Forsyth, Jamie; Nahornick, Nora

Report

Estimated Cost of Cleaning Canada’s Orphan Oil and Gas Wells

Jamie Forsyth;Nora Nahornick

Published on January 25, 2022 PDF

This report provides an independent estimate of the cost of cleaning Canada’s orphan oil and gas wells.

Highlights

As of 2020, roughly 36 per cent of all wells in Alberta and Saskatchewan are active, the lowest share in recorded history. Inactive and plugged wells make up roughly 37 per cent of all wells.
Provincial regulators require oil and natural gas companies to close inactive well sites. In the case where there is no known, financially viable operator capable of addressing the environmental liabilities associated with closing their wells, the wells under the company are deemed orphaned.
In Alberta, the number of orphaned wells has increased from 700 to more than 8,600 over the last 10 years.
PBO estimates the cumulative cost for orphan well clean-up, on a national level, to be $361 million as of 2020.
PBO estimates the cost of orphan well clean-up in Canada to reach $1.1 billion by 2025.
At face value, the $1.7 billion allocated by the federal government through the Covid-19 Economic Response should be sufficient to cover the estimated clean-up of inactive oil and gas wells in the medium term. However, current provincial allocations give rise to an outstanding risk in the medium-term that the projected liability could persist if funding continues to be allocated to firms that do not have acute financial risk.

Communications

Quote

As the number of orphan wells increase, so does the expected cost for cleaning up environmental liabilities. Our estimated cost of cleaning oil and gas wells, on a national level, is expected to rise from 361 million in 2020 to 1.1 billion by 2025.

Yves Giroux
Parliamentary Budget Officer

Infographic

News Release

PBO estimates that the cost of orphan well clean-up will reach $1.1 billion by 2025

The Parliamentary Budget Officer (PBO) today released an independent estimate of the cost of cleaning Canada’s orphan oil and gas wells. The wells are mainly located in Alberta and Saskatchewan. Plugging wells protects underground and surface waters and avoids greenhouse gas emissions.

Businesses

Oil and Gas industry

Environmental Sustainability

Grants and Subsidies

Fiscal policy