A $1-billion program to clean up orphaned and inactive oil and gas wells in Alberta will begin on May 1, focusing on sites where there is no one left to pay for the environmental reclamation.
Cash for the site-rehabilitation program, announced Friday by Alberta Premier Jason Kenney, comes from the federal government. The province estimates the grant-based program will put around 5,300 people back to work, but critics say it’s nothing more than a taxpayer-funded bailout of oil and gas companies.
Last week, Prime Minister Justin Trudeau announced $1.7-billion to clean up orphaned and inactive wells in Alberta, Saskatchewan and B.C.
In an interview with The Globe and Mail Friday, Alberta Energy Minister Sonya Savage said calls from oil service companies have inundated her office since Ottawa announced the cleanup cash, of which $1-billion was earmarked for an Alberta government program.
“There are so many companies that are in need of the work and are just looking for the next thing to do – anything – to keep their people employed,” she said.
Program grants will cover between 25 and 100 per cent of total project costs, depending on the ability of the oil and gas company responsible for the site to pay for cleanup. Up to $30,000 per site will be paid directly to the oil service company completing the work.
The first $100-million is earmarked for sites where cleanup costs will be completely covered by the government program.
It’s targeted at wells where the owners “don’t have two pennies to rub together right now,” Ms. Savage said.
The idea is to stop wells from languishing as environmental and economic liabilities, or falling into the already overstretched Orphan Well Association, which has 6,300 sites on its books.
Online applications for those projects will be open May 1 to 31. The next $100-million phase, rolling out May 15 to June 15, will focus on sites where oil and gas companies have shortchanged landowners on lease payments, leaving government on the hook to pay compensation under the Surface Rights Act.
Ms. Savage said priority will be given to sites where landowners have opted into the program.
The Alberta Energy Regulator has a list of all 94,000 inactive wells that qualify for the program. Contractors will consult that list, contact the owners of the sites they want to clean up and get their blessing. The contractor then applies for the government program.
Federal Natural Resources Minister Seamus O’Regan said in a statement that "critical remediation work that’s good for industry and for the environment is ramping up quickly – glad to see it.”
Mark Scholz, president and chief executive of the Canadian Association of Oilwell Drilling Contractors, applauded the program Friday and said the direct payment component is crucial.
Contractors usually pay all of their upfront costs, then invoice oil and gas companies, waiting up to 180 days for payment. But under the new program, contractors will get 10 per cent of payment once an application is approved and another 60 per cent after submitting interim invoicing. The rest is paid out after the work is done.
“That means our guys are going to be able to get revenue and cash into the till a lot quicker than they would have if they’d be working directly for a producing company,” Mr. Scholz said.
Critics of government-funded well cleanup argue that it lets companies walk away from their messes and environmental liabilities without penalty, but Ms. Savage countered that the site-rehabilitation program will be “life-saving” for countless oil service companies.
“You know, there’s going to be complaints like that, but in the face of a jobs crisis, I just don’t have any time for it,” Ms. Savage said.
“It's a job-creation program that has the added benefit of being an environmental program.”
But the Alberta Liabilities Disclosure Project (ALDP), an association of landowners, researchers, academics and environmental groups, called the program a direct attack on Canada’s polluter-pays principle.
“Provincial and federal law are clear: Industry, not taxpayers, must fund the cleanup of old oil and gas infrastructure,” said Regan Boychuk, ALDP co-founder and lead researcher.
Oil and gas companies owe more than $173-million in unpaid property taxes to Alberta’s rural municipalities.
“By releasing $1-billion in Canadians’ tax dollars as grants, not loans to industry, the Alberta government is bailing out oil and gas companies that have profited from our public resources, but now refuse to adequately fund their own cleanup," Mr. Boychuk said in a statement Friday. "In many cases, these deadbeat businesses have stopped paying municipal property taxes and compensation to farmers and ranchers.”
Mr. Scholz acknowledged the complications around a taxpayer-funded program, but said “taxpayers are getting a good return” on the program, environmentally and socially.
“We’re putting people that wouldn’t be working today back into the field, and those people are going to be paying income taxes,” he said.
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