Alberta is changing how it calculates the payments oil sands companies make to ensure there’s enough money to clean up the mess they leave behind, after the sector was hit with an extreme drop in oil prices because of the pandemic.
The Mine Financial Security Program (MFSP) is one of many programs that are meant to ensure Alberta’s energy resources are developed responsibly. The interim change comes as the province reviews the program, but it’s not a break that oil companies have lobbied for.
Alberta’s liability management systems – or how it makes sure oil companies are responsible for their environmental impact – has come under fire in recent years.
A 2015 auditor-general report, for example, concluded that the MFSP needed improvements in how it calculated and monitored liability payments. It also found “significant risk” that MFSP calculations overstated asset values, and underestimated the impact of future price declines.
Government officials said at a media briefing Thursday that the extremely low oil prices of 2020 – which briefly dipped into negative territory – reinforced problems with the program’s formula.
Under the change announced Thursday, Alberta will no longer calculate payments based on a company’s environmental liabilities and its assets. Instead, the calculation will be based on a company’s revenue.
Tim McKay, president of Canadian Natural Resources Ltd., told The Globe and Mail his company has never raised concerns about the current MFSP. “I don’t think there’s been any issues that I know of,” he said.
But Lisa Fairweather, a spokesperson with Alberta Environment and Parks, said during the briefing that keeping the existing program would have cost the industry billions of extra dollars, even though the environmental risk of the mines hadn’t changed.
She said the overall goal of the change is to address the unanticipated impact of 2020 economic and market conditions on the program, but added it’s a temporary move until a complete review of environmental security payments is held this summer.
While the government says the change will have no impact on environmental obligations, critics worry it will erode the cleanup fund.
Nina Lothian with the Pembina Institute, an environmental think tank, told The Globe her organization has long been concerned that the MFSP doesn’t adequately protect Albertans from being left on the hook for environmental cleanup.
“The action announced today is actually further eroding what we already thought was weak protection,” she said.
Ms. Lothian said the program needs to be more stringent and transparent. Instead, she sees Thursday’s change as one where companies may end up paying less in liability amounts.
“That’s the opposite direction of what we’ve been advocating for,” she said.
The government says the MFSP review will include conversations with Indigenous peoples and other stakeholders.
Details on the review and engagement plans will be available in the coming weeks.
Jason Nixon, Alberta’s Minister of Environment and Parks, said the math of the existing program simply “doesn’t work if you have extremely low or negative oil prices, like we did in 2020.
“Instead, what we need is a long-term solution for the Mine Financial Security Program to better protect our environment and Alberta taxpayers,” he said.
- With a report from The Canadian Press
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