The number of “orphan” oil and gas wells has skyrocketed in Canada over the past 10 years, forcing various governments to assume cleanup and closure costs. A worrying situation that poses a risk to the balance of public finances of the provinces and the federal government, believes the Parliamentary Budget Officer.
Posted at 11:56
In a powerful report released on Tuesday, the Parliamentary Budget Officer (PBO), Yves Giroux, is concerned about the increase in the number of “orphan” wells in Canada, particularly in Alberta and Saskatchewan. A well becomes orphan “when there is no known and financially viable operator who is able to fulfill the environmental responsibilities associated with the closure” of this one, specifies the report of about thirty pages.
However, the number of “orphan” wells in Alberta has increased from 700 in 2010 to 8,600 in 2020. In Saskatchewan, their number was estimated at 300 in 2015. There were 1,500 in 2020.
According to the PBO, the security deposits required by governments from oil and gas companies will not be enough to cover the expenses in the face of the growing number of wells that become orphaned.
Despite a federal grant of $1.7 billion to the governments of Alberta, Saskatchewan and British Columbia in 2020, the PBO believes “there will likely be a need to tap into industry, provincial and federal funds to cover the increasingly high clean-up costs.
There are 600,000 oil and gas wells in the country, 91% of which are in Alberta and Saskatchewan. According to the PBO, only 35% of wells are active in Alberta and 39% in Saskatchewan, “the lowest rates on record”.
These “orphan” wells pose environmental risks. “An unplugged well can lead to contamination and cause leaks and it is essential that these wells are properly plugged to protect ground and surface water,” said the Parliamentary Budget Officer. These sinks can also leak methane, a potent greenhouse gas that contributes to global warming.