Oil and gas well cleanup could spur jobs

By Catherine Griwkowsky June 30, 2021

Enforcing the polluter-pay principle for oil and gas well cleanup could lead to job creation in the most affected communities.

That’s the upshot from a new report by the Alberta Liabilities Disclosure Project (ALDP), which found Canadians are spending $4.3 million per day to clean up oil and gas wells. In Alberta, that bill ranges from $40 to $70 billion currently on the books.

Regan Boychuk, lead researcher for the ALDP and oilfield liability expert, said if the province implemented the recommendations, Alberta could create 10,400 jobs with $750 million in wages per year for the next 25 years.

“This report is our call to Albertans to take control of our relationship with the oil and gas industry and enforce the polluter pays principle and thereby unlock a reclamation booming in the province that can kickstart our next economy,” Boychuk told reporters.

The ALDP ranked the top 20 municipalities by cost of reclamation and potential job and employment income.

Cypress County took the top spot with more than $4.8 billion in reclamation costs, which could create 22,207 jobs and nearly $1.6 billion in employment income.

Calls for a non-profit Reclamation Trust
The ALDP’s 13 recommendations include a call for a non-profit Reclamation Trust to use the remaining revenue of wells to fund their cleanup. The report also calls for an industry-wide levy to recoup cleanup costs, updates to the Bankruptcy and Insolvency Act to prevent companies from downloading liabilities onto small companies for as little as $1, and collecting the full cost of the annual levy to the Orphan Well Association.

The ALDP says the trust is necessary due to “regulatory capture” — where the regulator lost independence and caters to the interest of the industry it is supposed to regulate.

The report also showed half of all licensed oil and gas companies are insolvent, with 80 per cent of unreclaimed oil and gas wells past the “best before” date when future revenues are exceeded by cleanup costs.

Ontario’s former environment commissioner Dianne Saxe, who was consulted for the report, dismissed claims that Alberta’s oil industry is ethical.

“An ethical, well-governed fossil fuel industry would pay its own way without billions in public subsidies and would clean up its own mess,” she said. “As this report clearly shows, that’s not what’s happening in Alberta today. This makes a mockery of Alberta’s claims that its oil and gas industry is an ESG leader.”

Industry advocacy group agrees with job creation potential
Sustaining Alberta’s Energy Network (SAEN), an industry advocacy group, estimated the current liability assessment of non-producing wells to be more than $25 billion.

In a news release, SAEN said they agree with the ALDP that liabilities need to be addressed through cleanup. The group disagreed with the ALDP’s proposal, calling it a plot to create “a state-owned energy company.”

Instead, they propose an incentive program dubbed R-Star. The proposal works by giving companies future royalty credits calculated off a well site’s liability value upon completion of reclamation.

SAEN has already been in talks with UCP backbenchers Jeremy Nixon and Peter Guthrie over the proposals, which it estimates will create $76 billion in new spending.

“This is an Alberta-made solution that will drive development in the area of site rehabilitation,” Nixon said in a news release. “Alberta is a leader in environmental stewardship and technological development. R-Star builds on that legacy and the entrepreneurial spirit of Albertans.”

Province subsidizes industry, undermines polluter pay, ALDP says
The ALDP accused the government of subsidizing energy companies to the tune of $1.565 billion in 2020.

“The funds for cleanup are increasingly coming from the public versus rather than oil and gas companies legally responsible for the retirement of the infrastructure under the polluter pays principle,” Boychuk said.

The provincial government took $1 billion from Ottawa for the Site Rehabilitation Program. The program distributes grants to clean up oil and gas wells as part of a Covid economic stimulus project, a move it expects will generate 5,300 jobs.

The calculation also includes $245 million in unpaid municipal taxes; a $200-million federal loan to the Orphan Well Association; a $35-million investment in methane reduction programs from the province; $65 million in delayed payments to the OWA for oil well cleanup; and $20 million in surface rights compensation for landowners paid for by the province rather than the oil and gas companies.

Recommended Posts