Alberta Energy Regulator blocks sale of Shell assets over cleanup concerns

Alberta's energy regulator has cited cleanup concerns in blocking the sale of sour gas wells, pipelines and other facilities from an energy giant to a much smaller company.

In a decision released Thursday, the regulator said Calgary-based Pieridae Energy's attempted purchase of the southern Alberta assets from Shell Canada goes against the intent of environmental laws.

The issue was seen as a test case of the regulator's determination to avoid cleanup costs for energy facilities falling to the taxpayer.

In its written decision, the Alberta Energy Regulator said it wasn't happy with how the deal would have split the liability for cleaning up the sites, especially at a pair of gas processing plants. The terms of the sale would have had Shell responsible for existing contamination and Pieridae on the hook for future problems.

"The scope and extent of the contamination at the site is not well known and is not well described in the applications," the decision said. "To date, the contamination at the sites has not been fully understood."

Without knowing that, the regulator said, it would be impossible to know which company would have been responsible for what.

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The decision also said the company that made the mess should clean it up.

"Shell is the polluter," said the decision. "The ... applications appear to request that the AER, by way of approval, override or at least significantly dilute Shell's obligations.

"The AER is of the view that it cannot, by way of approval, carve up and redistribute fundamental regulatory obligations in a manner that is contrary to or inconsistent with (the law)."

The two companies agreed to the deal last summer. It involves 284 wells, 66 facilities and 82 pipelines in the southern Alberta foothills.

It came shortly after the regulator had promised a closer eye on such licence transfers to ensure purchasers are able to cover reclamation costs. At the time, Pieridae's market value was less than the price of the Shell assets and its stock value was less than a dollar.

The number of energy facilities left unreclaimed by struggling producers has boomed in recent years. As of May 14, Alberta alone had more than 10,000 unreclaimed wells, pipelines, facilities and sites.

In April, the federal government pledged $1.7 billion for such so-called orphan wells in Saskatchewan, Alberta and British Columbia, although they are supposed to be reclaimed by an industry-funded group.

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The energy regulator said the two companies were free to restructure their deal and try again to get the licence transfers approved.