Landowners challenge Alberta Energy Regulator over orphan well cleanup

Judicial review alleges AER failed to follow mandatory funding formula as orphan-well liabilities climb to $1.66 billion

A group of Alberta landowners and landowner organizations has asked the Court of King’s Bench to review the Alberta Energy Regulator’s 2026-27 Orphan Fund Levy, alleging the regulator failed to apply the funding formula required by law.

The application was filed on behalf of landowners Dwight Popovich and Teresa Patry, the Polluter Pays Federation and the Alberta Surface Rights Federation. Their lawyer, Suzanne Calabrese, told Energi Media that the case challenges the AER’s $154.56-million levy, which finances work by the Orphan Well Association.

Calabrese said Section 73(2) of Alberta’s Oil and Gas Conservation Act requires the regulator to set the levy using a cost-based formula covering the association’s annual cleanup and operating costs, prior-year deficiencies and necessary surpluses. The lawsuit alleges the AER has instead considered factors outside that formula and allowed government and industry considerations to influence the levy.

The case comes as Alberta’s orphan-well inventory continues to expand. Calabrese said the Orphan Well Association now faces about $1.66 billion in liabilities and roughly 7,300 wells. Since it was established in 2002, she said, the association has completed about 4,100 reclamation certificates.

The growing inventory is part of a much larger end-of-life liability problem in Alberta’s conventional oil and gas sector. The province has roughly 78,000 inactive wells, while bankruptcies can abruptly transfer large numbers of properties into the orphan system. Calabrese said a policy of increasing the levy only gradually cannot keep pace with those liabilities.

The burden can also fall directly on rural landowners. Popovich went eight years without a responsible operator on his property while a company moved through bankruptcy proceedings. After the site was finally designated an orphan, he was told reclamation could take another 10 to 12 years because of limited resources.

Calabrese said the lawsuit is fundamentally about the polluter-pays principle. Alberta generally does not require full upfront security for well cleanup, and only the current operator is responsible when a property changes hands. That makes the orphan levy the key financial backstop when an operator becomes insolvent.

The applicants are asking the court to send the levy decision back to the regulator and require the AER to recalculate it according to the statutory formula. If successful, the case could force substantially more industry funding into orphan-well cleanup and intensify the broader debate over who will pay Alberta’s mounting oil and gas environmental liabilities.