This investigation is a collaboration between The Narwhal and the Investigative Journalism Foundation.

One of Canada’s largest oil and gas companies violated a deal it struck with B.C.’s energy regulator to address thousands of inactive pipelines in the province — and faced no financial penalties for doing so. 

Internal government documents obtained by The Narwhal and the Investigative Journalism Foundation reveal Canadian Natural Resources Ltd. (commonly called CNRL) failed to meet targets it proposed to the BC Energy Regulator to gradually deactivate more than 4,300 pipelines it operated across the province. 

Companies like CNRL operate thousands of short pipelines which connect natural gas wells — including fracking operations — to major pipeline networks. When the wells no longer produce gas, companies operating in B.C. are required to decommission pipelines within 18 months. The legal timeline is aimed at protecting the environment from leaks and damage as pipelines gradually decay. Deactivating a pipeline includes removing any fluid and disconnecting it from the system. The sealed-off pipeline will remain in the ground in perpetuity.

In 2020, the BC Energy Regulator found CNRL hadn’t deactivated thousands of pipelines and set out to get the company back into compliance with the law. CNRL proposed a detailed, multi-year plan for decommissioning its pipelines as part of an exemption from B.C.’s normal environmental regulations.

Under that plan, CNRL was to deactivate a targeted number of pipelines each year until 2028, with exact annual targets ranging from 398 to 544.

The regulator agreed and gave CNRL the extra eight years to get the work done. 

But in 2023, the regulator revoked CNRL’s exemption after learning the company “failed to deactivate the pipelines in accordance with the timelines set out in the plan,” according to the documents obtained under freedom of information legislation. The regulator later said in a statement that CNRL had failed to meet targets for three years in a row.

That led to the regulator issuing an order demanding CNRL clean up some of its pipelines. The company complied. The BC Energy Regulator then approved a second exemption for CNRL in 2024 and says the company is exceeding targets under that plan.

The regulator told The Narwhal and the Investigative Journalism Foundation in an emailed statement it did not fine CNRL (which posted gross revenues of more than $41 billion last year, according to its 2024 financial statements) because it did not deem it necessary to ensure the company got back into compliance. The regulator added it could still “pursue a contravention and the issuance of an administrative monetary penalty in the event CNRL does not meet its remaining deactivation requirements.” In early March, CNRL still had 865 pipelines to decommission, according to a previous statement from the regulator. 

It is unclear why the company failed to meet the requirements for deactivating its pipelines, including failing to follow its own plan. The company did not respond to multiple requests for comment made via email and over the phone. 

CNRL’s failure to deactivate pipelines is ‘consistent with a pattern’: legal expert 

The documents obtained by The Narwhal and the Investigative Journalism Foundation provide an inside look at the regulator’s approach to working with companies when they fail to follow the rules.

In March 2024, BC Energy Regulator vice-president Nicole Koosmann wrote to CNRL expressing concern that the company “failed to to complete the deactivation requirements under the initial plan” but said complying with the normal rules was “not reasonably practicable” given the thousands of pipelines that had to be shut down. 

“I am further satisfied that adherence to the targets and commitments set out in the updated plan remains the most effective and efficient way to achieve compliance with regulatory requirements and to minimize the risk associated with the remaining pipelines,” she wrote at the time. 

Koosmann’s letter to CNRL came after government officials discovered the company had “not met the targets for any of the years 2020, 2021 or 2022,” according to an unattributed statement from the regulator.

That led the regulator to invoke a clause in the agreement that rendered it null and void if the company failed to meet its end of the bargain. The regulator then issued a general order, forcing the company to deactivate hundreds of pipelines, and renewed the pipeline exemption. The spokesperson said it struck the second deal with CNRL in part because of the “public interest in having the pipelines brought into compliance more quickly with less land disturbance.”

(Until previous reporting by The Narwhal and the Investigative Journalism Foundation, exemptions like this were not publicly disclosed — the regulator has since started developing a publicly available database.)

Martin Olszynski, the chair in energy, resources and sustainability at the University of Calgary’s law school, said CNRL has a track record of being slow to clean up and deactivate its assets. As of June 2, the Alberta Energy Regulator reported CNRL holds more than 20,000 inactive wells in that province — or more than 25 per cent of Alberta’s inactive wells. 

“It’s consistent with a pattern that I’ve seen that this is a company that has a really hard time dealing with the backends of its assets,” Olszynski said.

‘What teeth does the regulator have?’

CNRL is now “exceeding their targets for pipeline deactivation” under the new plan, which would see the company shut down all of the pipelines by 2028, according to the regulator.

Olszynski said the BC Energy Regulator’s approach — ordering the company to comply but stopping short of a fine — could be perceived as soft. But he also pointed out it seemed to produce the desired effect of jolting the company into compliance. 

“The regulator has been pushing and pulling. It has used the power that it has to force these guys to do the work,” he said. 

The regulator also has a vested interest in maintaining a good relationship with the company, he added. 

“As a regulator, they’re not about bringing down the man,” Olszynski said. “Capitalism, that’s beyond their wheelhouse.” 

Jeremy Valeriote, the interim leader of the BC Green Party, said the lack of penalties highlights a cultural problem of the province’s regulators being too lenient with oil and gas companies.

“It begs the question, what teeth does the regulator have?” he said. 

The BC Energy Regulator, formerly the BC Oil and Gas Commission, is mostly funded by levies on companies that run oil and gas projects. The sector has been expanding in recent years as B.C. gears up to become a major exporter of liquefied natural gas (LNG). 

Valeriote said he worries the regulator is unwilling to confront companies that break the rules, and what that means as it takes on additional responsibilities. The B.C. government has been allocating extra powers to the BC Energy Regulator, including responsibility for overseeing renewable energy projects such as wind farms. 

“They need to prove to the public that they can fill the role, especially if they’re going into new areas and new sectors and they’re looking to build public trust,” he said.

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