The Alberta government has officially returned more than $137 million to the federal government for the cleanup of old oil and gas wells as time is running out to spend the money.
The question remains as to why state governments have failed to utilise badly needed funds despite the existence of tens of thousands of unused wells.
Many businesses are also disappointed that the full amount was not spent due to losses from landfill works.
The money was part of $1.7 billion the federal government committed in 2020 aimed at reducing environmental risks for aging oil and gas infrastructure while providing jobs in the oilfield services sector after oil prices collapsed at the start of the pandemic.
The money was split between British Columbia ($120 million), Alberta ($1 billion) and Saskatchewan ($400 million). The Alberta Orphan Well Association received a $200 million loan to help clean up wells left behind after companies went bankrupt.
The federal government confirmed that Saskatchewan had spent the full amount, while British Columbia had to return a small amount of unused funds.
Last year, Alberta began lobbying the federal government to keep the remaining funds for continued oil patch remediation work, particularly cleaning up wells on First Nations land, even though the funding was overdue.
“A great deal of effort was put into getting the federal government to understand the value of continuing this work, but they have now asked for the return of unspent funds,” Alberta Energy Minister Brian Jean said in an emailed statement.
Jean said the money was returned last month. Federal Finance Minister Chrystia Freeland’s spokeswoman, Catherine Kauplinskas, said the money will be deposited into the government’s general revenue.
Unfinished business
“Why hasn’t that money been spent?” asked Duane Bratt, a political science professor at Mount Royal University in Calgary. “The industry agrees it’s important, the provincial government agrees it’s important, the federal government said it’s important. Resources have been put in place but they haven’t been spent, or they haven’t been spent enough.”
Bratt also pointed to the political angle of the situation, with Premier Daniel Smith and his cabinet ministers “constantly complaining about the federal government’s spending powers in Alberta and that transfer payments between Ottawa and Alberta are unfair compared to other provinces.”
Initially, the Alberta government struggled to launch the Site Remediation Program (SRP) as applications flooded in and government staff were overwhelmed. Eventually, tens of thousands of projects were approved and all federal funding was exhausted.
However, years later, some of the funds were left unused because some of the approved cleanup work was never completed.
Some industry leaders point to bad weather and labor shortages as reasons why work is incomplete.
“You can’t expect them to spend that much time in minus 35-degree weather with the ground frozen,” said Gurpreet Rail, chairman and CEO of Ensarva, a trade group that represents oilfield service companies.
“If I had more time, I would have spent this money,” she said.
Part of the SRP is focused on cleaning up wells and other old oil and gas infrastructure on Indigenous lands, and has been slow to provide training to local communities.
While the unused funds are a “1,000 percent opportunity loss,” Reil said the program overall had been crucial in getting the industry through an “extremely challenging” period.
She wishes the remaining money could have stayed in the province to continue cleanup efforts, especially on Indigenous lands.
“This is the first time we’ve trained Indigenous people to work on reclamation on their own land and to dispose of abandoned wells with our member companies. Why wouldn’t we want to continue doing this work?” she said.
Program Impact
The Alberta government had agreed to a federal deadline of March 31, 2022, for funds to be released for certain cleanup activities, which was extended to May 15, 2022. The actual cleanup work had to be completed and invoiced by February 14, 2023.
“I’m sure they’re disappointed,” Joe Chowaniec, executive director of the Alberta Environmental Services Association, said of how member companies feel about the unspent funds.
“It could have been used to give people jobs,” he said.
While the industry remains grateful for the SRP, some critics say it is a missed opportunity to address the state’s dormant well problem.
Drew Yurchak, a former lawyer at the University of Calgary’s Public Interest Law Clinic, said not only was the program slow to get off the ground, but some of the funding went to wealthy oil and gas companies that didn’t need the help.
He also questioned the program’s usefulness in helping oilfield services companies, as crude oil and natural gas prices recovered less than a year after plummeting in April 2020. By early 2022, crude oil prices had soared to their highest levels in several years.
“at that time [the Alberta government] “The plan was going well, there was enough work being done to generate jobs, and oil and gas prices were already starting to recover or had already recovered, so the goal ended up being completely wasted,” he said.
“They couldn’t get the work done fast enough and the money that could have been spent very quickly went to companies that could have afforded to do the work anyway,” he said.
The number of idled or marginal production wells in Alberta has fallen slightly in recent years, from 206,800 in 2020 to 177,801 this year, according to the Alberta Energy Regulator.
