clean up orphans based on the value of this year’s levy. It will take even longer if more wells are declared orphans over the next several years,” the judicial application reads.

One of Ecojustice’s clients, Dwight Popowich, says he’s had an inactive well on his property in Two Hills, east of Edmonton, for years, and says he was told last year it would take another 10-12 years to reclaim it.

Methane from abandoned oil wells worse than initially recorded

"And while that's pending, there's environmental risks. It pollutes the land, air, and water. The longer a well sits there, the more likely it is to leak," Calabrese said.

Last year, the Orphan Well Association told CBC News it would likely take until 2037-2040 to clean up its inventory.

The AER sets a levy each year, which the government of Alberta signs off on as part of its annual budget. The levy is calculated based on the current needs of the Orphan Well Association, and how much of a shortfall the association has from the prior fiscal year.

The regulator then applies a formula to determine how much of that levy individual oil or gas stakeholders are required to pay.

"What we're saying is that the levy that provides the majority of funding to the Orphan Well Association is far too low and also violates the mandatory law and the mandatory needs-based test that the Alberta Energy Regulator has to use in setting the levy," Calabrese said.

In 2023, a group of academics criticized the AER for being too close with industry. Calabrese argues oil companies can afford to contribute more to fund a higher levy.

Ecojustice’s clients are not arguing for a specific amount that the levy should be raised to, but rather hope the court will direct the AER to reissue the levy in accordance with the cost-based formula.

On Tuesday morning, the AER said it was unable to comment publicly on matters before the courts.

The regulator added that the $154-million levy total provides additional funding to help the Orphan Well Association address the growing number of orphaned oil and gas sites around Alberta.

"The levy amount was endorsed by the government of Alberta as part of the overall budget and will support the OWA operating budget for the 2026/27 fiscal year," the AER said via email.

The AER said that since 2002, the OWA has decommissioned more than 8,900 wells, and received more than 4,100 reclamation certificates with nearly 3,700 other sites reclaimed.

Jennifer is a reporter with CBC Calgary. Previously, she worked for CTV News in Toronto. You can reach her at jennifer.keiller@cbc.ca