By Marla Orenstein
Published in the Calgary Herald and London Free Press
April 16, 2020
How do you turn a liability into an asset? This isn’t just a theoretical question for Alberta, but a real problem and also — quite possibly — a major economic and environmental opportunity.
The problem of inactive facilities is relatively well known in Alberta. Currently, there are over 165,000 inactive wells in Alberta, 6,100 of them considered “orphaned” or without an extant owner. Sitting dormant, these sites represent an enormous public financial and environmental liability.
They also represent a multifaceted opportunity. Many — although not all — of these sites are good candidates for repurposing for other energy uses, including geothermal, micro-solar, hydrogen, recovery of lithium or other metals, or carbon capture and storage. Repurposing these sites for new energy lives would have multiple advantages. It would mean that industrial sites can be kept on already-disturbed brownfield land rather than eating into greenspace. It would create jobs for oil and gas workers who have been laid off, and remove liability, thus easing taxpayer burden. It would also help diversify the energy sector, expedite a smart energy transition, and create new economic opportunities for landholders.
Unfortunately, this isn’t happening yet — at least at scale. And it’s not for lack of trying. In recent years, there have been numerous attempts by both startup and established companies to repurpose inactive sites in order to create complementary value. However, for the most part, these innovative projects have died due to either inflexible regulations that do not allow for site repurposing (rather than pure remediation and reclamation) and/or difficulties in assigning financial liability.
But something is different now.
Over the last few months, a multi-stakeholder group has been working in Calgary to identify a pilot program for what they are calling “limited probability receptor” or LPR sites. The group wants to use pilot projects to create a framework that can help the regulator decide which inactive and orphaned sites are good candidates for being partially remediated and reused for new energy purposes, and what technical and regulatory challenges will result. Their efforts are not about avoiding environmental commitments, but about safely repurposing well sites to provide benefits to landowners, local communities and the public.
What is particularly novel about this group — and what may set it apart from previous failed efforts — is the wide range of interests it brings together. Headed by Millennium EMS Solutions and the Energy Futures Lab, the group includes both oil and gas and renewable energy companies, as well as the cities of Calgary, Edmonton and Medicine Hat, the Orphan Well Association, the Canada West Foundation and PTAC. In a speed-dating type of process, oil and gas facility owners are being paired with new energy entrepreneurs to create pilot projects that have synergistic benefits.
Not every abandoned site will be a good candidate for safe repurposing. But the impact of getting a substantial portion of inactive sites off the books and returned to productive use is meaningful — furthering the goals of government, landowners, the public, the environment and the economy. And it represents an opportunity not just to bail out companies, but to build durable solutions.
It’s also a move that aligns with the Alberta government’s stated priorities. The current government has announced that as part of its jobs plan, it would provide a $100-million loan to the Orphan Well Association to work on the environmental liability problem while putting oil and gas workers back in well-paying jobs. The initiative also strongly aligns Alberta’s red-tape reduction priority, as it reduces regulatory barriers to business.
What will be needed for this initiative to meet with success is flexibility on the part of the regulators. The AER, the AEP and the AUC all own different parts of this problem, and need to find a way to work together, and to fix or bend the rules that have prevented progress previously — like the rule that says industrial sites have to be returned to their original conditions before they can be repurposed for new energy uses. Direction needs to come from the provincial government that solving this problem is a priority, new energy entrepreneurship is welcome, and that the regulators have the mandate to co-operate, co-ordinate and innovate as needed.
Let’s find a way to walk the talk of what the Alberta government has been promising — laws and processes that support easy business, a smart transition to a cleaner energy system, and jobs for Albertans.
Marla Orenstein is the director of the Natural Resources Centre at the Canada West Foundation.