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Failure to clean up B.C. oil wells nets company $45K fine

B.C. Green MLA says fines have become the 'cost of doing business' and do little to deter the expansion of abandoned oil and gas wells.
A oil jackpump in Western Canada. The $45,000 penalty handed to Procyon Energy Corp. is under a regulatory regime that allows fines of up to $500,000 for similar contraventions.

An Alberta-based oil company has been fined $45,000 for failing to decommission two wells in British Columbia. 

In its decision, handed down April 16, 2024, the BC Energy Regulator (BCER) cited Procyon Energy Corp. for failing to shut down two wells it was supposed to decommission by the end of 2021. 

The company did not take all reasonable steps to prevent a contravention and had “no meaningful plan” to address the two sites, wrote BCER’s executive director of compliance and enforcement Dax Bourke. The company was found to have “derived some economic benefit” for shirking its regulatory obligations.

Plugging oil and gas wells protects water both above and below ground. Unplugged, the wells are a significant source of greenhouse gasses. The largely methane-based gasses are 80 times more potent than carbon dioxide over the first 20 years they are released into the atmosphere. 

Under the Canada Environmental Protection Act's polluter pays model, industry is expected to cover the cost of environmental cleanup at no cost to the taxpayer. When it comes to oil and gas wells, that means permanently sealing an inactive well with cement, cleaning up contamination and bringing back the land to “pre-activity conditions.”

But when oil and gas companies go bankrupt or cannot be located, the site can be left as an “orphan well” scarring the landscape until an industry-backed Orphan Site Reclamation Fund pays for the BCER to clean up the site, according Leanna Parfitt, a spokesperson for the energy regulator. 

The $45,000 penalty handed to the company is under a regulatory regime that allows fines of up to $500,000 for similar contraventions. The B.C. Green Party's Adam Olsen said such fines have become “the cost of doing business” for the oil and gas sector and shows the B.C. government's interim policy to clean up old wells “falls short.”

“Not enough money is being collected, estimations are too low and more government direction is needed to facilitate remediation,” Olsen said in an email.

Polluter pays model falls short

By 2018, the number of inactive wells that had not been decommissioned spiked to nearly 7,500, up from 3,800 in 2007. In March 2019, B.C.’s auditor general Carol Bellringer released an independent report that found the province’s oil and gas wells present an “environmental risk and potential financial liability for government.”

The cost for oil and gas well operators to restore well sites in B.C. was estimated to have climbed to $3 billion by 2019, according to the the BC Energy Regulator (then known as the BC Oil and Gas Commission). 

Even if that money were spent, the B.C. regulator “lacked legislative triggers to compel operators to decommission wells and restore sites in a timely way,” wrote Bellringer in the report. 

In June 2019, B.C.’s oil and gas regulator announced it would be the first to impose legal timelines to restore wells. The regulator said it would fund orphaned well cleanup through a new liability levy, set to be phased in over three years. The next year, the Canadian government pledged to put another $120 million toward restoring a variety of well sites — including dormant, orphan and legacy sites — as part of a COVID-19 relief package to industry. 

A March 2021 report from the BCER said that “barring any unforeseen increases in the orphan population” it planned to restore 357 orphaned sites within a decade of their designation.

'Negligent in their abandonment program in B.C.'

In September 2019, Procyon submitted a plan to decommission six dormant wells. But over the next three years, no decommissioning took place, “rather it indicated the intent to restart the wells for production.” 

Procyon told the B.C. regulator that it could not meet its obligations because of low commodity prices and a lack of revenue. It said it was restarting the wells to generate enough money to decommission them. 

But by 2022, when the regulator requested information that would show the company was in compliance, Procyon said they had not completed any work in the previous year and were “negligent in their abandonment program in B.C,” according to the decision. 

Last fall, the company did not respond to a BCER letter offering it a chance to be heard. A website listed by Alberta’s energy regulator as belonging to Procyon Energy Corp. appears to be shut down. Glacier Media reached out to the company’s president Ron McKellar for comment, but has yet to receive a response. 

In February 2022, the BCER issued a general shut down order to one of Procyon’s wells after the company failed to provide a more than $2.68-million security. That order was cancelled in March 2023. 

The BCER spokesperson confirmed cancelling the order to cease operations occurred after the company agreed to a payment plan. Procyon has so far paid $84,377.55 and has $30,000 past due.

“Payments will continue until the amount owing is satisfied in full,” wrote the BCER spokesperson Leanna Parfitt in an email. 

While the Procyon case offers a window of what could happen when a company can’t clean up its own wells, it could also be a sign of the future, according to Olsen. 

The Green MLA for Saanich North and the Islands said he expects a drastic increase in wells in northeast B.C. in order to supply the several approved and proposed liquefied natural gas projects in the province. 

“B.C. will see thousands of new wells,” he said. “We are already failing to decommission existing wells. I would like the provincial government to square this circle.” 

Correction: An earlier version of this story erroneously stated that orphan well cleanup is funded by taxpayers. The program is funded by industry, but carried out by the provincial regulator. We regret any confusion.