Thread by @mark_dorin

[1] #RStarScam (Liability Management Incentive Program) IS NOT ABOUT ORPHAN WELLS.

Let's clear up misconceptions about Alberta's complex laws on who pays for oil & gas well end of life - "closure" – costs for wells. Misconceptions include terminology misunderstandings.+

[2] “Closure” means collectively (1) wellbore plugging ; (2) soil remediation; and (3) site restoration or reclamation.

An "orphan" is a well that has no responsible owner/licensee to perform closure work or pay for it.

"Abandoned" wells are sealed (not left behind by owner).+

[3] Explained below as per Alberta law is: who covers closure & related costs (industry) for:

1. wells with a viable responsible owner/well licensee (RStar applies; versus,

2. wells that do not have a viable owner to look after them or pay for closure ("orphans”). +

[4] Industry asked for the Orphan Fund model of managing liabilities (closure) about 1991. Govt. and regulator obliged. Viable industry members maintain the Orphan Fund through a yearly levy (in recent years insufficient to cover orphan well closure costs) imposed by Regulator. +

[5] The Orphan Fund does not cover the cost of paying landowners and taxes until orphan sites are closed and land reclamation certificates are issued. These costs are being borne by landowners/and ultimately by taxpayers, but with a law change could be paid out of Orphan Fund. +

[6] Companies that lease & produce minerals such as oil and gas pay royalties to the mineral owner (usually province of Alberta). RStar involves a proposed credit - a royalty payment holiday based on closure expenditures - applied to production from a newly drilled well. +

[7] In such a manner the govt. seeks to incentivize and therefore speed up cleanup, plus seeks to add to existing incentives to drill new wells (called "CStar", this is where the RStar name derives from). It is pure subsidy, albeit indirect, and possibly contrary to law. +

[8] Royalties, already lowest in the world (arguably ridiculously so), are a major source of provincial govt. revenue. RStar would reduce revenues used to provide services such as health care (or to go to savings) by the value of closure credits given under RStar +

[9] Someone put a value or cost to citizens of RStar at $20 billion. This assumes very low closure costs and may not take into account that the Premier has mentioned that for $1 spent on closure, a $2 tradable royalty credit might be made available. +

[10] Current proposal is called Liability Management Incentive Pilot project – a $100 million cap on having a whirl at cleaning up the worst of the worst sites (4,300 flare pits) ultimately at taxpayer expense. Issue is: who should pay, well licensee as per law or citizens?

[11] There are some $40-$70 billion in ultimate cleanup costs required if no more wells are drilled in Alberta. Want to open the floodgates of paying for this? Support RStar. Don’t want to pay? Support the status quo or tightening up of laws based on polluter pay principle.