The oil and gas sector in Alberta will be required to increase spending on cleanup activities to at least $700-million in 2023, as rural municipalities say that companies aren’t spending enough on remediation efforts, particularly as the industry enjoys record profits thanks to sky-high commodity prices.
The mandated increase comes as part of a program introduced by the Alberta Energy Regulator (AER) this year at the behest of the provincial government to overhaul the liability management framework for oil and gas wells.
In part, the change required oil companies to spend a specified amount each year on environmental cleanup – a number that will increase by about 65 per cent next year from the $422-million set by the AER for 2022.
The AER forecasts the mandated spend will jump to $992-million by 2027, though the regulator may revisit that number depending on commodity pricing, market conditions and recent industry spending on its cleanup efforts.
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AER president Laurie Pushor told The Globe and Mail this week that the industry has – for the most part – responded well to the new program.
“Companies have really embraced the notion that … Albertans expect them to do better,” he said. “But also, their financial realities are that they need to be attending to this like any other obligation.”
And while many large companies are already spending more than they’re mandated to under the program, Mr. Pushor said, the regulator is working with smaller producers or companies in financial difficulty “to try to work out something that isn’t going to jeopardize them going into receivership.”
Paul McLauchlin, president of Rural Municipalities of Alberta, told The Globe that putting more emphasis on cleanup is a positive step, but questioned whether the new targets are high enough. “There’s still a significant amount of unclean wells on the land.”
“You would think at a price point that we are right now with [strong] free cash flow, that would be a priority. Instead, what the priority for a lot of oil and gas businesses is, is share buybacks and dividends,” he said.
As those companies plow cash back to shareholders, Mr. McLauchlin said RMA members are still concerned about the hundreds of millions of dollars they’re owed in unpaid municipal taxes. That sum hit $250-million at the end of last year, according to the group – up 3 per cent over the previous year.
Mr. McLauchlin said he plans to raise the issue with the province’s new Energy Minister, Peter Guthrie, during their first meeting.
“This is a public-interest conversation,” he said. He added that it would take only a small regulatory change to tie a company’s ability to operate to payment of municipal taxes.
He has high hopes that the government will force the issue, he said, “because this starts to become a conversation of, ‘Seriously, how long can this go on?’”
Opposition Leader Rachel Notley told RMA members at their fall convention in Edmonton Wednesday that an NDP government would make legislative changes necessary to ensure companies pay their taxes.
“We cannot be in a situation where a quarter-billion dollars of taxes are owed, while folks are making record profits. That’s not fair,” she told media afterward.
“Ultimately, it’s a matter of where we need to roll up our sleeves and send a message very clearly to folks who are operating in the sector, that the expectation is that they’re going to pay their taxes.”
A January report from the independent federal Parliamentary Budget Officer estimated the cost of cleaning up orphaned Canadian oil and gas wells (those with no owner) at $1.1-billion by 2025. The Alberta Liabilities Disclosure Project, a group of landowners, researchers, academics and environmental groups, has pegged the price tag in Alberta alone at closer to $70-billion.
Mr. McLauchlin said he’d like the AER to be much more transparent about the true level of liabilities in the province, and whether there is enough oil and gas in the ground to pay for it.
“I don’t get that number at all. I’ve asked for it repeatedly from regulators and no one’s ever provided it. The calculation should exist,” he said.