An Alberta oil and gas company has been ordered by the provincial regulator to abandon 36 sites across the province, leaving the company, which says it’s “financially broke,” saddled with more than $2 million in abandonment and reclamation liabilities.
The Alberta Energy Regulator has mandated that Calgary-based Cycle Oil & Gas Ltd. abandon the 36 sites within two weeks of the Aug. 21 order due to its failure to comply with AER orders and the company’s financial inability to maintain and operate its facilities.
Alberta Energy Regulator said the order was deemed necessary “in order to protect the public and the environment.”
The majority of the 36 sites, including wells, pipelines, and facility sites, are located in Strathcona County and Lamont County northeast of Edmonton. The company also has sites near Red Deer, Millet, and Swan Hills.
The AER order said regulatory issues with the company began in June, when it issued an order to the company, partially due to concerns that Cycle was not providing reasonable care and measures to prevent impairment or damage to its sites.
The regulator found that Cycle had failed to fulfil the requirements of its initial order, and noted the company’s failure to follow through on the June order’s provision that Cycle abandon the wells that its mineral leases were expired for.
According to the Aug. 21 order, Perry Miller, the corporate director and 100 per cent shareholder of the company, said in an email to the AER on Aug. 6 that the company was “shut in and that there was no money to maintain [its] properties.”
The order also said Miller asked the AER what steps were required for the company’s sites to be taken over by the Orphan Well Association, which is an industry-funded, non-profit organization that closes oil and gas sites in Alberta that do not have financially viable or responsible owners.
The AER order shows that Miller then emailed the regulator on Aug. 10 and said the company was “financially broke with no money to operate or maintain [its] facilities.”
CBC was unable to reach the company for comment.
A group of landowners is part of a coalition taking on the Alberta Energy Regulator. They’ve filed a challenge attempting to get the AER to charge energy companies a larger upfront levy to pay for the cleanup of orphaned wells.
The AER’s manager of orphaning and insolvency, Kaitlin Szacki, deemed it necessary to order Cycle Oil & Gas to abandon its wells and pipelines in order to protect the public and the environment, as well as to conserve and reclaim the land the sites are located on.
The order said that Cycle must complete abandonment of its sites and submit a reclamation plan for AER approval within 14 calendar days of the Aug. 21 order.
It said that the company’s total abandonment and reclamation liabilities are estimated to be more than $2.2 million.
The regulator noted that the company’s intention to cease operations does not limit or relieve any of its regulatory responsibilities or obligations.
Unpaid taxes
Reeve of Lamont County David Diduck said Cycle had nine active wells in the county, and still owes $279,000 in tax arrears for those sites.
Diduck said Cycle is adding to the increasing trend in his county in the past decade.
He said, in total, Lamont County has had to write off about $6 million in tax arrears from oil companies over the past six years.
“So the government asking [Cycle] to shut down their operations is gonna cost the county another $279,000 in lost taxes on top of what we’ve lost in the previous six years here,” Diduck said.
“Abandoned wells and associated liabilities continue to be a major issue for RMA members across the province,” said Kara Westerlund, the president of the Rural Municipalities of Alberta, in a statement to CBC.
She said rural municipalities in Alberta face a total of over $250 million in unpaid property taxes on oil and gas properties.
Westerlund said the RMA has been advocating to the province for years for a more proactive regulatory approach to take action against delinquent companies while they still have the resources to pay taxes and other expenses.