As we addressed here, Investors for Paris Compliance recently issued the report Accounting for the Canadian Oil & Gas Liabilities Gap.

We looked last time at some of the report’s observations on financial statement disclosure. Another of its findings is “a potential massive overall liability gap based on a leaked Alberta Energy Regulator (AER) estimate of liabilities. The 15 companies (the report examined the 15 largest Canadian oil and gas producers) report about $67 billion of liabilities in today’s market prices vs. their share of the AER estimate of $180 billion, a $113 billion gap, or 2.7 times what appears in their financials.”

Chris Hatch commented on this in a National Observer column:

• The numbers are huge, and incredibly difficult to pin down. That itself is testament to the captured regulators and wishful accounting that shrouds a true reckoning with the scale of the fossil fuel industry’s damages. Set aside the biggest costs — to human health, the impact on nature, and the wee matter of fossil fuelled climate disruption — we don’t even have clarity about the cost to clean up the industry’s work sites.
• …And, while the oilsands megaprojects loom large in the national imagination, there are also more than 466,000 drill sites spread across the landscape in Alberta…The problem of unplugged and “orphan wells” and aging drill sites has been growing for decades.
• … Independent researchers like Martin Olszynski, a professor at the University of Calgary agree that number is in the right ballpark. “There’s a trajectory that we’re on, and there’s no doubt in my mind that nothing about our current approach to this problem is moving us away from that trajectory. And that trajectory is for this all to fall in the public’s lap,” Olszynski said on a recent episode of the Energy vs. Climate podcast.
• The problem becomes worse under scenarios where the energy transition continues and oil demand levels off — i.e. the most likely set of scenarios, according to the International Energy Agency. If we see oil demand plateau or contract, the scale of liabilities will become even more relevant to a company’s valuation.
• …It becomes a double-barreled financial problem. If the liabilities are much higher than disclosed and companies can’t rely on bountiful cash flows to fund reclamation, the financial burden will fall somewhere. If the polluters don’t pay, you can only imagine who will.

The heralded $113 billion gap is, of course, a matter of significant estimation. As the report acknowledges, the total AER estimate of liabilities ($282.4 billion in 2025 dollars) has itself been subject to much debate (although if anything, it may be understated). Only six of the fifteen companies reported their decommissioning liabilities in today’s market prices; for the others, the preparers estimated that amount by applying an average costs to revenue ratio “based on the revenue and decommissioning costs data for the companies that did disclose their current cost estimates.” The preparers then estimated by comparison how much of the total AER estimate of liabilities ($282.4 billion in 2025 dollars) should be attributed to the fifteen companies, based primarily on the fact of the fifteen representing 64% of total production in Alberta in 2024. They emphasize that their methodology is if anything conservative, but still, there’s something ironic that a report about the inadequacy of financial reporting in this area makes its point in part by trumpeting a specific estimate of equal unreliability. Presumably, despite its limitations, the preparers considered it the best way of driving home the point.

The report provides a recent real-life example of the issue:

• Oil sands mines in Canada are already reaching the end of their reserves and operators must begin paying for closure costs, with little warning to investors. In late 2025, Alberta’s Mine Financial Security Program (MFSP), which ensures the closure of oilsands mines when they stop operating, collected payment from an oilsands operator for the first time in ten years. Syncrude was required to post $869 million in security for its Mildred Lake-Aurora North mines due to depletion of reserves. It is estimated that the MFSP will collect $10.7 billion for this site over the coming years. While it is unclear whether Syncrude and its owners (Suncor and Imperial are majority owners) were given much warning by the MFSP that they would have to start paying in 2025, it was not noted in either Suncor or Imperial’s annual financial reporting that payments were expected for Syncrude.

It calls this “just one story reinforcing the overall narrative that the oil and gas industry has, at a minimum, a decommissioning liabilities transparency problem.”  And it is indeed the overall narrative that’s the point. It’s certainly futile and wrong-headed to have excessive confidence in the amounts provided by the companies in their financial reporting, but that should have been known all along. As with so much else, those amounts and the accompanying disclosures are best taken as a starting point for skeptically informed consideration and assessment. For which the Investors for Paris Compliance report is more than useful…

The opinions expressed are solely those of the author.