Canada is paying $1.7 billion to fix toxic oil wells that energy companies are legally required to clean-up

The Canadian government announced almost two billion dollars to clean up oil wells abandoned by energy companies.

The controversial payment comes as part of government announcements made by Trudeau in response to COVID-19. The government claims the cleanup will create 5,200 jobs.

Abandoned oil wells are a serious ongoing problem in Alberta. When companies go bankrupt, responsibility for cleanup goes to the Orphan Well Association.

But years of corporations underfunding the association, as well as poor regulations by the Alberta government make abandoning the oil wells relatively easy, as reported in the Washington Post:

The industry-funded Alberta Energy Regulator, an arm’s-length watchdog agency of the provincial government, has a system that’s supposed to ensure companies that drill have the financial wherewithal to clean up their wells in the future. If a company’s estimated assets are less than its estimated liabilities, it is supposed to put up a security deposit.

But Tom Cumming, an insolvency lawyer in Calgary, said the “liability management ratio” is “not reliable,” because it’s based on oil and gas prices before the downturn, allowing companies to inflate their assets and underestimate their liabilities.

And unlike other jurisdictions, Alberta doesn’t require upfront security deposits for cleaning up the oil drillings, or require mandatory timelines for cleaning up those sites.

The Supreme Court ruled in 2019 that oil companies were legally required to cleanup these wells.

Now Canadians are on the hook for $1.7 billion to clean up oil wells that corporations were legally required to clean up.

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