Confusion, lack of clarity dog Alberta plans to clean up old well sites

With the Alberta government facing pushback to its plan to give oil and gas companies a royalty break to clean up old well sites, questions are mounting about how the program will function and who, ultimately, will pay for it.

The proposed pilot project dubbed the Liability Management Incentive Program, previously known as RStar, has in recent days garnered criticism from economists, landowners, analysts and the Opposition NDP.

Late last week, it also drew a warning from analysts with Scotiabank, who wrote in a report that though the program could benefit some producers, it had the potential to generate "negative public sentiment toward the sector."

"Moreover, we also believe the program goes against the core capitalist principle that private companies should take full responsibility for the liabilities they willingly accept," the report reads.

The province has said that the program, which would involve $100 million in royalty breaks, is still in development and no final decisions have been made. Producers pay royalties to the province for extracting resources that the province owns on behalf of all Albertans.

Oil companies largely appear to be reserving comment on the proposed plan. On Monday, a spokesperson with Cenovus said the company was assessing the program.

"We'll determine how it may affect our plans after we've seen more details," the Calgary-based company wrote in a statement to CBC News, adding it's about halfway through its well site reclamation inventory target.

Between 2019 and 2021, Cenovus said it received 1,455 reclamation certificates from the Alberta Energy Regulator.

In a statement sent Tuesday morning, Canadian Association of Petroleum Producers (CAPP) senior special advisor Brad Herald said that there had been a "dramatic acceleration" in well cleanup.

"Industry, orphan well funds, the federal government and provincial governments have all played key roles in updating liability management policies and policy supports to make this happen," Herald wrote. 

"We look forward to the consultation process with the Alberta Government on their proposed Liability Management Incentive Program and will work to ensure the momentum built in the reclamation of legacy sites in Alberta continues."

Opposition has suggested lobbying a 'huge concern'

Kathleen Ganley, the NDP's energy critic, has called it a "huge concern" that Smith had lobbied for an oil well cleanup bailout prior to re-entering politics.

Over the weekend, Smith told her audience on a province-wide radio show that governments of the past shared the blame for wells that hadn't been cleaned up effectively.

"Because we're targeting it so closely on the worst wells, we're looking at sites, for instance, that have been inactive for 20 years that were drilled prior to 1990, so these are kind of the worst of the worst sites," Smith said, arguing regulators had failed to require cleanup from companies in the past.

Andrew Leach, an economics professor at the University of Alberta, said Monday the premier's comments suggest industry was prepared to leave liabilities on the landscape indefinitely. 

"When the premier comes out and says, 'This is reclamation that would not have otherwise happened,' that's a big shot across the bow to the industry," Leach said.

"Because she's essentially saying, 'You oil and gas producers are not going to meet your legal obligations to Albertans.'"

Though the program has nothing to do with oilsands, Leach added that such an approach had future implications for other liabilities on the landscape, such as massive oilsands tailing ponds and site reclamation.

During a press conference held Monday to discuss Alberta's TIER fund, Sonya Savage was asked about comments she had made during her time as energy minister stating that the RStar program wouldn't fit within Alberta's royalty structure, and would violate the province's polluter-pays principle.

Savage acknowledged those comments, but noted the pilot project was under consultation and directed questions around the pilot project to the current energy ministry.

Energy minister met with landowner groups

Leach added that questions loom about how the program will work and who will be covered.

"Are we talking about wells that are literally, from a regulatory perspective, orphans, or are we talking about wells that are still owned by operating entities?" he said.

In response to a request for comment requiring clarification over which sites could qualify for the pilot, a spokesperson for Energy Minister Peter Guthrie said such details would be made available when development of the pilot program is complete.

"Minister Guthrie was very clear that stakeholders would be engaged as part of this process and that is what we're doing," wrote Gabrielle Symbalisty in an email.

"This pilot program will target some of the oldest sites in the province that have not produced oil and gas for many years. Our goal is to shrink the inventory of inactive and orphaned wells and create jobs across Alberta."

Guthrie was instructed to develop such a targeted program as a part of his mandate letter last fall. On Thursday, Guthrie met with landowner groups to discuss the project.

Daryl Bennett, director of Action Surface Rights Association and the Alberta Surface Rights Federation, said the meeting lasted around two hours, and included staff from the Alberta Energy Regulator.

Bennett said he didn't attend the meeting but two representatives of the group did.

In an interview, Bennett said it was one of the best meetings the organization has had in terms of receiving access to the minister. 

"I'll be frank, from a landowner perspective: we want the wells cleaned up," he said.

"And the original social contract was society can take our land, expropriate it, extract resources, with a guarantee you're going to clean up the mess," Bennett added, noting the organization prefers industry pays for it.

"But if they're unable to do it, then the taxpayer does have some responsibility. But at a time of record profits, I think the taxpayer should be insisting that industry pays a little bit more."

In Vulcan County, where hundreds of wells with no owners need to be cleaned up, there is confusion surrounding why taxpayers could be left footing the bill to clean up the messes oil companies made, said Reeve Jason Schneider.

"We're going on about seven years, where we've had companies that have operated without paying their taxes," he said.

"Now, it's a small number of them, but between those companies and companies who walked away from their liabilities, we're over $9 million worth of taxes that haven't been collected.

"So I guess we're a little disappointed to see the province move so quickly on this RStar program to give tax credits, when for seven years, they've been ignoring municipalities like ours."