Season 1, Episode 32: How Do We Address Oil and Gas Liabilities?

with Justin Mikulka, Sarah Stogner, and Mark Dorin

In this episode, I lead a discussion on the current state of oil and gas liabilities with guests Mark Doran, Justin Mikulka, and Sarah Stogner. You hear us explore the scale of the problem, the inadequacies of current regulatory frameworks, and the financial and environmental challenges posed by abandoned wells and infrastructure. The conversation highlights the need for better enforcement, innovative solutions for well closure, and a shift in public policy to address these long-term liabilities. The guests emphasize the importance of public awareness and the role of landowners in advocating for responsible industry practices.

Welcome and Introductions to Justin Mikulka, Sarah Stogner, Mark Dorin, and North America’s Oil and Gas Liabilities

Alex:

Welcome to the Gravity Well Podcast with Alex and Jenny. You break down heavy ideas with us at The Gravity Well to understand their complexities and connections. Our mission is to work through dilemmas with you in conversation and process making our world a better place for all creatures.

Jenny:

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Alex:

Want to know more? Check out thegravitywell.net and remember to smash that like button and hit subscribe.

Jenny:

Welcome. I’m glad to have Mark Dorin here, my partner in the Polluter Pay Federation. Justin Mikulka, the director of communication at Oilfield Witness and Sarah Stonger, the District Attorney elect for the 143rd Judicial District of Texas. She’s an entrepreneur, lawyer, and mom like me. Thank you guys. Welcome to the program. That was our introduction. Again, I’ll have to say an apology from Alex. He is getting over Covid and he’s unavailable for this conversation. What Alex would’ve brought to this is a good way to make sure that we’re not talking in non-general pop speak. We sometimes fall into a lingo that other people don’t know in this space. Cut and caps, things like that that we say about wells. He’s a good way of making sure that we’re using words that everybody gets.

Anyway, we’ll try and just honour that for him while he’s not here. But let’s start with some introductions. What we want to talk about today is the current state of oil and gas liabilities. When I say liabilities, that is the wells pipelines and facilities and waste facilities associated with oil and gas. I’m grateful to have some voices from the United States. Mark and I spend a lot of time talking about this issue in Alberta. I’ll talk about Alberta first in terms of grounding on the size and scale of the issuer we are, we have 500,000 wells in Alberta and associated facilities and pipelines with that. But then we have oil sands. The oil sands make up in terms of liability. It’s a 50-50 spread. We have 50% of our estimated liability in those conventional assets, those wells pipelines and facilities.

And the other 50% that is 130 billion on each half of that coin is the oil sands itself. And that’s a hundred thousand hectares on its own with 1.7 billion worth of wastewater associated with it. That’s the scale of the issue in our province, and I can speak a little bit, I worked in both BC and Saskatchewan as well. BC is about 15% of that size and growing, and then Saskatchewan is about 10% of that size. Very different scales of issues and Mark can attest that there are wells across the country and we can talk about some of the state of the history as well. Mark, maybe you can get into that for us. That’s the scale and size in our province. I want to start with right now we’re doing about $700 million worth of liability closure a year on a problem, as I said, is a $260 billion problem.

The amount of work happening would take 150 years for us to get through this problem in its entirety. The reason why I’d like to have this conversation is the need for us to have a phase-out plan as a part of the transition. I think is enough for me. And I’ll just offer for you too, I’m a geophysicist by background. I spent 10 years in development and then because of oil prices coming out in Alberta back in 2014, liability became my focus and never got away from that. Here we are today. Okay, let’s start with you, Mark, just because you are more familiar with this area and me and then we’ll go to the others. Thanks.

Mark:

Hi, thanks. My name is Mark Dorin. I have about a 50-year almost background in upstream oil and gas production. I worked mostly in Canada, but well actually mostly overseas, but largely in Canada. For the past 15 years or so, I’ve switched focus to representing landowners, on the landowner side of it. I’m a co-founder of the Polluter Pay Federation and the Pluto Pay Federation does what it stands for. We’re a landowner group that is dedicated to ensuring only polluters pay for their actions. And in Alberta and other provinces of Canada, we’re a federal nonprofit. A big part of Polluter Pay is landowner payments. Surface owners cannot refuse entry onto their land in Alberta, BC or Saskatchewan, and the government will issue an order allowing the company on the land. It’s an effective expropriation; so, landowners are entitled to recover their costs and they’re essentially indemnified.

Canadian taxpayers and especially Alberta taxpayers don’t realize that if these costs end up in the lap of the landowner, the landowner can recover from the taxpayer. I won’t get into the laws of Alberta right now. We’ll do that a little bit later. But that’s a bit about me and my background. I would also just like to add one thing: one of the things that I stress that I work heavily on is fugitive emissions. It’s one of my pet peeves, his fugitive emissions. And it’s largely because my mother was exposed to extreme gas venting and she used to get asphyxiated in her garden, go in your garden from a little rinky dink operator who should have known better. He was a welder, he knew better, but he vented his gas illegally in a town in Alberta. And in Alberta, you can pretty much get away with doing whatever you want because we have good laws, but there’s pretty lax enforcement. I’ll leave it at that for now.

Jenny:

Perfect. Thank you, Mark. I appreciate it. Sarah, you’re next on my screen. We’ll go in a clockwise order. Thank you.

Sarah:

Sure. Hi, I am Sarah Stagner. I am a lawyer. I live in West Texas on a cattle ranch, and I represented mostly oil and gas operators for the first, I guess, 15 years of my practice as a lawyer. And then when I moved out onto this cattle ranch in 2021, an old plugged well that Chevron had plugged in the mid-nineties came unplugged and it started spewing toxic brine and it didn’t have any oil. Nobody cared. Then I realised, okay, I thought I’ve, bless my heart, I thought, “Oh, good it’s Chevron, they’ll do the right thing.” And instead, it was, “Oh good, they’re Chevron and they will spend Chevron money to shut you up and keep you away.” I’m in the middle of litigation. We go to trial in September and we’re not asking for a lot of money. What we’re asking for is for them to secure their well bores. We have lots of horizontal wells here in West Texas, and with that comes a lot of produced water and we inject it deep, it causes earthquakes, we inject it shallow, and it comes into contact with old well bores like the one that you see in the background that then flow water and nasty stuff to surface and will kill the land for generations. Thanks for having me.

Jenny:

Thank you Sarah for coming into this work. It’s interesting. We don’t generally come into this on purpose. It’s unfortunate how we end up, it comes to us, let’s put it that way. Thank you. I feel the pushback from the industry to do this work well and to rectify these errors. Justin, you’re next, please.

Justin:

Hi, I’m Justin Mikulka. I did not come into this work intentionally. I was living in a town that had a lot of oil trains going through it in 2014 when the Lac Megantic disaster happened became a journalist by accident. And I spent five years covering that issue, which was about fracked oil coming from North Dakota in train cars that kept derailing exploding. And 47 people were killed in Lac Megantic. From that work, I started digging into the fracking industry and the economics of it. The US fracking industry is producing lots of oil, but it was losing lots of money through the first decade. But one of the things that I came across and started writing about probably five or six years ago was these huge liabilities and the fact that the industry, the system we have in place in the US has allowed the industry to walk away from, we don’t know how many, but probably 2 million oil wells that are abandoned in the country.

Carbon Tracker has been doing great work on this, and they’ve estimated we could be talking hundreds of billions of dollars, as you said, or similar numbers in Alberta that don’t include the Gulf of Mexico, which is just a wasteland of abandoned infrastructure. We’ve got a huge bill. We also have the world’s largest oil industry producing record amounts of oil and currently making lots of money. The system that we’ve had in place has allowed all of these companies to, and I’ll talk about how they do this later, but to walk away from hundreds of billions of dollars of liabilities, it’s currently continuing to poison the atmosphere water, the disaster that’s unfolding in West Texas that Sarah talked about. And that same system is in place. Nothing has changed. The current situation, the way I like to describe it is the oil industry is taking all the profits, they own profits and people of the US currently own the liabilities.

And the only work being done right now is 5 billion of money. That is federal money that came with the Inflation Reduction Act. The public is currently footing the bill. We just coughed up 5 billion at the public and any of these major oil companies, Chevron probably bought back 15 billion of stock in the last six months. They have the money, they caused the damage, and we’re picking up the tab. I think that’s what we’re facing. It’s the same in Canada though. You have slightly different systems, but it’s a massive problem. There are new aspects of this that they’re seeing in West Texas now due to the injection wells where the cost to deal which Chevron is dealing with closing well, can be orders of magnitude higher than if it hadn’t blown out. We’re now learning about radiation issues. We have lots of different issues and the liabilities keep adding up water contamination. The only people right now who are doing anything to pay for it and clean up the mess are the public.

Jenny:

Thank you, Justin. That was a brilliant first summary. I’m just going to reiterate a little bit of what I heard in this and the similarities for you. It’s interesting when we talk about trains, I’m just going to back up and start there because we talk about this potential safety issue between trains and pipelines, yet we have a lot of pipeline leaks and issues that we see. And then I’m sure Sarah, you can attest to this. I think the transportation risks of this whole system are not fully understood by people. Let’s start there. But then also obviously the infrastructure. When we talk about orphans, a lot of people talk about, Mark and I have talked about this, abandoned wells. Well, that is one component of this problem. Again, reminding people that we have well sites, we have pipeline sites, we have facility sites, and then we have all the pipe that connects all of those, plus the transport system that you’re describing. That’s kind of the all-encompassing things around liability, the potentially 2 million wells. I know, Sarah, if you could maybe expand a little bit on Pennsylvania and the East Coast, there are a lot of wells that we don’t understand a lot about.

Sarah:

Some of the earliest drilling in the United States was in the Appalachia area. You’ve got a lot of wells that were drilled old school and may not have casing. There are no records of them. They’re in the mountains. It’s dense forests. You’ve got natural coal, methane leaks, you’ve got, and all of the reason in all of these areas is the traps, the weird traps that hold the oil and gas. When rock does weird things, it can be attractive for oil and gas. Well, when rock does weird things, it also doesn’t contain things and it takes a lot of trial and error to get it right. Although I think today we are fully capable of drilling and completing a well properly with today’s technology, a lot of times they don’t. But historically in the past, they didn’t even have the technology. They were learning as they went.

And anytime you put any sort of a hole through rocks, you take away that barrier. What I’m trying to get people to understand is it doesn’t matter what we call these holes in the ground. They’re all holes in the ground and they’re all conduits for pressure. Anywhere you’ve got these, you’re going to have potential problems. And when you add modern-day fracking and wastewater disposal on top of that, all of that water is coming out of rocks that the reason we’re having to frack in the first place is that it doesn’t have the porosity and the rock characteristics to carry the fluids. Unlike in the past when we would drill a traditional just vertical well, right, and you could put the water back into the same zone that it was coming out of, and now we’re putting it in different zones in different layers, and it’s absolute mayhem.

Jenny:

Yeah, thank you. I want to expand on that a little bit. I feel there’s some common misunderstanding in this. First of all, we use water and fracking as Sarah’s saying. We are taking oftentimes freshwater in Alberta, they’re allowed to use fresh water. I’m certain it would be similar in The States in Alberta which amounts to about 200 billion liters a year. The oil sands is 200. That’s again, the scale of the water that we’re using for fracking. But as Sarah’s saying as well, when we produce oil and gas, there is associated water that comes with that. And generally over time, as wells produce down, we produce more water than we do from the oil and the gas that we’re getting. I’ll give you an example. A field I worked on had a 99% water cut, meaning each barrel of oil came with 99 barrels of water.

That water needs to be disposed of. And that is often the issue when we talk about earthquakes from oil and gas, it’s generally from that reinjection of that water that we’re trying to dispose of that’s causing this overpressure. And then like you’re saying, Sarah, if water can move between these conduits, then we have gases that can move between these conduits too. I think Justin, you were alluding to the risks around the ongoing production in this. We and Sarah, you just did too. We’re in tighter zones. We’re doing more damage to the rock formation and having less certainty of where those fluids are going. Sorry, Mark, I saw you unmuted. Go ahead. You wanted to add something.

Mark:

Interestingly enough, a week from today, I believe it is the 28th of November or the Alberta Energy Regulator will conduct what’s called a Regulatory Appeal Proceeding, which is an appeal of a previous regulator decision heard by a panel of hearing commissioners of that regulator, obsidian energy was charged or there was some order issued related to an earthquake. They are appealing the decision that’s already been made by the regulator of an earthquake. And it’ll be broadcast live a week from today. That might be of high interest to people. I just want to make sure people know that they can watch it from the Alberta Energy Regulator websites.

Sarah:

Yeah, it’s Thanksgiving in the United States. In between football games. Make sure you post a link on social media.

Mark:

I’ll try to find it. Yeah. Also, interestingly enough, we don’t talk a lot about oil and gas in the province of Ontario, Canada, but it’s an extension of the gas fields, Sarah, you talked about. That’s in Appalachia. There are about 25,000 of these older gas wells in southern Ontario. One has exploded recently in a town. The same situation there is in say, Pennsylvania or Ohio, where these older wells long since forgotten, not registered locations, unknown leaking gas into basements of buildings downtown until they exploded. We don’t have that problem in Alberta. We’ve only got a handful of wells that were drilled in the early years, we’ve always had a regulator that did issue licences, and we do know the location of almost all of the wells in Alberta, thankfully. I also wanted to mention that we don’t have that many wells in Alberta that operators have walked away from.

It’s fairly low numbers. Some people call that abandoned here. Abandoned means plugged. We talk about orphan wells. We’ve only got about 10,000 wells that are named orphans so far by the regulator in Alberta. We named them because we have a special program that I’ll talk about later, but there are probably 30 or 40,000 wells that should be named orphans because here the industry has to pay for the orphan cleanup, and the regulator’s reluctant to name wells because the industry has to pay. I’ll come back to that later, but just to add a little bit to what’s already been discussed there.

Who Is Paying for Oil and Gas Liabilities? What is Happening?

Jenny:

Well actually Mark, why don’t you lead us off in that? What I wanted to start talking about now is who’s playing for closure work. If we can just describe what it looks like right now. I know we’ve talked a little bit, but we’ll expand on this. Start with Alberta and then we’ll let the…

Mark:

Sure. Yeah. In Alberta, well closure has three components: that’s plugging of the well under one law and remediation of any soil. That’s if there’s a spill under a second law and reclamation of the site or the pipeline right away under that same second law, which doesn’t have to occur until the operator has finished with that site. In Alberta though, that’s what closure cost means cost to plug the, well possibly remediate the site if there’s contamination, and to restore the site, which is called reclamation, back to its near condition. If there’s been a road put in the road needs to be taken out unless the landowner wants to keep it, et cetera, those costs must be borne by the operator. By law. In the 1990s up to about the year 2000, the regulator and government of the day in Alberta started to notice that there was some risk and some smaller companies went bankrupt and there was some risk of bankruptcies.

And the regulator also was concerned with the number of transfers of wells from the big companies that originally drilled these wells to mom-and-pop operations, et cetera. They wanted to start imposing security deposits against these closure costs, and they wanted to start regulating and monitoring these transfers. And industry said, “No, don’t do that to us. Let us transfer our licences to whomever we want and don’t make us put up security deposits to cover end-of-life obligations. And in return, we will insure against the bankruptcy of our members.” They said, “We will pay for the closure of any well that’s orphaned or that if the company can’t or will not close that well or then clean up the well site industry as a whole will pay.” We have something called, it’s unique, and I think it’s probably the envy of the world. It’s called the Orphan Fund.

It’s legislated under part 11 of the Oil and Gas Conservation Act. There’s a yearly levy that’s supposed to occur. That levy is supposed to be determined by the amount that’s required, supposed to be determined by the Alberta energy regulator once a year on the industry, depending on a formula, depending on how many wells you have, what your liabilities are, et cetera. And once a well is named as an orphan by the regulator. Then the Orphan Well Association is a designated authority under the Alberta law and they carry out the work. But the payment for that work comes from either if another company’s participating in the minerals, they may have to pay their share, but if there’s no one there in the industry to pay for those closures, it’s supposed to come out of the orphan fund. We also have something called liability management, which is a system of trying to determine when there should be security placed on a given operator, and that’s to mitigate the risks to that orphan fund.

We have this two-tiered system, which is imposing security, which is rarely done, especially when there are well licence transfers, et cetera. But we have this safety net, this backup plan called the orphan fund. But the problem in Alberta is that the levy’s too small and they’re kicking the can down the road. At law, we have something so the citizen never has to pay. In reality, we don’t charge that levy and the regulator doesn’t properly administer that orphan fund or capitalize that orphan fund by making the industry pay for it. Well, then we have the same thing you guys are going to experience in the states where there’s nobody to pay. And those systems are under attack. Big companies that have a lot of wells, they’re trying to renege on their deal. They’re trying to say, well, now it’s time for us to pay. And now that we’re putting out hundreds of millions of dollars a year to close other people’s wells, we don’t like doing that.

Let’s get rid of it. We don’t want to keep the promise we made just like Chevron in Texas. Probably, as you said, I belonged to a group called ALDP in the past where we did freedom of information requests from the regulator. We have all the good data, on how much it costs to clean up these sites and plug these wells. And we confirmed that the cost just to plug and clean up the sites just for conventional oil in Alberta is about $60 billion. It’s a big hit. And if we uphold our laws, citizens will never have to pay. Landowners will never have to pay. If we don’t, there will be citizen pay in the future.

Jenny:

Thank you. Sarah, if you can talk about what’s happening with the liability, is closure work happening? I know Justin already mentioned the Inflation Reduction Act and any other activity that’s happening if you can talk about the state of the liabilities?

Sarah:

Right. Okay. In Texas, you’re supposed to have bonding, right? Technically. But the problem is just like if you were to get a construction bond or any other sort of bond of, Hey, I’m going to do this work, and if I don’t, you can collect the bond money. But in Texas, the maximum amount of any bond for any operator is $250,000. Chevron has one $250,000 bond with the state, which is not enough to properly plug one. Well, that has problems. It’s maybe enough to properly plug two wells that have absolutely no problem, assuming that they were drilled, completed, and maintained in accordance with standard industry best practices, which let’s be honest never happened. And if you look at the state, I think they say they have at any given time about 8,000 wells that are officially orphaned in Texas. But we’ve got over 140,000 wells that have been idle for at least 10 years, meaning they’ve just been sitting there rotting.

And the longer they sit, there’s a lot of salt and produced water. We all know what happens with steel at the beach. Just imagine steel pipes in oceans of water down there rotting, and the cement is supposed to protect the steel. But if you don’t get a good cement job, which they never do because they’re not required to, because they don’t have to test to make sure that they do, they do in Norway or someplace where they have to demonstrate that they have a good bond. In Texas, it is absolutely a Ponzi scheme. I think that all future revenue is not enough to account for current liabilities and the economic reality is that the oil and gas industry isn’t going anywhere because people’s consumption habits aren’t changing. And we all like our cheap energy and gas in the United States, and we don’t want to change that.

More oil and gas wells are coming. And I think that it’s problematic because in a lot of places, especially in the suburbs where you have old historic oil fields that used to be a long way away from towns, but as the suburban sprawl happens, we’re now building neighbourhoods, homes, schools, churches on top of these old wells where no one’s monitoring them. I think that what we need to be doing going forward is making sure that it used to be, well, you plugged your well, you cut it off a few feet below ground, you welded a cap on top of it, and then we don’t have to do any remediation here. You’re just like, here’s your Kelechi pad site, good luck. But at least the thought was that the well shouldn’t leak. Well, now we know I’ve excavated over 150 wells out here, and none of them appear to be okay.

And a lot of them actively have pressure. They’re actively flowing oil, gas produced water outside of the casing, which means it’s already into our groundwater and there’s lots of problems. I would say that any figures you hear on liability are grossly underestimated. And on this ranch where I live right now, there are over 400 wellbores on this 22,000 acres. And if it costs two to 5 million per well to properly plug it and then delineate and remediate any groundwater, which is a low number, if you have to remediate the groundwater, you’re probably looking at $20 million a site. When you start talking about those numbers, I don’t know what 20 million times 400 is, but I can tell you that we’re talking trillions or whatever’s after trillions when you talk about what’s the actual liability of these things, because what we now know is you can’t just plug it and walk away. Once you put that conduit there, it’s there for generations, it’s there forever, and we don’t have any technology that can plug it for thousands of years.

Jenny:

Justin, I’ll let you roll off of that, please.

Justin:

Well, I certainly agree with what Sarah says that any number you hear is likely far too low. As I mentioned earlier, I mean an issue that remediating the groundwater is going to be very difficult. In West Texas, the groundwater is contaminated in many areas as it is in Pennsylvania, North Dakota, Ohio, Oklahoma, take your pick, California. Also with that, this new, I mentioned earlier, the radiation issue, it’s big in Pennsylvania. In Pennsylvania, one of the ways they decided where to frack was wherever the radiation was highest because they realised that indicated that there was more likelihood to hit the gas. The industry is well aware of this. There was a report in 1982 from the API saying, we don’t want to have to deal with radionuclides because it would be expensive. I think that’s why the numbers are very large. What Sarah described in Texas is similar to other states, although Texas is the standard bearer for not having any real regulations or enforcement. And their regulators right now are asking for another hundred million dollars to deal with wells just like the ones that Sarah is dealing with. That’s just a little, it was very quiet. They said, Hey, can we have another a hundred million.

Sarah:

For two years? Right? They had 150 million already for the next two years, and they were like, we need another a hundred million because they’ve doubled their costs since I started coming around and talking about this. Because guess what? You cannot plug a well for $10,000.

Justin:

And that’s across the states, whether it’s North Dakota, all of them, the estimates for what it costs to close a well versus reality, they’re way off. But even if you use their estimates, the way it works in the US is the bonding is done on a state-by-state basis. The states are the ones required to get that money upfront in any state where they do it. Colorado is a good example in Canada, and most people in America aren’t aware that there was an oil industry in Pennsylvania. Colorado right now is a major oil producer, and they just went through a several-year-long process to revamp this. They’re like, okay, we’ve got a problem. We’ve got a couple hundred of millions of dollars, billions of dollars that we don’t have, and we have big companies here making profits, we are going to hold them accountable.

And they’ve bragged a lot about how they have the best system in the US and now it’s in place. And again, Carbon Tracker has done great work on this. This is why I know these numbers. They had about $200 million against an estimate of eight, no, six to 7 billion in liabilities. And as Sarah pointed out earlier, you can probably make that a much higher number. In reality, after the several-year process, we’re like, Hey, we’re doing it. We’re holding them responsible. They have less money than when they started and the liability has grown. That’s California. The oil industry loves to say that California is anti-oil. California’s oil industry right now is declining, and the value of the oil left in the ground is less than the money it will take to clean it up.

They just had an opportunity. They also went through a process and said, we’re not going to let this happen. We’re not going to let the public be on the hook. And what’s happened in California, and this is how the system works and why we have many abandoned wells, large companies like Exxon and Chevron, drill new wells, and all the oil comes out in those first, especially in shale wells. The first two or three years is where you make your money. Once they’re declining and they’re no longer gushers and making, they sell them off, they spin them off to other companies. In California, you have a company called CRC. It hasn’t existed for very long. It’s the old assets of Oxy Shell and Exxon, and they own more wells than anyone else in California. They do not have the money to pay for the cleanup.

They went bankrupt shortly after they were spun off from Oxy. They came out of bankruptcy. The value of their oil assets, it’s nowhere near close to what they need to pay to clean up. They recently, with California’s new regulatory structure, agreed to merge with another large oil company with a lot of Exxon’s old assets. These two companies merged and all the activists were like, this is going to be great. The new law says they owe us a billion dollars to cover these assets. But as I like to say, the oil and gas industry, lawyers and lobbyists are some of the best and normally wrote the laws. What happened was they said, oh no, this is a merger. In California, if you do a merger, you don’t have to pony up that billion dollars. Here we have Colorado, they’re doing worse than when they started the process.

California just handed a gift to a company. And the additional part of this Ponzi scheme, and I agree with Sarah, is that this is what the US shale industry has been on several levels. Now, what CRC is saying is, oh yeah, we can’t make a lot of money with these oil wells, which are old and don’t produce much. We’re a carbon capture company. We’re going to capture carbon and blast into the ground in these same areas. With all of those holes that Sarah and you have described. We know what happens. We’re all being strung along and they’re set up to walk away. There’s a company, but that company, a lot of that is Exxon’s assets, which they have pushed off. And that’s how this has happened in the past month. Exxon very quietly unloaded a billion dollars worth of old wells to a company called Hillcorp, which is amassing all of these old assets, and they just paid a $10 million fine in New Mexico because they’re known as “Spill” Corp in Alaska where they own a lot of stuff.

Hillcorp, another company called Diversified Oil, has 70,000 old gas wells. Now. What they’re doing is saying, we’re going to operate these gas wells for another 50, 80 years, maybe we’ll give you the money then no one’s. They’re Ponzi schemes, but these people, the executives at those companies are making ridiculous amounts of money. And the only money coming to Texas right now is another a hundred million. That’s the only place the money is coming from the public. And that’s how it’s set up. Unless we change the current system, the industry is very, they’re just set up to walk away.

Jenny:

Thank you. That’s such a great summary of the situation, guys. Yeah, I am going to reiterate a couple of things that I heard before we start getting into some of these changes that we need. Absolutely, yes. State by state, the same thing in Canada. For each province, it’s up to them to bring in deposits, I saw in your notes a 1% deposit. Same with us. We have about 1%, maybe Saskatchewan is best on a percentage basis, and then BC and then Alberta. And again, we’re talking one or single, single-digit percentages at that point. Yes. The company, this example that you talked about with Chevron dumping their assets in California. We have a very similar thing happening here. Mark said we have everything accounted for. You can trace every well in Alberta back to its original owner. But yes, we have, for example, a company called Pieridae.

Jenny:

They on paper are the owners of these assets in the Eastern Slopes, but on licence, those licences are still with Shell. We have assets that have gone from the Riddell family. A very longstanding family. Paramount is one of their companies in Canada. Oh, Sequoia-Perpetual has come from that family passing on, holding onto the asset value and passing on the liability forward. There are a lot of really small entities that are the licensees of these issues, but it’s very well documented and traceable back to the original owners, which are these large companies. Of course, as they divested over the years. And as Mark was saying, we have these rules. It’s interesting. I sat in on a discussion with the Roosevelt Institute. I’m not sure if any of you are following what they’re working on, but they are calling it a Green Industrial Policy.

How Do We Create Positive Change in Oil and Gas Liability Management?

Jenny:

I’m going to use this as a tee-off back into our final round of comments here. I’m going to start talking about how do we change this. I agree with your comments, Justin. I see this as we need the public to be demanding a different system, a different process. I look at the fact that we are in Canada, in the us, we’re still helping support fossil fuel development. We’re subsidizing fossil fuel development with tax subsidies and things like that. Meanwhile, we’re also paying for liability. I think, and as Mark’s saying, even though we have this great system in Canada, it’s not being enforced now that we’re here and it’s down to it. To me it’s about if we are required to participate as the public, then I think we need to have a say in how that money is being spent and how it’s being focused.

I’ll just reiterate this. It’s a green and industrial policy, and it’s talking about having a wind-down strategy. To me, each state, each province needs to have a wind-down strategy. Sarah, I hear your very good point about the size and scope of these issues. As somebody who worked in the industry, one of the things that I see as an opportunity is to restructure this work from an industry standpoint rather than from a company-by-company standpoint. I’ll just be specific. We have single-site assessments. Well, we should be doing area-based assessments. And to your point, we need to be backing off the landscape in a lot of ways. Instead of this urban sprawl, we have to start, to me, the transition involves restoring the environment. We have to make sure that there is space for all the life that serves us too.

To me, it’s that land stewardship law practice that I think needs to be put first and foremost in our line of sight, rather than talking about net zero. Justin, as you’re saying, that’s a stall tactic from the oil and gas industry to not address these site cleanup efforts that are required. I like looking at this green industrial policy because I think it’s an opportunity for each state, and each province to look at how we want to decide where our money is going. When I think of, again, the scale of the problem, where do we need to focus first? We need a ranking system of some kind because the problem is so far past manageable that we need to now have priorities. I guess that’s what my thoughts are, I’ll just list them again before I hand it off to you, Mark. I think talking about what policy looks like, making sure that it’s around land stewardship so that we are aiming to restore these sites and aiming to close them to even, I want to say the main arteries because a lot of things are happening in piecemeal, pipes aren’t properly purged, and that in itself creates many more hazards in doing things in piecemeal.

Again, to look at it holistically. And lastly, I’ll just say to make sure that the public, if we’re paying for this, we need to have a say in how the money is being directed and how it’s moving forward. And the last thing I’ll say, and Mark, you can say more on this, is I understand in our province the way to hold these companies accountable is through litigation. Meaning our laws are great, but they need to be upheld through a hearing process. And again, Mark, you can speak more to that. I think Sarah, if you can offer even from a legal standpoint some things, the last thing I’ll say is I mentioned this ELL family, they had to pay out of pocket. That’s a new occurrence here in Alberta that we had an individual have to pay for cleanup. I think there might be some opportunity in potentially getting some of these executives to be held to account if the money is no longer in the corporations. I’ll stop there. Mark, what are your thoughts on going forward and what we need to do?

Mark:

Well in Alberta, I think if we want to talk about going forward is how long it’s going to take to clean all this up, as we said at the current rate, it’s going to take over a century. We have to pick up the pace. The problem here really in Alberta, and my humble view is an administrative law problem. We have a regulator that’s unlike your regulator in Texas. The people are appointed. And we have a hearing commissioner panel at that regulator that sits idle. Some years they issue 40,000 licences, permits and other approvals, and in some years they cannot conduct any hearings on oil and gas whatsoever. I’ve spent months researching a case I’m involved in where even where we did have a rare pipeline hearing, they did things before and after the hearing that negated the entire hearing.

And I’m going to prove that. Even when we do have a hearing, it’s a joke. We have an industry-captured regulator in Alberta, and I think probably have similar problems in the US. To me, it boils down to challenging the decisions of this regulator. And the other board we have here in Alberta’s called the Land and Property Rights Tribunal, they’re the one that decides compensation issues for landowners. We have to hold these administrative tribunals accountable. We have to ask them to review their own decisions. They’re allowed to do that, they usually won’t. And we have to appeal their decisions to the courts to get clarity on these matters. And only in this manner, only when we’re appealing the decisions of these regulatory bodies and having the matter sent back to them to do it properly. Well, they learn. What they do now is they’re just either, well, they’re either captured or incompetent or both, doesn’t matter.

The end result is the same for the public, but very few people will take these boards to court. That has to occur a lot more. That’s a funding issue. We also have a lack of lawyers in Alberta. There used to be a few lawyers that would represent landowners, for example. And here we’ve got almost all the wells in Alberta are on arable farmland. Or like Sarah said, I mean I represent a lot of urban land owners, and I can assure you that the degree of mischief is directly proportional to land value. When we have extremely valuable land in the cities and towns, that’s where the real mischief occurs. That’s where the landowners suffer the most damage without being able to be compensated. And I agree with what Sarah says. One thing we’ve got to do, we’ve got to team up North America-wide. We’ve got to get these universities and we’ve got to find ways to permanently plug wellbores.

We don’t have them now. I’m concerned that engineering students have taper right off, especially at the University of Calgary, with almost nobody going in for oil and gas engineering anymore. We’ve, we’ve got to spend lots of resources on how to properly plug these well bores and these liabilities will go on and on and on forever. We’ll have to reenter these wellbores countless times in the future. That’s what keeps me up at night. I don’t know how long will it take to wind this down. The bottom line is if we don’t figure out how to plug wells, this is a permanent problem for the planet Earth. And it’s a big one in Alberta, though, a big portion of p polluter pay. I think our regulators, or sorry, our lawmakers were pretty wise in the past. They passed some pretty good laws. But a big part of it is landowner compensation.

That’s the misunderstood part. In Alberta example, there are timelines in, for example, North Dakota, how long an active site has to go before you have to close it In Alberta, we don’t have timelines like that. But the reason is that the lawmakers recognize it might take a hundred years to clean up a site. The incentive to clean up here is to not have to pay the landowner anymore and not have to pay municipal tax taxes anymore. And if that conversation’s too low, if landowners are subsidizing the industry by having their land depreciated or having to clean up that mess, well then we haven’t looked at the statutory scheme as a whole, if you will. I think a big part of it here is proper compensation of landowners and telling those sites the use of those sites as returned to them. And that land has to be returned to them in a clean state in Alberta.

I think we need to focus more on that. The other thing I think I need to say is that NGOs or environmental NGOs, can’t get status in these hearings. The only people who can get status are the landowners. They have rights, they’re the ones with rights being abused. NGOs should be backing up landowners instead of wasting their money trying to get status in these hearings for themselves, and then we can do some good. That’s some of the things we’re trying to address at the Polluter Pay Federation. But there’s a bit of a lack of funding, and a lot of the funding you can get from foundations comes from groups like the Rockefellers. And that funding doesn’t do you any good, it gets you knocked off track pretty fast. I guess that’s about all I have to say about how long it’ll take to clean this mess up.

Jenny:

Thank you. Mark. Sarah, can you offer some thoughts from your point of view?

Sarah:

Yeah, from my perspective, it’s a little different, I don’t think we’re ever going to restore the land. And I think instead there needs to be a focus on landowners who didn’t get the benefit of the oil because we have separate ownership of the minerals from the surface, which creates a lot of problems. And also under Texas law and most other places that I’m aware of, your liability for damages is capped at the value of the land. If you’re out here and you’ve got pasture land that would retail for $1,500 an acre, well, it’s cheaper to buy out the rancher at multiple values of the fair market value than it is to address the problem. And once the oil and gas companies own the surface, then there’s no one to complain to the regulators about problems because same thing.

If you look at the tax records in Texas, a lot of land is owned by oil and gas entities. And in the Permian, it’s something I’ve heard the number as high as half of our acreage is the surface is owned by the oil and gas companies. In my perspective, as we talked about, California doesn’t want to admit it’s an oil state. Well, it just disowns Bakersfield, right? I mean, there are places in these states where the well spacing now it’s a pin cushion. And my personal, what I think should happen is the landowners that are here should be bought out and they should have land somewhere else that doesn’t have these problems. And if you own 22,000 acres here, you should be able to, I don’t care. Somebody buy me out here and then find 22,000 acres somewhere else. And if it costs you $30,000 an acre somewhere else, not my problem is, I think the most realistic thing that’s going to happen because again, I don’t think oil and gas is going anywhere anytime soon.

And instead, we just need to be more thoughtful about where we put it and be more responsible in not having the sprawl. I guess from my perspective then I’ve got lots of ideas. I mean, for new wells that are drilled, we should have 100% bonding for decommissioning. If you’ve got eight or $9 million to drill a new fancy horizontal, well put $500,000 into some sort of interest-bearing account today to properly decommission that. Well, and if you’re able to do it for less, great then 30 years from now after it’s been getting interest, and then let’s take that interest and put it towards orphans. Well, I think we should stop using fresh water for oil and gas operations. I think it should be illegal. And right now, if it costs 75 cents a barrel to dispose of a barrel of produced water in the Permian, then there should be a 75-cent tax on injection and let’s double the price.

And now all of a sudden, recycling has become more economically viable. And I’m all for incentives if you do it the right way, like carrot and stick kind of things. But I think, again, the problem is that it’s complicated and there is no simple answer. And a politician’s not going to go and advocate for this in the United States because of our two, four or six-year cycles of politics. They just want to stay elected instead of saying, oh, this sucks and it’s going to be 30 years of really hard, grueling whatever, and this is how our plan is going to be to dig ourselves out of this. No one has the cajones to do that, here we are. But yeah, I don’t know that I have a happy proposed resolution, but I think we need to get intellectually honest so that we can get to work on something that will work and not kill our economy at the same time.

Jenny:

Yeah, it’s complicated. Okay, Justin, I’ll let you go next, please.

Justin:

Yeah, well, I thought Sarah had a lot of great ideas there. I would love for us to bring criminal penalties into some of these actions. You can certainly talk to lots of people who think that crimes have been committed. There just has to be some disincentive for these companies, and currently, there is none. What they’re doing is making them lots of money. Doing the right thing would cut into some of those profits. Historically, as an industry have always chosen to take the money over doing the right thing. I think one of the first things we should talk about is if you talk to people in the industry, cement doesn’t plug wells. It certainly doesn’t plug them for a hundred years or a thousand years. We’re using a technology that probably was the chosen technology because there was a bag of Portland cement at a well site somewhere, and that’s what they used.

A lot of these wells in the US have been plugged with socks, tree branches, whatever was there. Part of the problem, let’s stop making it worse. We have a lot of active wells. Some technologies are a lot better than cement to plug these wells. Let’s start thinking, addressing the not making this problem worse from an environmental standpoint. All of these wells are leaking methane, which is a climate issue as well. We have the incentive to do that better. I think one of the things that from my perspective, the only way we’re going to solve this is to stop putting all these holes in the ground and continue to make the problem worse. We’re at a point in history in the world where for the first time, there are competitive products to oil and gas for a lot of things.

We are starting to see oil demand come down this year. Surprising a lot of people. Yes, the world runs on oil and gas right now, but it also runs on a lot of clean energy. Texas is an excellent example, you go to West Texas and you see a lot of wind turbines that are powering the oil industry. I do think that we need to think about transitioning to clean energy. But the other thing is people in the oil industry will say, well, you’re going to take away our livelihood. I guarantee, especially since US employment in the oil industry is about half of what it was 10 years ago, you can employ everyone who knows how to do anything about a well to these 2 million wells because you can’t just take someone off the street and say, go plug a well, you need to be able to go downhole.

You need to know what you’re doing or you’re going to make the problem worse. We have, as Mark mentioned, yeah, young people aren’t total idiots. Going in, getting an engineering degree in petroleum right now might not be the best idea. But if we had programs where you could say, Hey, we’ve got work for 40 years closing and you’re doing something, it’s engineering. That’s what we need. But we don’t have any of that. We’re not talking about this problem seriously in any way about solving it. But even separate from the financing, which is large. But I think one of the things, these are big numbers, we’re talking about a quarter [trillion] dollars in Alberta, quarter billion dollars, maybe twice that in the US, but they’re not big numbers compared to the amount of money the oil industry makes. If we took a good year of profits from the oil industry that would cover cleaning up Canada, but they’ve never been asked, we’ve never made them pay their fair share, and they’re able to just keep passing the buck, and we don’t get to do that. What they do with fraudulent conveyance is that they take all the money out of it and then give it to someone who they know can’t pay back. It’s like maxing out your credit card and then giving it to your son who’s six and telling the credit card company good luck. Maybe he’ll spend more. Maybe he won’t. It’s not my problem. And the credit card company saying, huh, that’s what

Sarah:

We’re giving you another credit card.

Justin:

Yeah. Unfortunately, yes, the scale of this problem is large, but it’s not insurmountable. The power of this industry to make sure it isn’t held accountable, which unfortunately probably just became even stronger in the US, is what we’re dealing with. And that this isn’t that hard. Yes, the oil industry might not make as much money. Some of these wells wouldn’t be profitable if they had to put up a half million dollars upfront. They’d think twice about drilling them. But that isn’t happening. It has to happen. Or I think how Sarah is describing West Texas, unfortunately, having been there and seen it in person and reading a lot about it, it does seem like it’s just going to be a sacrifice zone and people are going to just move away because the water’s poisoned. They’re also sucking down the aquifer and the air isn’t great, and what would it cost to fix that? But I mean, that’s horrible, but how much of our country, how much of Canada, the rest of the world are we going to allow that to happen? The idea is that when people say, “Well, we need a just transition for oil field workers. If we’re not going to keep producing oil”, I have a plan. We can employ everyone, but who’s going to pay for that? I think the oil industry should pay for it.

Sarah:

Yeah, I was just going to say, it’s not a new problem in West Texas. It’s the tragedy of the commons and where I am, everyone’s like, oh, it’s just mesquite scrub brush. And you can see here, okay, well, a hundred years ago it was all beautiful grasslands and we overgrazed it, and then after we overgrazed it, we started punching holes in it and we’re abusing it. And I will counter a little bit of what Justin said about a transition to clean energy. I don’t think there’s such a thing as clean energy, because windmills require fibreglass and oil and solar panels require, right? I mean, consumption has a cost. Batteries. Now we’re going to go start raking the sea floor for rare earth minerals, right? I mean, we are raping the earth. Humans are an invasive species. And I think that we just need to be having discussions about what the future looks like for our grandchildren and what at the same time that we’re trying to get ahold of greenhouse gases, we’re injecting CO2 into the ground, which is the dumbest thing ever because all we know is we’re going to create carbonic acid when that CO2 mixes with the water and carbonic acid is highly corrosive and eats through the steel and the cement even more.

Sarah:

And we’re not going to make a demonstrable difference. And oxy’s spending billions of dollars a few miles away from me with these direct air capture big old fans in the middle of the desert, and they’re going to suck the CO2 out and inject it into the San Andrew’s formation, which is the same formation that is feeding this water right here in the picture. I mean, it’s the absolute, or as Hawk likes to say, wiping your butt with a hula hoop, right? I mean, and not expecting the shit to come back around. And here we are. Yeah, absolutely. We’ve got to do something. I think it looks different in different places, but it needs to be Okay, if we all need a little turbine on the back of our fence, we all need solar panels on our roofs and we all have to adjust when we wash our dishes and our laundry, and these are consumption changes and the grid, like in Texas, a thousand new people every day move to Texas, our grid cannot handle it.

My water wells are down because it’s going to be $25,000 to replace a transformer. We can’t electrify everything. It’s too expensive. I think where I am at least, right, it would be millions of dollars to run new electricity to where I am. If it’s okay, I should probably be off the grid, just like high-speed internet. There’s all this broadband money that we’re spending in federal tax dollars right now. We don’t need it with Starlink. Now, I hate to break it to you guys but do I love that Elon Musk has a monopoly? No, but we shouldn’t be spending tax dollar we don’t have, printing money on the federal level and our deficit and there’s just all kinds of craziness. This is one of many problems, but there’s no one-size-fits-all solution. I guess

Key Takeaways

Jenny:

I hear you, what this Roosevelt Institute discussion led with was that all we’ve done is build out a renewable sector. We’ve done nothing about the overconsumption over-exploitation problem. I’m with you. We don’t need to extract any more minerals. The battery industry can go fully circular right now. That needs to happen. We should not be doing any more extraction for any rare earth minerals. There are ways that we can do that differently. But one of the things I did want to say, because I agree with everything that’s said here, we’re going to have some sacrifice zones. We have some zones that just need to be protected in place and let them fix themselves. When I talk about priorities, I’m talking about the Eastern slopes. And why I say that is because Alberta has a very small section. It’s only 15 kilometers wide that serves.

It’s the headwaters for all of Southern Alberta, South Saskatchewan, and Manitoba, but it also goes down to the Mississippi. We are not small potatoes in terms of our criticalness to restore. In my case, that’s where I’m coming from. That’s the focus. If we can restore the Eastern Slopes and make sure we have a water source, a freshwater source, that’s to me why the focus is. But one thing I’m going to add that I think is a potential hopeful angle, is Canada released new anti-greenwash legislation in the summer, and what it caused was all six of the Pathways Alliance companies, all the companies that are committed to doing this CO2 injection, to scrub their websites of [Carbon Capture and Storage]. My rationale for that is, and I’m not a lawyer but, corporate governance. We haven’t spoken at all about, we’ve talked about public pressure, but I think there is a corporate governance aspect to this that will help move this dial.

Meaning if you’re promoting something for an investor that is going to lose the money and cost them in the long run, that’s potentially a financial litigation opportunity, is how I see it. And the fact that they scrubbed it, I don’t think it was out of the federal fines. I think it’s because of this corporate governance issue. I think there is an opportunity in there to explore. I’ll just leave that as something else to consider. Any closing thoughts before we leave? Thank you very much. I feel like this is one of, I hope another couple of conversations next year. I think this is something that we have to start getting people to talk about. Yeah, go ahead, Mark. You can lead us off.

Mark:

Yeah, it was interesting what Sarah said about just purchasing the land that if there’s contamination, et cetera, in Texas and Alberta, that so, or Exxon Imperial Oil is, the same company has purchased a lot of land with those sites, but they can only delay it. In Alberta, the environmental laws protect the land regardless of who owns it, and the owners are not allowed to contaminate or allow contamination to go unchecked.

Sarah:

I mean, that’s theoretically the law here too, right? The problem is enforcement. It’s just if what land owner watching, if the landowner’s complicit in it, who’s going to complain? And I think the answer is methane satellites, right? Big brother, we can’t avoid the truth, right? There are satellites now. We’ve got InSAR data, which is showing actual rising and lowering and changing of elevations out here where there should not be changing elevations like science will prevail. It’s just a matter of getting the government and the enforcement up to speed and having people like the landowner that I work for, fund multimillion-dollar lawsuits to go after these guys because that’s what it takes.

Mark:

Here in Alberta. Most landowners, well, we’ve got corporate landowners, but most landowners don’t have that anywhere near that amount of land because the land’s a lot more productive here. But still, that’s a big problem. But the big problem all over North America is probably enforcement. How do we hold these regulators to task? That’s my number one concern.

Justin:

Yeah. Well, I guess I would just echo what Jenny just said about when I first started when those oil trains first started blowing up and the disaster in Lac-Megantic, I just started asking questions like, how is this allowed to happen? And it took a while to get through the noise from the industry saying, crude oil doesn’t blow up. Something else must have happened. And they worked through a lot of different things. And I followed that process because people said, we can’t have this happen. 47 people died. Everyone was like, regulations are written in blood. It took 47 people for us to get new regulations, but the American Petroleum Institute was at the head of the table for every one of those regulatory meetings that was open to the public. They also had plenty of private ones. I watched for over five years, those regulations, they know exactly how to move oil safely.

They just can’t do it profitably. They choose to sacrifice people like the people in Lac-Mégantic, they’re doing it. They’re sacrifice. West Texas is a sacrifice zone. People are living really close to oil and gas facilities there who are getting doses of hydrogen sulphide and benzene, and it’s happening everywhere. Regulations are not going to solve it. Regulations are not going to solve the issues. And certainly, in Texas, there is no enforcement. But it’s not just Texas, it’s North Dakota. It’s across the country. I think that one of the things I would caution about is thinking that we can regulate our way out of this. We had another oil or a hydrocarbon-trained disaster in the United States in East Palestine a year and a half ago. All of the things that I wrote about in my book saying, here’s what we need to do to avoid this happening again, those are the things that led to that. We know what to do, but I am not a believer that with the challenges we’re facing, that regulations are going solve our problem. We will be talking about those for another 10 years, at which point the sacrifice zones will have gotten much larger. I think we need to think about these problems differently, but the money’s there. The oil companies have the money though, but they just refuse to do the right thing.

Sarah:

Can I leave one closing remark for this group specifically I heard the other day it’s like, don’t forget, you can get so much more done in 10 years than you ever dreamed and a whole lot less done in two than you were planning. And I think that my journey, I’ve been at this really for about four years now, and it’s very true. And I mean things are happening slowly but surely. A lot of stuff behind-the-scenes operators are realizing and it’s encouraging people when they see something to say something and social media is the great power equalizer. I just want to leave by encouraging this group to continue to spread your truth and scream it from the rooftops and that there can be other people that can try to play nice. And that my job specifically is not to play nice.

It’s to call out and to expose the truth. And then once it’s like any 12-step recovery program, the first step is admitting there’s a problem. And we have to educate America and Canadians that there’s a problem, there’s a problem with our consumption. There’s a problem with the way we produce our energy, and it’s going to take all of us. We’re all going to pay more at the pump, we’re all going to pay more per kilowatt hour. We’re going to pay more for fresh water. We’ve never been accurately pricing these things, and pocketbooks are a great motivator. Yeah, if it costs a hundred dollars a barrel to responsibly produce a barrel of oil, we shouldn’t be producing it for less than a hundred dollars a barrel, which means that we’re not going to get gas for $2 a gallon. It’s just basic economics. And we just need to stick to that and continue to tell people because it is making a difference. And I’ll just say, we get recognised and it’s working. Just everyone keep doing what you’re doing and let other people try to come up with some of the solutions too, right?

Jenny:

Yeah. This conversation, to me, is amplifying our efforts, thank you so much. The one thing I do want to say I always say to Mark is liability is like fight club. Nobody wants to talk about liability. Yes, the more we talk about it, the more people feel comfortable. And a big part of this is landowners feel alone in this. Mark can attest to this. They’re isolated. They’re made to feel like it’s their fault in a way. The more that we can encourage them to talk about it, the more the general public can support this work too. Thank you so much, guys. I appreciate this and all the work you’re doing. And yeah, let’s keep it up on social media. Thank you so much. Take care for now.

Justin:

Thank you. Take care.