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As Alberta Premier Jason Kenney pushed the federal government to keep its proposed environmental laws out of the oilpatch's business in Ottawa on Thursday, back home the provincial energy regulator scrambled to assess the safety of 4,400 licenced well sites abandoned by a company that ran out of money.
The company, Trident Exploration, abruptly announced on Tuesday that it was ceasing operations, terminating 33 employees and 61 contractors, while abandoning 4,700 wells. It blamed low gas prices and capacity constraints on a TransCanada natural gas pipeline system, along with high municipal property taxes and lease payments.
The company estimated it had about $329 million in clean up liabilities.
"We're very concerned about the challenge of well reclamation in Alberta," Kenney told reporters in Ottawa before meeting Prime Minister Justin Trudeau and after speaking to senators about his concerns over federal environmental legislation.
The Trident case highlights ongoing economic concerns in Alberta that threaten jobs. It also highlights concerns raised by the Alberta Energy Regulator (AER) in internal documents about weak provincial rules that fail to crack down on operators that don't have enough money set aside to cover cleanup costs at the end of an oil, gas or pipeline project.
Those concerns contrast with frequent claims by industry lobbyists and some politicians that Alberta has strong environmental oversight. Kenney and oilpatch industry stakeholders have used their claims to make the case against the Trudeau government's proposed environmental legislation, Bill C-69, that would change how federal assessments of projects are done.
When asked who was to blame for the growing liabilities in the oilpatch, Kenney refrained from mentioning any possibility of tougher rules.
Instead, Kenney said he wants Trudeau to work with Alberta to create incentives for companies to clean up old wells.
“One of the issues I may be able to raise with the prime minister today is how we can work together to incentivize well reclamation in a way that also generates economic growth," Kenney told reporters. "A lot of unemployed oilfield workers could be at work doing environmentally responsible reclamation for abandoned wells.”
A recent Supreme Court decision about a company called Redwater Energy that ruled bankruptcy was no excuse for avoiding cleanup payments has also put pressure on the oil and gas industry and financial institutions that back exploration.
Kenney said his government has more work to do in reviewing the Supreme Court’s decision before identifying how it can assist companies with compliance. He also said his government would be meeting with municipalities to raise concerns identified by Trident about high property taxes.
“There are a number of small and junior gas producers in Alberta that are running down their balance sheets, almost giving away their natural gas, because of market asset challenges,” he said.
“They simply can’t afford higher and higher municipal taxes in addition to the uncertainty created by the Redwater decision.”
A federal official later told National Observer that Kenney didn't raise the issue with Trudeau during their meeting on Thursday.
The federal government has already chipped in some money to help Alberta clean up abandoned wells. In its 2017 federal budget, the Trudeau government offered $30 million in support for the oilpatch, including funding to support reclamation of orphaned wells. An orphan well is an inactive site that no longer has an operator due to bankruptcy.
An industry group manages orphan wells in Alberta, collecting funds from member companies who cover the costs of reclamation.
Kenney also said he would speak to PM Trudeau about working together on a well reclamation plan after news yesterday that a company was walking away from more than 4000 wells and leaving over $300 million in cleanup liabilities. pic.twitter.com/ofVdReuvYl— Mike De Souza (@mikedesouza) May 2, 2019
Liabilities could be as high as $260 billion
Last year, National Observer obtained internal AER documents on oilpatch financial liabilities as part of a joint investigation with Global News and the Toronto Star. The documents included warnings in a presentation from a senior regulatory official who said that clean up liabilities could be as high as $260 billion for oil, gas and pipeline operations. The official also said that stronger rules could help ensure taxpayers don't wind up getting the bill for cleaning up abandoned assets.
News of Trident's failure revealed that the provincial regulator was unable to get the company to comply with orders to cover the cost of cleanup liabilities and transfering assets it couldn't handle to other companies. This was despite weeks of discussions, the AER said in a statement.
The company informed the AER on Monday that it was ceasing operations, the regulator said in a statement on May 1.
The AER then ordered Trident to properly manage its shut down, ensuring that it was covering its liabilities or transfer the assets to another company. But Trident didn’t respond to its order. Instead, the AER said Trident’s directors “ceased operations, terminated employees and contractors, and then resigned.”
The AER told National Observer in a statement on Thursday that Trident informed the regulator of its decision through an email sent on April 30.
"We are working to ensure that the public and environment are protected and will assess any high risk sites to ensure there are no immediate risks," the regulator added.
with files from Carl Meyer
Editor's note: This article was updated at 6:51 p.m. ET on May 2, 2019 with additional details about Trident Exploration's estimate of its liabilities.