Open letter to Prime Minister Trudeau and Finance Minister Morneau

Dear Prime Minister Trudeau & Minister Morneau,

cc: Minster Freeland & Minister O’Regan

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In Alberta, the pandemic and low oil prices are creating extraordinarily hard times. Unemployment could reach levels not seen since the Great Depression. We appreciate your strong actions to keep Canadians safe and employed during the global coronavirus pandemic, and for considering aid to put Albertans to work reclaiming old wells.

 

We applaud your response to Albertans in crisis, however, we call on you to not reward irresponsible oil and gas producers with public dollars. Canadians' support should be directed to the oilfield service sector to spark a “reclamation boom” retiring aging oil and gas wells, not propping up exploration and production companies at odds with Canada’s commitment to become a net zero carbon society by 2050.

 

As independent experts, former regulators, landowners and advocates for oil and gas cleanup jobs with the Alberta Liabilities Disclosure Project, we strongly urge strict conditions for any oil well cleanup aid in order to maximize jobs and ensure industry pays for the cleanup of its infrastructure. 

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Increasingly, oil and gas producers are dining on the profits of Alberta's public resource, and dashing on their dues to Albertans. Right now, they collectively owe $173 million in unpaid rural property taxes and tens of millions in unpaid compensation  to landowners, who are forced to have wells on their land. The industry continues to underfund the Orphan Well Association (OWA), which has been operating mostly on public loans in recent years. Increasingly and soon, producers will be filing for bankruptcy, dumping more and more clean up commitments on the OWA.

 

Worse, just as you are considering a public loan to the OWA, the Alberta government passed new legislation—under cover of COVID-19 and without consultation—that gives Cabinet power to direct the OWA and its funding. This raises concerns about politicizing cleanup work. 

We strongly urge to you to implement six conditions on any oilfield cleanup loans to uphold Canada’s Polluter Pays Principle:

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1. Require AER to follow the law and collect enough from industry to reclaim all its orphans, every year. By law (Sections 73(2 ) & 70(1) of Alberta’s Oil and Gas Conservation Act), Alberta should be collecting enough fees from industry annually to cover the cost to clean up its full inventory of orphaned oilfield infrastructure, every year. It doesn’t. By law, there shouldn’t be any inventory of unfunded orphans at the end of the year, nor should there ever be any need for public loans. The federal government must make this a requirement to break the cycle of industry relying on public loans and grants ($395 million so far) to fund cleanup. If Alberta followed existing law and used credible cleanup cost estimates, it would have collected $1 billion more from industry for cleanup work and jobs this year.

2. Require independent oversight of federal loans. Alberta’s industry-run Orphan Well Association is not transparent enough and Bill 12 makes it even more problematic.  A transparent, accountable entity must oversee how federal loans are spent, to protect the public interest. It must make cleanup records public and prioritize wells with health and safety concerns.

3. Require industry to pay back money owed to municipalities and landowners. Target federal loans to orphan wells with unpaid rural taxes or landowner compensation, and include those debts as part of the cleanup cost. This ensures industry pays back what it owes to Alberta municipalities and farmers. Loans should also ensure landowners are properly notified and compensated at all sites cleaned up with federal funding.

4. Require a short, 3-year timeline for repayment to minimize interest costs and default risk. It would be collectively repaid by remaining Alberta oil and gas producers. The loan must not be written-off and a strong legal mechanism to ensure the industry actually repays this loan is needed, perhaps a dedicated production tax. Any write-off scenario would transform the loan into an unacceptable industry subsidy that undermines Canada’s Polluter Pays Principle.

5. Match OWA loan with $30 million direct investment in indigenous entrepreneurship to train and launch Indigenous-and Métis-owned reclamation companies and advance UNDRIP principles.

6. Reserve $30 million for landowners to reclaim wells on their own land and send the bill to the well’s owner(s), when producers refuse to clean up the land. The Supreme Court has set precedent for this with Smith v Alliance Pipeline. A federal fund would spark cleanup without landowners being out of pocket for any expenses—just as it should be.

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Every crisis holds opportunity. Will we rescue polluters who do not pay their bills? Or will we use our public dollars to build the cleaner future we all need?  This is a pivotal moment for you to support good jobs in Alberta, while holding polluters to account.
 

Signed on behalf of Alberta Liability Disclosure Project members,

 

Regan Boychuk

Co-founder and lead researcher

Alberta Liability Disclosure Project

 

Dr. Lucija Muehlenbachs

Associate Professor of Economics

University of Calgary

 

Mark Kavanagh

Environmental & regulatory consultant /

former Alberta energy regulator

ERCB + AUB

 

Dr. Thomas Schneider

Associate Professor of Accounting

Ryerson University