Alberta’s Rockefeller Coups, Part 1: The ‘No-Lookback’ Deal

1989 ABQB 3232 p. 4, para. 24, p. 1, para. 6 (‘cabinet backing’); ERCB 1989a+b (‘regulator response to lower court’)

1989 ABQB 3232 Panamericana de Bienes y Servicios SA v. Northern Badger Oil & Gas Ltd. Court of Queen’s Bench of Alberta Reasons for Judgment #3232 (20 December 1989): 6pp

p. 4, para. 24: “Counsel for the E.R.C.B. opened his argument with this statement:

The real issue in this case is whether the costs of abandoning the wells shall be borne by the taxpayers of Alberta, or the creditors of Badger, who if not responsible for the costs of abandoning the wells will receive a windfall as a result of the failure of Badger and Vennard to comply with their statutory duties.”

p. 1, para. 6: “The Energy Resources Conservation Board,”the E.R.C.B.”, made an order 6th June 1989, amended on 14th June 1989, ordering the receiver to abandon seven oil wells at an estimated cost of abandonment of approximately $200,000. The orders are not mere board orders but are sanctioned by orders in council of the Government of Alberta. So that I have treated them as the law of Alberta. There is a potential for pollutants being released from the wells at some future time unless the wells are properly abandoned.”

ERCB 1989a Alberta Energy Resources Conservation Board “Recommendations to limit the public risk from corporate insolvencies involving inactive wells” (December 1989): 21pp (available from AER library for fee)

p. ii: Even years before Northern Badger was finally decided, regulators already knew how to solve the issue of leftover wells from bankrupt companies. Regulators’ December 1989 report put industry on notice: “The Department of Energy is considering changes to the Mines and Minerals Act to the effect that

a) the obligation to abandon a well or to reclaim the surface survives the expiration of the lease and the lessee shall indemnify the Crown for any costs associated with the abandonment or reclamation;

b) the transfer of a lease will not relieve the transferor of this obligation if the transferee fails to honor it;

c) there may be provision for the well to be abandoned within a set time after the lease expires.”

ERCB 1989b Alberta Energy Resources Conservation Board “Orphan wells: Well licence transfers” Informational Letter #89-22 (21 December 1989): 2pp (available from AER library for fee)

“The Board has been concerned about the orphan well problem for some time. It has been working with Industry and Government to examine this problem in detail and to develop new legislation, policies, and procedures to minimize the number of orphan wells in the future and thus the financial burden on both the public and industry. Although the major effort has been directed towards the development of new measures aimed at minimizing the number of orphan wells, the Board is also emphasizing increased surveillance and enforcement under the existing legislation.

In particular, the Board has taken a much firmer position in dealing with the requirements under section 18 of the Oil and Gas Conservation Act which requires that the Board consent to transfers of well licences. In cases where the proposed transferee has a proven operating record in the Province of Alberta, the transfer application would normally be approved in a routine manner. However, this would not be the case where transfers involve a party or company that is unknown to the Board or whose operating performance raises serious doubts as to the appropriateness of transferring additional wells into its custody. In these situations, the Board will seek information to fully satisfy itself that the transferee is aware of and capable of fulfilling all of its obligations and responsibilities under the Oil and Gas Conservation Act and the Oil and Gas Conservation Regulations.

Specifically, the Board will require the transferee to provide documentation respecting its ability to carry out the financial, technical, and operational responsibilities that it will assume as the holder of a well licence, Including the subsurface abandonment of the hell and reclamation of the well site. Documentation respecting the well abandonment requirement may include a written commitment to abandon the well or a commitment to a specific plan to ensure that adequate funds are in place to cover the sur ace and subsurface abandonment and reclamation costs when they are required in t e future. These requirements will be in addition to the Board’s normal requirements for a well licence transfer.

If a transferee fails to satisfy the Board with respect to its ability to assume the full responsibilities of a Licensee, then the Board will deny the transfer, even if a sale transaction has been completed. In these cases, the Board will advise both buyer and seller that the well application has wen denied and will instruct the exist continue its normal responsibilities for the well.”

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CICA 1990a+b & EJ 18/7/92c (‘accountants’); 1991 ABCA 181, CH 18/6/91 & CH 18/1/92 (‘appeal court’)

CICA 1990a Canadian Institute of Chartered Accountants “Section 3060: Capital assets” Revision #67 (October 1990): 10pp

p. 1141(5), para. 3060.40: “Provisions are needed to accrue the liability for future removal and site restoration costs, when the likelihood of their incurrence is established as a result of environmental law, contract, or because the enterprise has established a policy to restore a site, and when such costs can be reasonably determined.”

CICA 1990b Canadian Institute of Chartered Accountants “Full cost accounting in the oil and gas industry” Accounting Guideline (October 1990): 19pp

p. 1n1: “References to”estimated dismantlement and abandonment costs” have been deleted from paragraphs 28 (c) and 34 and references to “future removal and site restoration costs” have been included in paragraphs 45, 52, 57 and 59.”

EJ 18/7/92c “Big oil, big cleanup: Chartered accountants help lay groundwork for cleanups” Edmonton Journal (18 July 1992): G3

‘Since the end of 1991, the cost of restoring an oil well or gas plant site has to be factored into a firm’s annual financial statement as a liability. …In the past, companies figured the money they could get from salvaged equipment at a site was enough to cover the cost of cleanup, said [an accounting manager with Petro-Canada, Mike] Barkwell. …But the new accounting practices don’t stem from a burning desire to protect Mother Earth. Instead, it’s simply a matter of shareholders getting an accurate assessment of the value of their investment. “If you’re an investor, you want to know what the true financial picture is and if a company hasn’t put in the costs of abandonment…it won’t paint an accurate picture of the company,” said Howard Samoil of the Environmental Law Centre in Edmonton. “It’s natural evolution of the industry. These are the retirement activities. Like any responsible person sets aside money for retirement.” Recent court cases [Northern Badger] have also shown the environment comes before paying creditors and can even dig into the pockets of corporate bosses. …The lesson is executives must show they have specific plans in place to prevent environmental damage and they must deal promptly with any pollution problems.’

1991 ABCA 181 PanAmericana de Bienes y Servicios v. Northern Badger Oil & Gas Limited Court of Appeal of Alberta Reasons for Judgment #181 (12 June 1991): 20pp

pp. 7, 11, paras. 21, 33: “abandonment of oil and gas wells is part of the general law of Alberta enacted to protect the environment and for the health and safety of all citizens.” Those regulations bound all who became licensees of oil and gas wells, even in bankruptcy.

CH 18/6/91 Rick Pedersen “Ruling strengthens environmental laws” Calgary Herald (18 June 1991): E5

’The Alberta Court of Appeal reversed a lower court ruling which had given secured creditors such as banks first chance at the assets of a bankrupt company called Northern Badger Oil & Gas Ltd.

… Without this decision, “the provincial laws would not have been enforceable,” said ERCB lawyer Jill Page.

But the ruling could make it tougher for oil companies to borrow from banks, warns a lawyer on the other side of the issue.’

CH 18/1/92 Jeff Adams “Well cleanup will cost $4.5 billion” Calgary Herald (18 January 1992): C9

‘Alberta’s oilpatch has begun declaring a painful, $4.5 billion financial liability: the price tag for cleaning up the province’s 90,000 well sites. … 90,000 wells at $50,000 apiece means $4.5 billion … the Canadian Institute of Chartered Accountants has begun insisting that individual companies acknowledge their share of the costs. Their acknowledgments will be in 1991 annual reports to be released soon. One of the first companies to bite the bullet is Ranchmen’s Resources Ltd., which has cut shareholders’ equity by $6.2 million and earnings by $300,000. Price Waterhouse accountant Lloyd Godfrey noted the new rules don’t force companies to set aside actual cash for the eventual cleanups. But firms must begin allowing an amount from each well’s production revenue, or list the future costs as a current financial liability for the entire company. The first method means a drop in potential earnings while the second takes a slice out of shareholders’ equity. Either way, it’s bad news for shareholders. “It’s certainly going to hurt,” agreed [ERCB’s manager of drilling and production John] Nichol. “But that’s the oil and gas business. You can’t just drill wells and walk away from them.” … So many companies have walked that he said the ERCB is stuck with as many as 100 orphan wells for which no owner can be found. No owners means no one to pay environmental reclamation costs. The [ERCB], fearing more companies will try to escape their responsibilities, is awaiting passage of legislation later this year that will speed up the rate at which non-producing wells must be declared abandoned and then cleaned up. The new law, now in draft form before a government-corporate committee, will also begin assessing fees on owners of suspended or inactive wells, with the money going into a fund to pay for reclamation. … [“chief operating officer of Petroleum Financial Consultants Inc., a Calgary firm that estimates well reclamation costs for owners, buyers, lenders and insurance companies”, Donald] Bain said the Northern Badger case has highlighted the importance for banks and insurance companies of conducting environmental assessments before they lend money or underwrite drilling projects. The same goes for major investors and would-be partners. These assessments will show how much cleanup will be needed. The costs must be included in a well’s overall production costs when judging its economic viability. The higher the costs, the narrower the profit margins – and the sooner depleting production will result in shutdown. “Companies can’t go on producing, with no thought of the day of reckoning,” argued Bain, a former Canadian Imperial Bank of Commerce executive who helped put together the 1987 deal in which Hong Kong billionaire Li Ka-shing bought 43 per cent of Husky Oil Ltd. of Calgary. … “For any company that’s been burying its head in the sand, the new rules are going to hurt,” [Petroleum Financial Consultants President Charles] Dove said.’

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CBA 1991 pp. 9 & 13, EJ 18/7/92a+b+d, CH 5/9/92 & CH 17/11/92

CBA 1991 Canadian Bankers Association “Sustainable capital: The effect of environmental liability in Canada on borrowers, lenders, and investors” (November 1991): 18pp

pp. 9, 13: “In the event the polluter cannot pay, then the liability should be treated as a social cost. … [But] relief from direct liability risk would not relieve a lender from the credit risk caused by environmental liability. The lender must still contend with the possibility that a borrower may be a polluter and that cleanup obligations imposed on the borrower could cause the value of its security to be eroded or eliminated. The borrower’s cash flow may be insufficient to pay for cleanup and still service the debt. For this reason, lenders will undertake due diligence procedures whenever they have a concern that a borrower’s business may pose an environmental risk.”

EJ 18/7/92a Erin Ellis “Big oil, big cleanup: Mopping up after the oil boom” Edmonton Journal (18 July 1992): G1ff

‘Only two things seemed to matter during those glory days of the oil boom: getting it out of the ground and getting paid for it. No one worried too much about dumps of oil, drilling chemicals and sludges at the well site. Just bury it. Spills of oil and salt water were unpleasant, but considered a price of doing business. When reserves of conventional crude oil peaked at 1.2 billion cubic metres in 1968, environmental regulations in the oil business scarcely existed. …twilight appears to have arrived for Alberta’s conventional oilpatch… But the industry that laid the golden egg for Alberta is still treated differently from any other. Hazardous chemicals from the oilpatch don’t have to follow the same rules applied to similar wastes made by other businesses.’

EJ 18/7/92b “Thousands of inactive wells may pose threat” Edmonton Journal (18 July 1992): G3

In the past, an accounting manager with Petro-Canada explained to the Edmonton Journal ‘companies figured the money they could get from salvaged equipment at a site was enough to cover the cost of cleanup’. The Journal was quick to add, ’the new accounting practices don’t stem from a burning desire to protect Mother Earth. Instead, it’s simply a matter of shareholders getting an accurate assessment of the value of their investment.

“If you’re an investor, you want to know what the true financial picture is and if a company hasn’t put in the costs of abandonment … it won’t paint an accurate picture of the company,” said Howard Samoil of the Environmental Law Centre in Edmonton. “It’s natural evolution of the industry. These are the retirement activities. Like any responsible person sets aside money for retirement.”

… Recent court cases [Northern Badger] have also shown the environment comes before paying creditors and can even dig into the pockets of corporate bosses. …The lesson is executives must show they have specific plans in place to prevent environmental damage and they must deal promptly with any pollution problems.’

EJ 18/7/92d Don Thomas “Big oil, big cleanup: Putting an old oilfield out to pasture” Edmonton Journal (18 July 1992): G3

‘Reclamation was the least of drillers’ concerns when the field was developed in the late 1940s. There were no reclamation guidelines, and topsoil salvage wasn’t required until 1978. …Drilling fluids, garbage and some toxic waste such as lead-based pipe joint compounds went into sumps which were later filled in with no record of where they were. Persistent herbicides and other soil sterilants were used to keep sites weed-free and may remain in the soil many years. …Some oil companies try to make private sign-off cash deals with landowners who aren’t fussy about a proper job, says [Drayton Valley Surface Rights Association spokesman Carl] Zajes. It only postpones problems for the next landowner, he says. …Sampling of topsoil and subsoil for sterilant, brine, drill mud, hydrocarbons, garbage, salinity and sodium content may be required on some sites, say Conservation Council guidelines. But they say it’s only necessary to confirm suspicions from examining or smelling the soil. That puzzles Denise Maurice, a soils specialist with Alberta Agriculture. She has done research on reclaimed well sites with crop growth problems. It showed that long-lasting soil sterilants were to blame. A lack of weeds indicates that sterilants are the problem, but the only way to be sure is to test the soil.’

CH 5/9/92 Gordon Jaremko “New rules cracking down on industrial polluters” Calgary Herald (5 September 1992): B4

‘All the banks have implemented policies to assess environmental risks,” reports [Canadian Bankers Association] CPA commercial affairs director Brian Farlinger. “It would be inconceivable now that a lender wouldn’t want an environmental audit done.” … The private environmental policing stems from a string of painful lessons learned in court cases over pollution damages, Farlinger explains. … Cases that drive the trend include a recent one in Alberta’s Court of Queen’s Bench. [Northern Badger (1991 ABCA 181) ] … The [CPA’s new] guidelines set out a program that goes beyond holding environmental audits when new loans are made. The policy calls for lasting “diligence,” with loan agreements requiring regular pollution checks, guarantees by borrowers that they will keep their operations clean and commitments to repair environmental damage promptly. Every business borrower faces a check called a “phase one” environmental audit, including inspections and reviews of operations’ history. Any hints of trouble trigger “phase two” audits. These call out all the environmental troops to investigate soil, air and water conditions, then require repairs as conditions for granting loans. Businesses are taking the advice to heart.’

CH 17/11/92 Alan Boras “Industry confronts task of burying its past” Calgary Herald (17 November 1992): A11

‘Cleaning up the wastelands of Canada’s oil and gas industry – 200,000 abandoned and spent wells, gas plants and refinery sites – will cost an estimated $5 billion. Albertans’ share is about $1,600 each, a bill no one knows who will eventually pay. Known in the oilpatch as decommissioning and reclamation of small oil and gas sites, it’s an environmental problem that’s attracting booming attention. Organizers had expected 80 to 100 people at a one-day seminar Monday sponsored by the Canadian Association of Petroleum Producers. But more than 320 showed up, paying $187.25 each to uncover opportunities on how to reduce costs of shutting down wells that no longer produce oil and gas. “The interest is phenomenal,” said Darrell Chollak, chairman of the association’s decommissioning task force. It recently released a comprehensive report on how to meet provincial environmental guidelines and clean up polluted land and tear down unused facilities. …older sites, built and operated before anyone worried about environmental damage, could prove to be great problems. There are potential risks for every corner of the industry, including legal liability of company directors and financial risk for banks which lend millions to petroleum companies. …the petroleum industry… doesn’t appear to have the cash on hand. …“There’s a lot more work that has to go on. I think the doors are now open for government, industry and the public to get together to start resolving some of the issues, such as who’s going to pay,” Chollak said.’

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Martin 2002 pp. 95 & 101; LofP 1992 p. 2

Martin 2002 Don Martin King Ralph: The political life and success of Ralph Klein Toronto: Key Porter 2002

pp. 95, 101: “Environmental concerns were rising to the top of the polls in the late 1980s … With the environment rated the top concern in public opinion polling, in 1989 …”

LofP 1992 Richard Domingue “The greening of the economy: Repercussions on financial services”](https://publications.gc.ca/site/eng/9.610509/publication.html) Library of Parliament Research Branch Background Paper #BP-307E (September 1992): 10pp

p. 2: “In the late 1980s, Canadians said that the environment was one of their main concerns. According to a [Centre de Recherches sur l’Opinion Publique] CROP survey published in June 1989, 85% of Canadians stated that they were prepared to pay more for environmentally friendly products. At the same time, people began to focus on the quality of life. In addition, according to the CROP survey, 88% of Canadians said they felt that public health was affected by pollution, 73% of respondents stated that pollution was a major cause of cancer, and 81% considered that pollution problems threatened the survival of the human race. … The media contributed a great deal to the dawn of new values by regularly reporting on environmental disasters …”

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EJ 18/7/92b [see endnote 3]↩︎

ERCB 1989a p. ii [see endnote 1]↩︎

CH 10/1/90 (‘enviro rewrite’); CICA 1990a+b (‘full-cost accounting’) [see endnote 2]; EJ 21/10/90 (‘Schindler’)

CH 10/1/90 Mike Lamb “Ecological overhaul called long overdue” Calgary Herald (10 January 1990): A1ff

’Klein on Tuesday unveiled his plans for umbrella legislation to be known as the Environmental Protection and Enhancement Act. He outlined two years of public and government debate that will lead to a new, improved single piece of legislation in place of 11 separate acts.

But environmentalists are concerned changes will come too slowly or will be poorly enforced.

“It’s long overdue, especially when you consider the government reviewed and supposedly improved environmental enforcement two years ago,” said Brian Staszenski of the Environmental Resource Centre, an Edmonton- based private watchdog agency.

“The question is: will the cabinet allow the Department of Environment to become the environmental advocate that most Albertans want it to be?”’

EJ 21/10/90 Erin Ellis “Environment bill still murky, both sides agree” Edmonton Journal (21 October 1990): A8

“It’s exactly as I thought it would be. It’s set up totally to give the minister control over everything,” said David Schindler, a University of Alberta zoology professor.

“That isn’t what people in this country want. They want some laws they can count on for protecting the environment, not some regulations which political hacks can bend whatever way they want to bend,” said Schindler, a member of the environmental assessment review panel which examined the Alberta-Pacific pulp mill project planned for the Athabasca River.

Alberta’s draft environmental protection and enhancement legislation currently under public review will combine the existing Clean Air and Clean Water acts with seven other laws to create one piece of legislation. Environment Minister Ralph Klein plans to introduce the proposed law during the spring sitting of the legislature.

… “Ministers in our current system are simply above the law,” said Schindler.

… final details of new rules aren’t on the table yet …’

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1991 ABCA 181 pp. 7 & 11, paras. 21 & 33 [see endnote 2]↩︎

CH 13/6/91

CH 13/6/91 Anthony Johnson “Klein vows tougher penalties” Calgary Herald (13 June 1991): A3

’A Peace River pulp mill has been fined $75,000 – the largest environmental fine ever levied in Alberta – after pleading guilty to six charges of pollution.

And Environment Minister Ralph Klein is promising still stiffer penalties for polluters under new environmental legislation expected within days.

… “There’s a fundamental question here, and that is the question of how much polluters will have to pay now and in the future,” said Klein.

“I think the courts have demonstrated that the offences of pollution are very, very serious offences and they ought not to be taken lightly.”

… Klein said the prosecution is evidence the province is committed to fighting polluters.

The Japanese-owned bleached kraft mill near Peace River, 800 kms north of Calgary, started operations in July.

… Klein … promises the long-awaited tougher environmental legislation within 10 days …’

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CH 22/6/91

CH 22/6/91 Don Braid “Klein’s big bill drags on too long” Calgary Herald (22 June 1991): A3

’His big environment bill was supposed to be ready last year, then by this April 15. It finally limped into the legislature Thursday, June 20 …

Environment department officials had to mount a mammoth effort just to finish it before the session ended. “They were literally working 24 hours a day in the department for the last month,” said one government source.

Klein’s exhaustion and testiness showed. On Thursday he gave opposition members a couple of sarcastic bows when he was leaving the House. The Liberals went nuts, two of them got kicked out and the bill was nearly lost in the grandstanding.

It happened again Friday, as Speaker David Carter turfed Liberal Leader Laurence Decore for calling Klein “the honorable mousy minister.”

… Amazingly, it’s still open to revision and amendment even though it has already gone through two major changes.

… Klein regards this [proposed] whistle-blower provision as some kind of communist plot …’

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CH 18/1/92 Jeff Adams “Well cleanup will cost $4.5 billion” Calgary Herald (18 January 1992): C9

‘Alberta’s oilpatch has begun declaring a painful, $4.5 billion financial liability: the price tag for cleaning up the province’s 90,000 well sites. … 90,000 wells at $50,000 apiece means $4.5 billion … the Canadian Institute of Chartered Accountants has begun insisting that individual companies acknowledge their share of the costs. Their acknowledgments will be in 1991 annual reports to be released soon. One of the first companies to bite the bullet is Ranchmen’s Resources Ltd., which has cut shareholders’ equity by $6.2 million and earnings by $300,000. Price Waterhouse accountant Lloyd Godfrey noted the new rules don’t force companies to set aside actual cash for the eventual cleanups. But firms must begin allowing an amount from each well’s production revenue, or list the future costs as a current financial liability for the entire company. The first method means a drop in potential earnings while the second takes a slice out of shareholders’ equity. Either way, it’s bad news for shareholders. “It’s certainly going to hurt,” agreed [ERCB’s manager of drilling and production John] Nichol. “But that’s the oil and gas business. You can’t just drill wells and walk away from them.” … So many companies have walked that he said the ERCB is stuck with as many as 100 orphan wells for which no owner can be found. No owners means no one to pay environmental reclamation costs. The [ERCB], fearing more companies will try to escape their responsibilities, is awaiting passage of legislation later this year that will speed up the rate at which non-producing wells must be declared abandoned and then cleaned up. The new law, now in draft form before a government-corporate committee, will also begin assessing fees on owners of suspended or inactive wells, with the money going into a fund to pay for reclamation. … [“chief operating officer of Petroleum Financial Consultants Inc., a Calgary firm that estimates well reclamation costs for owners, buyers, lenders and insurance companies”, Donald] Bain said the Northern Badger case has highlighted the importance for banks and insurance companies of conducting environmental assessments before they lend money or underwrite drilling projects. The same goes for major investors and would-be partners. These assessments will show how much cleanup will be needed. The costs must be included in a well’s overall production costs when judging its economic viability. The higher the costs, the narrower the profit margins – and the sooner depleting production will result in shutdown. “Companies can’t go on producing, with no thought of the day of reckoning,” argued Bain, a former Canadian Imperial Bank of Commerce executive who helped put together the 1987 deal in which Hong Kong billionaire Li Ka-shing bought 43 per cent of Husky Oil Ltd. of Calgary. … “For any company that’s been burying its head in the sand, the new rules are going to hurt,” [Petroleum Financial Consultants President Charles] Dove said.’

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CBA 1991 pp. 9 & 13 [see endnote 3]↩︎

Nichol 1991; Well Licence Subcommittee 1992

Nichol 1991 John R. Nichol “Orphan wells: Who is responsible, for how long, and at what cost?” Canadian Association of Drilling Engineers/Canadian Association of Oilwell Drilling Contractors Spring Drilling Conference (Calgary: 10-12 April 1991) Paper #91-30: 6pp (finally available from AER library for fee)

pp. 1-4: “For the last three years a joint task force composed of representatives from industry … and the financial community have been reviewing the question of responsibility for wells in general, with a view to reducing the number of orphan wells and the associated cost to the people of Alberta. This paper reviews the history of this work.

… Clearly, if the people of Alberta were going to have to pay some significant amount toward solving this problem, they would look to the Board to develop stricter abandonment and suspension regulations to permit it. But as regulators, we are well aware that regulation is not always the most efficient way of getting things done.

… ERCB … philosophical approach … motivated by … the large companies selling properties (low producing wells) to stripper operators that may produce them to their economic limit … but who then may be unable or unwilling to abandon the wells properly. That could result in those wells becoming a public liability.

… Another of the Board’s objectives with respect to the suspended/inactive well population was … to reduce the number of wells in this category, particularly those wells that have no potential or remaining asset value … and that should be abandoned now rather than be left sitting until they become orphans.

… There has been an increasing number of well blowouts or uncontrolled flows associated with suspended/inactive wells over the last few years”

Well Licence Subcommittee 1992 Well Licence Criteria Subcommittee “Specific criteria to be applied by the ERCB when a well license is issued or transferred” DRAFT (18 November 1992): 46pp (Available again from the AER library, which temporarily denied its collection included this report or anything related to Nichol 1991. {7 January 2022 correspondence w/ “Lisa” InformationRequest@aer.ca})

p. 6: “At a meeting held on 17 January 1991, certain principles were advanced as a basis for a program to address the abandonment of wells. The basic principle advanced was that an Abandonment Fund would be established by industry to pay for the share of downhole abandonment costs of insolvent or non-existent well licensees and working interest owners in a well.”{see Yewchuk & Wray 2022}

pp. 1, 7: “An increasing number of corporate insolvencies, bankruptcies and reluctant licensees, coupled with rationalization activities that are shifting assets between different sectors of the industry, are all contributing to growing fears of unmanageable future abandonment problems if issues are not addressed now. … The number of transfer applications that appear to be an attempt to avoid abandonment responsibility, have increased in the past several years. … The licensee profile has changed rapidly over the past 12 months. There is an increasing number of new licence applicants who are relatively unsophisticated in the industry, with limited understanding of the obligations and risks associated with holding a licence. … An increasing number of licence applicants have inadequate financial resources to meet future well-abandonment liabilities. In many cases, the applicant does not recognize that such a responsibility exists. … In a number of recent cases, well-licence transferors have disposed of valuable assets, leaving only liabilities within a corporate shell and thereby generating future orphan wells. … There is an increasing incidence of new licence applicants who have a previous record of corporate deficiencies, both within direct and associated companies. Deficiencies include failure to respond to ERCB directives, unpaid surface/mineral lease rentals, etc.”

Yewchuk & Wray 2022 Drew Yewchuk and Chris Wray “How is the Orphan Fund Levy set? Alberta’s oil and gas clean-up costs in 2022” ABlawg (17 March 2022): 9pp↩︎

CH 18/1/92 [see endnote 2]↩︎

Schumacher 1993; Stewart 1997; Morton 2013

Schumacher 1993 Stan Schumacher in MLA Paul MacEwan, MLA Stan Schumacher, MLA Tony Whitford, MLA Gary Farrell-Collins, MHA Len Sims, and MLA Doreen Hamilton “Reforming the leadership convention process: A roundtable discussion” Canadian Parliamentary Review v16#3 (Autumn 1993): 7-9

p. 7: “The evolution of the leadership selection process can be divided into three phases. The first phase was in the early post-Confederation period. The selection of the national party leaders was modelled after British practices. … The formal selection of the Prime Minister, and consequently the Leader of the governing party, was seen as the prerogative of the Governor General.

Eighteen ninety-six is an important year in Canadian party politics. … For the first time in Canadian history, “The governing party asserted with some success a claim to choose its own leader independent of Vice-Regal wishes.

… The second phase of the leadership selection began with the election of Mackenzie King as Liberal leader at a national convention in 1919. For the first time, the extra-parliamentary wing of a national party played a pivotal role in the selection of a leader. …

In 1927, the Conservative Party held a national delegate convention to elect Richard Bedford Bennett as leader. Since then, national conventions have been used to select national party leaders. …

The national convention was adopted to ensure that the party’s extra-parliamentary wing had greater participation in important party activities …

The move to having national leadership conventions as television events represented the third phase in the evolution of leadership politics. The 1967 Progressive Conservative convention, which saw the election of Robert Stansfield as leader, was the first to be nationally televised.

… Elaborate constituency mobilization and organization techniques have become critical to effective leadership campaigns.”

p. 8: “Recent leadership conventions have become highly controversial on two fronts. First, the practice by campaign organizations and special interest groups of paying party membership fees to recruit instant party members who help elect sympathetic delegates of slates of delegates has undermined the integrity of the leadership selection process.

The second controversial dimension of the selection process is the cost and financing of recent leadership campaigns. Large sums of money and resources are now needed by the campaign organizations for leadership contestants to mobilize support and to ensure the selection of delegates.

Several provincial parties have [begun] … selecting their leaders through direct election by all party members in good standing. … Parti Québécois … in 1985 and 1987. … Progressive Conservatives in Prince Edward Island in 1987 and in Ontario in 1990. The Liberal Party of Canada at its 1990 national convention adopted a policy resolution that supported the direct election of its next leader.

In Alberta, the Conservative Party leader, Premier Ralph Klein, was elected through direct election process in December 1992. Amendments to the Alberta Conservative Party constitution were adopted in April of 1991 at our annual convention.

The events that led to the adoption of a direct election process may be traced back to the 1985 leadership convention. …”

pp. 8-9: “In the 1985 leadership convention, 2,000 members participated as delegates and 63,500 memberships were purchased. In contrast, the 1992 leadership contest, over 52,000 votes were cast in the first ballot and over 78,000 in the second ballot one week later. In total, 120,000 memberships were purchased, in stark contrast to the 12,000 memberships sold to the Conservatives in Ontario.

Unlike the Ontario Conservative Party, which set a cut-off date of almost two full months prior to the election date, Alberta party memberships could be purchased up to the date of the second ballot. In fact, the could be purchased right in the polling place. In Alberta, almost 30,000 memberships sold between the first and second ballots … One party official with whom I spoke pointed out that memberships sold between the first and second ballots represented the parties’s profit margin of $150,000 on the exercise.

More important, the 120,000 party memberships sold is the highest number in Canadian history. Moreover, the leadership race in Alberta was indeed a race. On the first ballot, only one vote separated the first and second place candidates. Ralph Klein went on to a landslide victory by a margin of almost 15,000 votes on the second ballot.”

Stewart 1997 David K. Stewart “The changing leadership electorate: An examination of participants in the 1992 Alberta Conservative leadership election” Canadian Journal of Political Science v30#1 (March 1997): 107-28

pp. 107-8, 112: “the only Canadian example of an all-member vote. Admittedly, the Conservatives have governed Alberta for more than two decades … thus important to keep in mind that the party was choosing a new leader at a time in which opposition parties maintained a strong presence in the provincial legislature and when many pundits were predicting that the Conservatives would lose the next election. When the Alberta Conservatives chose their new leader in December 1992, the continuation of their dynasty was very much in question and Alberta politics were uncharacteristically competitive.⁷ … many of the concerns raised by critics of the universal ballot are confirmed by the Alberta experiment …

⁷ Keith Archer has demonstrated that recent Alberta elections have seen a decline in the level of support for the government, and that much of the one-party dominance in the province stems from electoral system distortion. See Keith Archer, “Voting Behaviour and Political Dominance in Alberta, 1971-1991,” in Allan Tupper and Roger Gibbins, eds., Government and Politics in Alberta (Edmonton: University of Alberta Press, 1992).

… This study uses a survey of second-ballot voters in the 1992 leadership election to compare universal ballot voters with delegates to the 1985 Alberta Conservative leadership convention.²¹ …

²¹ Information on participants in the process was obtained from a survey of second-ballot voters. Using lists provided by the party, second-ballot voters were identified and surveys were sent to 2,728 of the more than 78,251 voters. A total of 943 usable responses were obtained, and these respondents proved quite representative both in terms of reported vote and region of residence. A systematic sample stratified by constituency was drawn from party lists. Additional information on the sample design is available on request. The survey was funded by a grant from the Central Research Fund of the University of Alberta and could not have been carried out without the support of the Progressive Conservative party of Alberta and the invaluable assistance of Brenda O’Neill.”

pp. 112-17: “The 1992 Conservative leadership election marked the first use of the universal ballot to select a leader in Alberta. In 1985, when Peter Lougheed retired, Don Getty was elected leader at a traditional leader- ship convention preceded by fierce competition among the candidates at delegate selection meetings. The negative publicity surrounding these gatherings and the anger expressed by party activists prompted the party to change its constitution in order to allow all members to vote directly for their leader. [citing Schumacher 1993p. 8] … There were no deadlines or cutoff points for obtaining a membership.

The rules for candidates were also minimal. … The candidates were allowed to purchase memberships in bulk from the party and to resell these memberships to possible voters.

More than 230 polling stations were set up across Alberta including at least one in each constituency. Individuals could purchase memberships and vote at any of these polling stations. …

… The polls were open on successive Saturdays from 9:00 a.m. until 7:00 p.m. and voters were required to present both a membership card and picture identification as well as to sign a registration card declaring their eligibility to vote (and that they had not previously voted). …

… A substantial proportion of the voters who made the ultimate choice of leader had very little background in the Conservative party and only marginal involvement in the campaign.

… Only 5 per cent of these voters had ever held an elected party position and fully 55 per cent of them joined the party for the first time in the year of the vote. Indeed, a full one third took out their memberships on election day (22% on the day of the first ballot and 12% on the day of the second ballot). More significantly, a majority of the participants (55%) admitted to joining the party just to vote for the new leader! … Not only did the 1992 voters possess very shallow roots in the Conservative party, few of them indicated that they wished to be involved more heavily. Only 26 per cent of the voters said that they planned to work for the party in the next election and the same percentage did not expect to vote Conservative provincially.

Ties to the federal Conservatives were less common than in 1985. … Almost 40 per cent of the voters who held a federal party membership belonged to the Reform party. …

… The relatively high proportion of Reformers who participated in the selection of a provincial Conservative leader becomes even more striking when one notes the number of Reform members in Alberta. Flanagan reports that on April 8,1992, there were 45,488 Reform party members in Alberta. Using the 78,251 second-ballot voters as a base, it appears that roughly 25 per cent of Reform’s 1992 Alberta membership voted in the provincial Conservative leadership race. This suggests that creating an opportunity for federal Reformers to participate in the activities of the provincial Conservative party was an astute strategic move that kept open a provincial home for thousands of Reformers.³²

³² It is possible that the level of Reform supporters’ participation in the leadership process is underestimated by this study. … It seems likely that a significant number of federal Reformers might have decided not to vote on the second ballot when their preferred options were no longer available.”

Morton 2013 Ted Morton “Leadership selection in Alberta, 1992-2011: A personal perspective” Canadian Parliamentary Review v36#2 (Summer 2013): 31-38

p. 31: “Ted Morton is a Professor in the School of Public Policy and the Department of Political Science at the University of Calgary. A former member of the Alberta legislature and Cabinet Minister he was an observer of the 1992 leadership race and a candidate for leader in 2006 and 2011.”

pp. 31-32: “The 1991 leadership reforms can best be described as creating what the Americans call an”open primary.” Not only is it based on the one-member, one-vote principle, but the membership requirement is essentially “open”. That is, there are no pre-requisites such as prior party membership or cutoff dates for purchasing a membership. Memberships can be bought at the door of the polling station on the day of the vote for $5. The system allows for two rounds of voting.

… Outsiders win, Establishment favourites lose

This is the most obvious consequence of the new leadership selection rules. … In the 1992 leadership, Edmonton MLA and Cabinet Minister Nancy Betkowski was beaten by Ralph Klein, the former mayor of Calgary. Betkowski had a long history with the Party and substantial Cabinet support. Klein was a relative new-comer to the Party. While Klein had the support of many back-benchers, he was not endorsed by a single Cabinet minister. Klein campaigned against Betkowski by labeling her as “part of Tory Establishment.” In the first round of voting, Klein surprised Betkowski by tying her, each receiving 31% of the votes. Cabinet Minister Rick Orman was a distant third with 15%, and withdrew, endorsing Betkowski. Indeed, six of the seven defeated first-round candidates endorsed her. These endorsements notwithstanding, Klein buried Betkowski in the second round of voting, 59% to 40%. The number of “new” voters surged by over 35,000, and they supported Klein by a large margin.”

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