A report detailing options to make Alberta’s oil well cleanup process more efficient and profitable recommends how the financial burden could be in part shifted onto the taxpayers through the creation of government business entities.
The 71-page confidential report, obtained by CTV News and first reported on by the Globe and Mail, details recommendations to the government to achieve shared goals “to maximize value, manage risk and ensure the long-term viability of Alberta’s energy sector.”
David Yager was tasked with leading the province’s engagement process on its Mature Asset Strategy (MAS).
“The MAS seeks to address the complexities of Alberta’s aging oil and gas fields with a collaborative and improved outcome-based approach,” the report reads.
The engagement process heard from 97 entities and 200 individuals, including 64 private sector companies, nine provincial government ministries, six oil and gas industry trade associations, five municipal governments, five rural/municipal agencies and associations, four provincial agencies/commissions and three Indigenous ministries/organizations/representatives.
The report acknowledges the premier, the ministers and deputy minister of energy and minerals, environment and protected areas, and municipal affairs for “prioritizing the strategy as a key initiative for the province.”
According to the report, Alberta’s energy regulator reported 471,363 licensed wells in the province.
Alberta has 274,215 wellbores that are rated as either “marginal, inactive (non-producing) or decommissioned, compared to 54,000 producing wells and nearly 105,000 wells that have been successfully reclaimed.
The report discussed the idea of the province creating “special purpose entities” to help reduce the costs of closing wells.
One of those entities, ClosureCo, is described as a third party paid to assume the lease, liability and closure for a fixed sum from the current licensee.
Another, HarvestCo, would assume the tenure and licence of wells that would otherwise be surrendered to the Orphan Well Association (OWA) to use revenue from mature assets to fund closure activities.
“These models are intended to reduce costs, improve outcomes, streamline operations, minimize or eliminate insolvencies and fulfill financial obligations to all stakeholders,” the report reads.
The report also suggests a “Legacy Asset Insurance Fund,” which would be funded by well licensees “but ultimately backstopped by the province.”
“This fund would offer certainty for surface rights owners and show licensees a path to remove closure obligations from balance sheets, which could provide another justification for accelerated closure activity,” the report reads.
Energy Minister Brian Jean responded to the report at the legislature on Tuesday.
“I’m saying I haven’t seen it. I’m waiting for it,” he said.
“But there will be no public money given to private companies to clean up their wells.”
The issue around property taxes not being paid by oil and gas producers to municipalities was also a key debate topic during consultations over five months.
Ponoka County Reeve Paul McLaughlin says his county has written off more than $6.5 million worth of taxes and surface leases owed.
“I might lose another million this year, but I’m more worried, too, about those surface rates.” he said.
“Good friends of mine that are owed $30,000 to $40,000. Imagine you at your home were owed $30,000 or $40,000 for how your home is functioning from somebody using your land and not paying their bills.”
Municipal Affairs Minister Ric McIver says unpaid property taxes are taken seriously by the province.
“The vast majority of oil and gas companies pay their taxes in full and on time,” said McIver.
“But there’s a small number of those that behave badly.”
Polluter Pay Federation vice-chair Mark Dorin says this proposal is not the way forward for Alberta.
“This will bankrupt the province. All Canadians need to stand up and say, absolutely not,” said Dorin.
“This is just too late in the ball game to change this. Everybody in Alberta’s future depends on it.”
Environmental Defence, a Canadian environmental advocacy organization, criticized the recommendations in the report, calling them “deeply disturbing.”
“The public should not have to be on the hook to clean up the industry’s mess,” Stephen Legault, senior manager focused on the Alberta energy transition with Environmental Defence, said in a news release.
“The government must toss this report and its ideas in the trash and hold polluters accountable to clean up after themselves and to pay their rent and taxes.”
Alberta NDP Leader Naheed Nenshi says the report, which he has not read, isn’t what Albertans want.
“It’s unsurprising,” said Nenshi.
“This is pure Danielle Smith. Danielle Smith wants to socialize business risk while privatizing health care. What kind of a conservative is that?”
There is no timeframe on when the report will be finalized and released publicly.
