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Mounting orphan B.C. oil, gas wells pose environmental, financial risks: auditor

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The number of inactive oil and gas wells that have not been properly decommissioned in British Columbia continues to rise despite legislation giving a regulatory agency more powers to ensure they are put out of service in a timely way, says the auditor general.

Carol Bellringer says contamination from oil and gas activity can affect human health, ecosystems, water and air quality, and the timely restoration of non-operating well sites reduces environmental risk and financial liability.

"Decommissioning an inactive well reduces the likelihood that oil, methane gas and saline water will move up through the well into freshwater aquifers, surface water, the ground or the atmosphere," says a 54-page report released Thursday by Bellringer.

The B.C. Oil and Gas Commission, which is responsible for regulating oil and gas activities, has standards in place to decommission inactive wells and remediate sites, but it has lacked the tools to compel operators to do the work and pay the full cost, the report says.

"Decommissioning an inactive well reduces the likelihood that oil, methane gas and saline water will move up through the well into freshwater aquifers, surface water, the ground or the atmosphere," says a 54-page report released Thursday by Bellringer.

The B.C. Oil and Gas Commission, which is responsible for regulating oil and gas activities, has standards in place to decommission inactive wells and remediate sites, but it has lacked the tools to compel operators to do the work and pay the full cost, the report says.

The audit says there are almost 7,500 inactive oil and gas wells in B.C. that have not been properly decommissioned.

It says the industry's security deposit fund to cover decommissioning and restoration costs was short more than $13 million last year. It says the total estimated restoration costs of all oil and gas wells in B.C., operating and not operating, was $3 billion as of February.

The oil and gas industry supported 10,000 jobs in B.C. in 2017 and contributed $498 million in provincial royalties, the audit says.

The report highlights the situation facing the oil and gas commission and the government by reviewing the cases of four oil and gas companies that declared bankruptcy in recent years.

The report says the four companies had 262 well sites and cleanup costs estimated at almost $86 million. The companies had security deposits totalling about $3.2 million, leaving the oil and gas commission with $82.4 million in decommissioning costs.

Bellringer agreed taxpayers could be left with the bill.

"Of course, in the event there is no other source for that, it would indeed be the taxpayer," she said.

But Bellringer cited a recent Supreme Court of Canada decision that ruled a bankrupt Alberta company cannot walk away from unprofitable wells on agricultural land without cleaning them up.

The oil and gas commission said the audit covers a period from January 2015 to October 2018, but since then the B.C. government has amended legislation giving it more power to ensure the cleanup of inactive well sites.

"The amendments have allowed the commission to improve the funding model, strengthened the commission’s authority to make regulations in the areas of orphan site treatment and closure, risk assessment mitigation, and accelerate the rate of inactive site restoration," says the commission statement.

Bellringer said despite the changes, she's not yet convinced they are enough to tackle the problem.

Michelle Mungall, the minister of energy, mines and petroleum resources, said the oil and gas commission accepts Bellringer's 11 recommendations aimed at ensuring operators decommission wells and restore sites in a timely manner.

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