December 2024
The energy industry has been a main driver of Alberta’s economy for many decades. Over time, this has led to an accumulation of infrastructure on the landscape–wells, facilities, and pipelines–in various stages of the life cycle–active, inactive, decommissioned, and reclaimed (see figure 1).
Ultimately, all infrastructure and energy development sites must be permanently and safely decommissioned, assessed, remediated if necessary, and reclaimed–activities otherwise known as “closure.” The costs and responsibility for closure–known as “liability”–rests with industry.
Figure 1. Stages of Closure
Liability is associated with all energy infrastructure regardless of where it is in its life cycle; however, close attention is paid to the amount of liability associated with inactive infrastructure because it is no longer generating income for a licensee to pay for its closure.
Historically, closure activity has not kept pace with the growth of inactive infrastructure, even during economically prosperous times. Between 2000 and 2010, there was significant growth in active wells due to drilling activity. As the number of active wells leveled off and began to decline, the number of inactive wells in the province continued to grow at 5% annually from 2000 to 2020.
Since 2020, the inactive well trend has reversed and continues to trend downward (see figure 2). This is a positive trend, but continued effort and focus are essential to maintain this trajectory.
Figure 2. Number of active and inactive wells, 2000–2023
Note: Data snapshots as of December 31 each year.
Historically, licensees focused on the closure of wells that had no production reported and wells that were recently inactive. In 2014, the AER introduced the Inactive Well Compliance Program (IWCP) to address the growing number of inactive wells that were not compliant with Directive 013 suspension requirements. Of the 31 000 noncompliant wells identified through the program, approximately 37% of them were decommissioned. This program helped shift industry’s behaviour towards decommissioning wells with production (see figure 3) and wells inactive for more than one year (see figure 4).
Figure 3 shows that 68% of the wells decommissioned between 2000 and 2013 had no reported production. These wells were typically drilled and decommissioned as per requirements with lower decommissioning costs. This trend shifted in 2014 when licensees began focusing on wells with production, where the decommissioning costs are generally higher. In 2023, 87% of the wells decommissioned had historical production.
Figure 3. Decommissioned wells by production, 2000–2023
Note: Data as of October 2024.
Figure 4 shows how long the wells were inactive prior to decommissioning. Historically, licensees focused on decommissioning recently inactive wells. In alignment with the introduction of the IWCP, industry started to focus on decommissioning longer-term inactive wells. Of the wells decommissioned in 2023, 40% were inactive for ten or more years. Approximately 36 000 wells inactive for ten or more years remain.
Figure 4. Decommissioned wells by years inactive, 2000-2023
Note: Data as of October 2024.
The following graphs identify the life-cycle status of wells from 2000 to 2023 (figure 5) and facilities from 2019 to 2023 (figure 6). (See Bulletin 2023-34 for more information on how we’re improving the quality of facility life-cycle status data.)
Tracking these trends over time will help monitor industry progress on closure obligations and industry’s management of their liabilities; the intent is to have timely movement of inactive inventory to being decommissioned and reclamation certified.
Figure 5. Number of wells by life-cycle status, 2000–2023
Note: Data as of December 31 of each year.
Figure 6. Number of facilities by life-cycle status, 2019–2023
Note: Data as of December 31 of each year. The decrease in inactive facilities in 2023 was a result of Bulletin 2023-34.
This is the first time we are introducing information on pipelines regulated by the AER into this report. For more information on what pipelines we regulate, see our pipelines topic on our website.
A pipeline licence is approved (“permitted” status) and then moves into operations (“operating” status). A pipeline status of “discontinued” corresponds to a well being inactive. When the pipeline status is “abandoned,” it has met the criteria for abandonment. Licensees apply to change the pipeline licence status as per the Pipeline Rules, and the AER then approves or denies the application based on relevant information. Figure 7 shows the total length of “operating” pipelines decreasing since 2016. In 2023, 60% of the pipeline length is “operating,” while 39% of the pipeline length is “discontinued” or “abandoned.”
Figure 7. Combined pipeline length in kilometres by licence status
Note: Data as of December 31 of each year.
