A coalition of environmentalists and landowners pushing for more transparency around the more than 6,100 orphaned oil and gas wells in Alberta says any cleanup loans from the federal government must come with strings attached.
The federal government has repeatedly said financial help for the energy sector is on its way – “shortly,” Prime Minister Justin Trudeau said Tuesday. But concrete timelines and dollar figures are still unknown.
While Ottawa fine tunes a potential assistance package, the Alberta Liabilities Disclosure Project – a group pushing for accurate and transparent government data on orphaned wells and tens of thousands more that are inactive but still on company books – has implored the federal government to avoid using public dollars to reward “irresponsible” producers who walk away from their mess.
The oil and gas sector is struggling mightily, hit by crumbling demand as COVID-19 travel restrictions keep cars in driveways and planes on the ground around the world. The demand drop is compounded by an oil glut and historically low prices caused by a recent production war between Saudi Arabia and Russia.
Regan Boychuk, the group’s co-founder and lead researcher, told The Globe and Mail Tuesday the COVID-19 pandemic and resulting slowdown in crude production has presented Canada with an unexpected chance to push for structural change that should have happened long ago.
"It would be tragic to miss this opportunity to make progress on something that has been simmering for so long and can’t be ignored any more,” he said in an interview.
“But if it’s just done willy-nilly, there’s almost no prospect that any loans will be repaid. Then it would just be another subsidy, instead of using this opportunity for badly needed reform,” Mr. Boychuk said.
In a letter to Mr. Trudeau, the ALDP urged Ottawa to tie conditions to any loans for well cleanup, thus upholding Canada’s polluter pays principle.
The group wants the federal government to ensure independent oversight of any loans, require the Alberta Energy Regulator to collect enough from industry to cover the cost of cleaning up wells, and implement a three-year repayment timeline to minimize interest costs and default risk. Oil and gas companies should also be required to pay back millions of dollars they owe to landowners and municipalities for property taxes and leases, the ALDP said.
Like Mr. Boychuck, Clean Energy Canada, a research group based at Vancouver’s Simon Fraser University, sees the current difficulties facing the oil and gas sector as an opportunity for structural change, and will meet with federal government ministers in the coming days to float its ideas.
Executive director Merran Smith told The Globe Tuesday the first priority is helping and protect workers who have lost their jobs, potentially by focusing stimulus dollars at cleaning up oil and gas sites – a win-win for employment and the environment.
But she also urged the federal government and the sector to embrace a long-term vision, and use current skills in the oil patch to make it more resilient; pivoting drilling technology toward geothermal energy production, for example, or putting people to work to fix methane leaks.
“The stark reality is the Canadian oil and gas sector is confronted with cyclical and structural change, so we need to reorient and rebuild the energy sector with a focus on clean energy, and rebuild jobs that are stable, resilient and sustainable,” Ms. Smith said.
Industry groups say governments should provide funding to help companies remove liabilities tied to future well cleanup from their balance sheets. Banks currently factor such obligations into the credit capacity of borrowers, a problem that has become more pressing since the Supreme Court of Canada ruled any money left over in an insolvency must first go to environmental requirements.
Tristan Goodman is president of the Explorers and Producers Association of Canada (EPAC), which represents small and mid-size oil companies. They are the most immediately vulnerable to financial pressure as cash flow in the industry dwindles and access to credit tightens.
Mr. Goodman told The Globe Tuesday EPAC would support cash for well cleanup. But he added giving it all to provincial orphan-well funds would be a missed opportunity, because the larger problem for the industry is liabilities tied to those tens of thousands of inactive wells that languish on corporate books.
“I think there does need to be increased motion, and increased forward momentum, getting inactive wells into a state that is improving on an annual basis. It doesn’t mean it has to occur during the worst price environment we’ve seen. But companies are committed to doing that and anything connected to that would be useful,” he said.
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Emma Graney
Jeffrey Jones