Strong Conditions Necessary on any Federal Loans for Oilfield Cleanup After Alberta Passes Troubling Bill 12
The Alberta Liability Disclosure Project
April 8, 2020 (CALGARY) — Public dollars must not go to Alberta’s Orphan Well Association (OWA) without strict conditions that uphold Canada’s Polluter Pays Principle, ensuring industry pays for cleanup, property taxes and landowner compensation, the Alberta Liabilities Disclosure Project (ALDP) said this morning.
The federal government is considering loans to Alberta’s OWA to create jobs cleaning up the province’s orphan wells.
ALDP raised the alarm after Alberta’s government rammed through troubling changes to the oversight and management of the OWA with Bill 12,The Liabilities Management Statutes Amendment Act under cover of the COVID-19 pandemic. The new law:
- Threatens landowner rights: Bill 12 broadens the list of activities companies can carry out on private property without compensation to or consent from the landowner.
- Politicizes cleanup: Bill 12 gives Cabinet the power to direct OWA’s work and funding. Instead of science and data guiding cleanup, such as prioritizing the most dangerous wells or those near aquifers, cleanup decisions are now in the hands of politicians. This gave Cabinet unprecedented powers to win favours and shun opponents–with public dollars.
- Undermines compensation for landowners: The new law allows the OWA to take over assets of bankrupt companies, continue operating their wells, and then conduct cleanup without having to negotiate with and properly compensate landowners.
- Incentivizes offloading of wells to the OWA: loopholes in the new law will effectively transfer landowner compensation to taxpayers, and unpaid property taxes will get written off in bankruptcy.
“This should be a moment to spur massive job creation in Alberta by requiring polluters to pay for cleanup of hundreds of thousands of their oil and gas wells. Instead, the government’s changes to the OWA will politicize well cleanup and could leave the rest of us paying the industry’s cleanup bill,” said Regan Boychuk, ALDP co-founder and lead researcher.
As the federal government contemplates loans to OWA to create jobs in Alberta and respond to the COVID-19 pandemic and oil price collapse, ALDP calls on the federal government to attach strict conditions to ensure that polluters, not taxpayers, pay for the cleanup.
Conditions (outlined below) include requiring the OWA to follow existing rules and collect enough from industry for its full inventory every year, make any loans short-term, and matched by support for First Nations, landowners and municipalities that are owed unpaid taxes from oil and gas companies.
“Which wells get prioritized for cleanup should be determined by independent evaluations and public health requirements, not by partisan politics. Having Cabinet drive decisions on well cleanup means the OWA could become a slush fund for the government to reward their friends and punish vocal opponents. We can’t let that happen,” stated David Swann, ALDP member and former member of Alberta’s Legislative Assembly
“If the federal government lends public funds to the OWA, with its new powers, they will tacitly weaken regulatory oversight in Alberta, and undermine Canada’s Polluter Pays Principle. The government must attach conditions to any funding to counter Bill 12’s disappointing measures,” stated ALDP co-founder Regan Boychuk, Co-founder of ADLP.
These changes are a disaster for farmers and landowners with oil and gas leases. They give the Orphan Well Association the right to operate the still-profitable wells on our lands, without paying annual compensation to us. Anyone with an existing well, facility, or pipeline on their property should be very concerned by these changes.” — Dwight Popowich, landowner with orphan well on his land near Two Hills.
Proposed Conditions for federal loan to Alberta’s Orphan Well Association
- Require that the Orphan Well Association collect the legally-mandated, annual orphan levy to fully fund cleanup of OWA’s entire inventory every year
By law, OWA should be collecting enough levies from industry to cover the full cost to clean up its full inventory of wells for the year — every year. It doesn’t. That could very well have meant $1 billion more for cleanup work this year alone. Allowing the OWA to collect any less than what is legally mandated amounts to an oilpatch subsidy and is leading to a troubling pattern of relying on public dollars to fund industry cleanup..
- Any loan to the Orphan Well Association should include a short timeline for repayment. ALDP urges a three-year timeline to minimize interest costs and maximize the chance of repayment. Any write-off scenario would transform the loan into a subsidy to industry, undermining the Polluter Pay principle, and must be avoided.
- Match loan to OWA with direct investment in building Indigenous capacity
Any Federal loan to the OWA should be matched by at least $30M to fund an Indigenous steering committee focused on education and training to launch Indigenous-owned enterprises to lead cleanup work. In this way, the OWA loan can become a vehicle to advance Indigenous entrepreneurship and UNDRIP principles.
- Finance landowners to reclaim wellsites on their own land
Landowners can clean up wellsites on their own land and send the bill to the oil company. The Supreme Court said so in Smith vs. Alliance Pipeline. A $30M federal fund could help spark cleanup without landowners being out of pocket for any expenses — just like it’s supposed to be.
- Independent oversight of federal funds
Neutralize Cabinet’s grasp for control by requiring an independent body of experts and public consultations to determine how best to prioritize cleanup done with federal dollars. One focus should be orphan wells with unpaid rural taxes or landowner compensation, so those debts can be swiftly paid through the orphan levy instead of by taxpayers. The federal loan ought to also include stipulations ensuring landowners are properly notified and compensated at all sites cleaned up with federal funding.
- Alberta has 300,000 conventional oil and gas wells, more than 400,000 kilometres of pipelines, over 1.4 trillion of litres of fluid waste held in tailings ponds, and more. As this infrastructure ages and breaks down, it can leak toxins into the surrounding air, land, and water.
- Using Alberta Energy Regulator’s data and methodology, ALDP estimates it will cost $40-$70 billion to clean up the 300,000 unreclaimed oil and gas wells alone. That’s 2 to 3.5 times higher than the regulator has told the public.
- Alberta has approximately $200 million held as security deposits against oil and gas cleanup, far less than 1 per cent of the total cleanup cost.
The Alberta Liability Disclosure Project (ALDP) is a non-partisan volunteer coalition of Alberta researchers, landowners, economists, former regulators and industry veterans focused on digging into the scale of Alberta’s unfunded oil and gas liabilities — and the employment opportunity of cleanup.