(Adds Cenovus comment)
CALGARY, Alberta/OTTAWA, Jan 25 (Reuters) - Funds allocated
by the Canadian government to help clean up the country's orphan
oil and gas wells may fall short if the main oil-producing
province of Alberta continues to allocate the money to
financially viable companies, the parliamentary budgetary
watchdog said on Tuesday.
About half the funds in Alberta went to 10 companies that
are expected to remain financially viable over the next few
years, including some of Canada's largest energy producers -
Canadian Natural Resources Ltd, Imperial Oil,
and Cenovus Energy, budgetary officials said. All have
benefited from surging oil prices in recent months.
Canada is the world's fourth-largest oil producer and
sixth-largest natural gas producer and its western provinces are
dotted with hundreds of thousands of oil and gas wells. Some of
those wells are orphans, meaning the companies that owned them
have gone bankrupt or ceased to exist.
In April 2020, the federal Liberal government allocated
C$1.7 billion ($1.3 billion) to clean inactive oil and gas
There are approximately 225,000 inactive and plugged wells
in Alberta and Saskatchewan, the two largest energy-producing
provinces. Around 11,000 are orphans and the watchdog estimates
the clean-up cost for those wells will reach C$1.1 billion by
While the amount set aside by Ottawa should be enough to
cover the orphan well clean-up cost, Parliamentary Budget
Officer Yves Giroux warned the funding could fall short if
Alberta continued to allocate federal money to firms that are
not in financial trouble.
"If that trend continues, it's possible that the funding set
aside would not be sufficient to clean up all of the inactive
orphan wells into the future," Giroux told a conference call.
Canada has a "polluter pays" principal, in which the
companies that extract natural resources are expected to set
aside funds to cover the cost of clean-up.
Giroux noted the federal funding was set up to clean up
inactive wells, not necessarily orphan wells, and it was up to
Alberta to determine which companies received funding.
Alberta government spokesperson Jennifer Henshaw said the
funds went directly to oilfield services companies specializing
in well clean-up, rather than the well licensees.
"The program has accelerated the cleaning up of inactive
sites and has created more than 1,900 jobs," Henshaw added.
A Cenovus spokesperson said in a statement the company had
accessed Alberta's site rehabilitation program during the
economic downturn in 2020, and would continue doing so until its
completion this year.
Canadian Natural and Imperial did not immediately respond to
request for comment.
($1 = 1.2639 Canadian dollars)
(Reporting by David Ljunggren
Editing by Mark Potter, Marguerita Choy, Bernard Orr and Aurora