A Double-Barrel Blast at Whitecap Resources Inc. and its Welfare-Promoting CEO
Methane Emissions of Predecessor Make Liquidity Subsidies Critical for Whitecap
Mark Dorin. Member of the Polluter Pay Federation Steering Committee and ALDP Member
On April 17, 2020 many eyes were on Canada’s Prime Minister as the federal government announced a number of funding programs aimed at “job creation” in response to the oil and gas sector and industry problems exacerbated by Covid 19. The CEO of Whitecap Resources Inc., Grant Fagerheim, was quick to condemn the federal measures as not enough (from his myopic industry perspective). He was quoted in a number of newspapers and appeared via video link on the CTV National News, including the National Post, as follows:
I don’t think there’s a full appreciation and understanding of the severity of what we’re dealing with, Fagerheim said of the Liberal measures
I am quick to condemn Fagerheim and for good, factual reasons. Lisa LaFlamme of CTV and other media personalities and journalists should know the true facts related to the character of those being interviewed on national television or for major printed publications, and should do some follow up stories, particularly on “methane emission” issues.
Ironically, I told one of Fagerheim’s right hand men that Whitecap needed to understand the severity of what it was dealing with in 2012. Whitecap was about to acquire a company named Midway Energy Ltd., which company had previously arranged for a tiny company owned by a welder, named Camino Industries Inc., to create a subsidiary and transfer most of its “assets” into the subsidiary.
Midway acquired all the outstanding shares of Camino and in the process the mineral rights and a related well, which was said to be “abandoned” but in reality was not, within urban lands owned by my family.
I called Gary Lebsack, land manager of Whitecap, and asked him if he knew about the incredibly massive liabilities of Camino and ongoing proceedings before the Surface Rights Board between Midway and my parents (the surface landowners). Mr. Lebsack stated he was unaware, but that he would appreciate being informed. I brought him up to date.
In some ways, Fagerheim is a bit like my colleague and friend Regan Boychuk, lead researcher for the Alberta Liability Disclosure Project (ALDP). Both are very well spoken men, who provide the type of great soundbites the mainstream media needs to sell ads, but that is where any similarity ends. When it comes to honesty and taking a broad view of societal needs rather than simply being concerned about how the pockets of industry executives get lined, Boychuk is by far the greater man of the two. In my view, Fagerheim is little more than an extreme danger to society and the shareholders of the company he runs. Boychuk is as informed as anyone – and speaks out – on why insolvent oil and gas producers like Whitecap are nothing but a danger to society.
One of the federal funding programs announced on April 17, 2020 is designed to reduce “methane” emissions. It was primarily those emission liabilities of Midway (I more accurately call emissions illegal natural gas venting), that I informed Lebsack of Whitecap about in 2012.
However, my advice given to Lebsack, which was to turn and run away from all things Camino – not to put a dog in the fight between my family and Midway – was ignored.
Whitecap acquired Midway against my advice, whereby Whitecap’s inevitable fate was sealed in that reckless moment. Fagerhiem has simply failed to disclose this to the public, which I believe he is required to do by law pursuant to securities law requirements (Fagerheim runs a reporting company meaning Whitecap shares are traded publicly).
Because of the actions of Midway, this company was already worthless before its shares were acquired by Whitecap – Midway had a lot more liabilities than it had assets by a long shot, which is the common industry problem, in this instance for unique reasons that directly involved me. Midway should have paid Whitecap to take over its massive liabilities.
Whitecap paid a lot of money for the shares of Midway (I believe the price was $500 million). Midway, led by its CEO Scott Ratushney, had acquired a few tiny companies or their operations including the Camino subsidiary, and had packaged them up for sale to Whitecap for a huge profit. Whitecap (including as Midway) was part of a fracking boom bubble – essentially a ponzi scheme that has overtaken North America for some time – this bubble now burst by Russia and Saudi Arabia in parallel with Covid 19. Fagerheim and friends must know this.
Camino owned a couple of dozens wells that it had acquired for $1.00 each many years earlier (indicating something much closer to their true value).
When Fagerheim complains that the industry Whitecap is a part of needs $15-$30 billion to address a liquidity problem, he is not kidding. Continuation of his large salary and bonuses absolutely depend on subsidy, loans and share capital injections, including from AIMCO. Just why the public should bail companies who are run by dishonest folks like Fagerheim, who line their own pockets with millions of dollars while begging for public bailouts, is never explained.
It is my impression that an outfit called Progress Alberta, made up of folks unlike Fagerheim who actually care about Alberta’s future, will soon inform the public about the scandalous decisions being made by AIMCO and what the executives of companies AIMCO invests in and lends money to actually make.
At the time that Camino acquired some twenty wells in the Olds Didsbury area of Alberta, there were rules about flaring natural gas produced by oil wells. When the ratio of produced gas compared to oil (Gas/Oil Ratio or GOR) rose above a given level, one as a producer either had to shut the well in, or implement a means of “gas conservation”, an alternative to wasting the gas by burning it or by flaring. The wells Camino acquired for $1.00 each were all shut in for by reason of high GOR.
Of course the GOR of a well cannot be calculated without accurate measurement of both the oil and the gas produced, where such measurement has long been law in Alberta. But Camino’s sole shareholder, a welder, didn’t care – he had an illegal-but-inventive strategy to make money, and make money he did as recorded by records now maintained by the Alberta Energy Regulator.
I believe that Midway paid about $6 million dollars for some twenty worthless Camino wells, on the basis that there was oil left in the Cardium B formations. Midway felt this remaining oil could be extracted through hydraulic fracturing. This was a foolish assumption, because the “Cardium B” solution gas reservoirs surrounding these Camino wells had obviously been depressurized to such a degree that even fracking would be uneconomical and fruitless. Camino made absolutely sure that publicly and perhaps privately owned minerals were rendered unrecoverable in future.
Whitecap (including as Midway) executives were apparently unconcerned about this, which should greatly concern Whitecap shareholders now. It is also possible that its engineers performed no reasonable due diligence. At the time it was all about estimated reserves in place, pumping up stock values through acquisitions, related public announcements, and having a good relationship with merchant bankers who could also make a lot of money raising the capital to buy worthless oil and gas mineral leases and related so-called “assets”.
Former welder-turned law-circumventing-oil-executive Tim Reeves pulled the sucker rods out of his newly acquired inactive oil wells. He installed something called a plunger lift. Reeves bypassed the gas meters at each site, and blew down his new oil wells to tanks, including tanks in an urban area on my parents’ lands and those very close to residences of one of my other clients. This created huge, directional, intermittent gas plumes.
This also occurred at another site, where the tank was too close to railway tracks by law.
Surrounding all of these operations, large areas well beyond “well site” legal boundaries were rendered extremely unsafe by way of off-site gas in potentially explosive mixtures in air (about 5%-15% methane in air are the upper and lower explosive limits). There is a common sense reason that vented gas must be burned by law in Alberta (since 1971) – this reason is to mitigate explosion hazards and risks.
Camino’s Tim Reeve could not have cared less. It is not like he didn’t know that his actions were criminally negligent – indeed oilfield welders don’t survive long if they weld in hazardous areas where natural gas is mixed in air in explosive mixtures such as those he was creating “off-site” surrounding all of his wells.
In Alberta the holders of a profit à prendre, which is a right to gather minerals such as petroleum and natural gas, may obtain a well licence and either a “surface lease” agreement, or if the surface rights holder refuses to sign an agreement, an order granting right of entry issued by the Surface Rights Board (both instruments grant a “surface right of entry”).
A right of entry is a set of specific rights, outlined in the written instrument granting right of entry, to use a specific portion of a titled land parcel not owned by the person who has acquired surface rights pursuant to a profit à prendre for purposes associated with a well bore.
Of course these purposes do not include illegal gas venting, particularly of the frequency and magnitude like that at least some 19 Camino wells in the Olds Didsbury area. This specific portion is referred to commonly as “the lease”. By law, operators must keep all their substances within the legal boundaries of ‘the lease” (which is essentially the same as any portion of a titled parcel covered by a right of entry order). Failure to do so is deemed a trespass under the Surface Rights Act. Trespass and nuisance are torts – whereby Whitecap has been rendered worthless for many years without advising the public.
Camino did not keep its gases on site or within leased boundaries at its wells in the Olds / Didsbury area. Surface Rights Board members and Alberta Energy Regulator officials and executives know this – these facts have been repeatedly pointed out to them – but have done nothing despite many applications having been filed with both bodies. Alberta’s problems extend well beyond irresponsible oil and gas executives.
When my father reported extreme gas venting to the Alberta Energy and Utilities Commission on June 11, 1999, this regulator sent a field inspector named Joe Gormley to investigate. He found flare pit violations and had Camino agree in writing never to produce the well on my family lands again using the tank battery facilities installed on the site until a means of solution gas conservation was implemented. A month later Camino was in violation of what it agreed to with the regulator.
However, my parents were not told of this. Gormley filed the letter agreement he made with Camino in the Red Deer field office – gas venting facts never made it into the official Well Licence No. 65135 application file now maintained by the Alberta Energy Regulator.
In a certain regard, my parents may have long been unique among Alberta landowners who host energy activities on the surface of their land, which is no longer the case. When deciding and ordering compensation to be paid to them by Whitecap’s predecessors, Surface Rights Board members apparently forgot to consider ongoing damages and losses, of which there were and continue to be many (compensation for ongoing damages and losses is normally paid on an annual basis).
Tens of thousands of nameless, faceless, Alberta landowners are now in the same boat as my parents have been in for some forty-two years and counting: They are no longer compensated for the ongoing losses and damages they actually incur as required by Alberta law. This is because polluters like Whitecap and its predecessor Camino refuse to pay amounts to them as required by law. Whitecap and its industry friends are patently law breakers. These debts are not on their books. The federal government will contribute to this lawlessness if it provides funding to industry, without firm terms and conditions attached, pursuant to the begging of the likes of Fagerheim.
Back to Regan Boychuk and the ALDP. On April 8, 2019, during an Alberta election campaign, Regan asked me to host a press conference. Three fine Albertans, Regan, Dwight Popowich, and my mother Shirley Dorin, were to be the stars of this press conference show. It was one of the greatest honours of my life to do this for Regan. I accepted but I was very nervous about being able to keep it together.
A few weeks earlier I had also been asked to take a film crew to some oil and gas sites on behalf of the ALDP. The producers were intrigued by our conversations this day. Having the rest of the day free, they asked to videotape me telling some of my personal story and those of my family. My mother was also interviewed on film.
My personal story includes that the Alberta Energy Regulator has earmarked me as some sort of a monster – a terrorist of sorts. From the AER’s perspective, and I am sure from that of Whitecap executives including its misguided CEO Fagerheim, I am sure that I am viewed as a monster.
In the minds of some Alberta Energy Regulator employees, and those of industry, it is monstrous for someone like me to ask oil producers to operate legally and safely or to compensate those who are adversely affected when they fail to do so. These misguided folks believe lack of public safety and illegal use of land is somehow in the public interest. This is what I have done and all that I have done, for a very long time. The myopic “I Love Oil and Gas” movement shares this view. Having worked in the oil and gas industry for most of my life, I somewhat share this love; however, I love only SAFE and LEGAL oil and gas.
As I told Whitecap, if I am a monster, I am a monster of Whitecap’s own creation. I am a monster that will certainly take Fagerheim and his company, as well as the Alberta Energy Regulator, down by legal and peaceful means if they dictate that such are my only remaining options. To date, many by way of their own choices have ensured that I must continue down such a path.
Gas venting causes far more than greenhouse gas emissions. I am told by neurologists who diagnosed and treat my mother that it causes various diseases, particularly neuromuscular diseases. Parkinsons is one of them.
Mr. Tom Prilesly is a brilliant Alberta film producer, editor and ALDP member. I will give his subjects, who talk about Whitecap’s predecessor in the video below, where the Surface Rights Board has clarified that Whitecap is responsible for the actions of its predecessors, the last word associated with this piece: