Federal and Provincial Industry COVID-19 Loans and Grants

Read the feature article below on the “Redwater Approach” to prioritizing federal “inactive well” grant fund use.

See the video and read the feature article below on the “Redwater Approach” to prioritization of sites to benefit from federal “inactive well funding.

“By way of job preservation funding, the massive liability and public safety problems caused by non-observance of Alberta’s comprehensive energy laws have spilled over to become the financial problem of all Canadians. COVID-19 is not the only pandemic Canadians failed to adequately prepare for.”

Mark Dorin and Regan Boychuk, Authors

April 2020: Loans Conforming to the Polluter Pays Principle

$100 Million Loan to Orphan Well Association: Unrelated to COVID-19, the Alberta Government is lending $100 million to Orphan Well Association. This rather than the Alberta Energy Regulator charging the full Orphan Fund levy as required by the provisions of Part 11, Sections 73 and 74 of the Oil and Gas Conservation Act.

$200 Million Loan to Orphan Well Association: The Federal Government is lending $200 million to the Orphan Well Association, in part because of the above-referenced failure of the Alberta Energy Regulator to observe Orphan Fund laws. Details on the Federal Government Department of Finance website under Canada’s COVID-19 Economic Response Plan: New Support to Protect Canadian Jobs

$675 Million in Hydrocarbon Gas Reduction Loans Available for Alberta. These funds are allocated to Natural Resources Canada over two years, starting in 2020-21, to create a new repayable loan program to work with conventional onshore oil and gas companies to reduce their greenhouse gas emissions. It is unfortunate that the federal government, not to mention major greenhouse gas reduction lobbies, clearly do not understand the nature of emissions of methane and heavier hydrocarbons from active, inactive, and abandoned wells, as well as hundreds of thousands of illegally-operated, unsafe tanks, used at upstream oil and gas well and facility sites. These are serious public safety and health issues.

We respectfully suggest that this “methane” reduction program might have been better structured as a grant. As the Alberta Energy Minister publicly stated in relation to the grant discussed below, many Alberta producers don’t have two pennies to rub together, but their operations emit explosive, disease causing gases, that are also greenhouse gases. They are unlikely to borrow or even to have the ability to borrow to solve serious health and safety related problems in their operations.

Non industry NGO’s should also have access to federal loans to kick start gas emission reduction strategies and businesses. For example the Polluter Pay Federation would enforce Alberta’s existing comprehensive laws that have made natural gas (including methane) emissions in any significant volume illegal since 1971 (Section 8.080(1) and Section 8.090(7) of the Oil and Gas Conservation Rules and Alberta Energy Regulator Directive 060). Canadians need to know that Alberta has comprehensive laws being ignored by way of lack of law enforcement.

April 2020: Non-Conforming Grants Made Contrary to the Polluter Pays Principle

Global News Six Days After Applications Opened: As reported by Global News, some 18,000 applications were filed by Alberta industry contractors in the first four days after the provincial Round 1 application process opened (May 1, 2020) to access federal inactive well funding. The Global News story includes a video on inactive well grants. The commentator concluded that Canadians are applauding federal inactive well problem grants with one hand and holding their nose with the other. Holding his nose, Regan Boychuk of the Polluter Pay Federation Steering Committee commented as follows on May 6, 2020:

Ottawa’s entire billion will be oversubscribed in round 1 of 10. Do you think we need more money spent on this? Lend it to them and make them spend $10 billion just to start…

Federal Inactive Well Grant to Province of Alberta

$1 Billion Inactive Well Job Creation Grant: The federal government has announced a grant of up to $1 Billion to protect Alberta jobs in the form of funding to address the province’s massive inactive well problem. In response the Alberta Government announced its Site Rehabilitation Program on April 24, 2020. Details on the first $100 million increment of potential spending were announced by the Provincial Government on May 1, 2020. Our members were contacted on May 1 by contractors – some very confused – all wishing to access the benefits of federal funding – all complaining about the provincial fact sheet.

First Increment May 1, 2020: Application requirements for inactive well contractors announced for the first $100 million of incremental spending were announced: A FACT SHEET was released by the provincial government, who appear to be managing federal grant funding (non-Alberta taxpayers might have justifiable concerns).

Second Increment, May 15, 2020 Issues Not Yet Fully Addressed: On this date additional funds (second increment of $100 million are said to be available, where the factor of non-payment of compensation owed to the landowner by the well licensee is to be somehow addressed. Presumably there will be additional announcements and a Fact Sheet as to how this provincially-identified aspect of funding shall be managed (landowner input).

NOTE: Round 2 includes the ability for landowners and indigenous communities to nominate sites for closure. See Provincial website LANDOWNER AND INDIGENOUS COMMUNITY SITE NOMINATION INSTRUCTIONS.

Third Increment and Majority of Spending, June 15, 2020. Presumably government need more time to iron out more details related to the majority of anticipated spending – up to the remaining $800 million available to Alberta contractors.

Notwithstanding that a grant of money for abandonment of wells and cleanup of related land used by well licensees is contrary to the polluter pays principle entrenched in all Alberta energy, environmental, and surface rights laws, we support the concept of saving segments of the service industry needed for cleanup and creation of related clean up jobs. Federal inactive well funding is a partially-transparent mixed bag. The Federation is concerned about provincial/federation cooperation issues and taxpayer value for each dollar spend.

Effect of Industry Lobbying with no Countervailing Property Rights and Tax Protection Lobby

In our humble view several improvements can be made to the program. Federal concerns about municipal tax arrears, which clash with the province of Alberta’s concerns about making landowner payments on behalf of defaulting industry participants a prioritization factor, are problematic. $1 Billion can only put a small dent in the inactive well crisis problem. As such and for additional reasons government appear to have overlooked, we developed the “Redwater Approach“.

Polluter Pay Federation Response to Inactive Well Spending Announcements – The “Redwater Approach”

Observing Judicial Guidance to Prioritize Alberta Inactive Well Spending

The “Redwater Approach” Provides the Greatest Value to the Canadian Taxpayer

Mark Dorin and Regan Boychuk on behalf of the Polluter Pay Federation Steering Committee.  April 29, 2020 (Appendix D added May 2, 2020 to expand on urban public safety issues)

Alberta has a massive inactive well problem that is increasingly becoming the problem of landowners and taxpayers contrary to law.  The cost to retire all inactive wells in the province, some of which are ‘suspended’, is between $7.4 Billion and $13.5 Billion depending on the estimate.

To combat growing unemployment in the province and preserve jobs, the federal government took a scatter gun approach and threw up to $1 Billion to the province of Alberta with few strings attached, aimed at the inactive well problem.   Canada’s COVID-19 Economic Response Plan: New Support to Protect Canadian Jobs.  The federal response plan reads in part as follows as to funding will be prioritized:

As part of this funding, local landowners will have the ability to nominate and prioritize wells for remediation, and funding will be prioritized to companies that are in good standing with respect to municipal taxes.“

Federal Backgrounder

The federal inactive well grant program is contrary to the rule of law, which the Polluter Pay Federation stands for first and foremost.  It is also contrary to the principle from which the Federation draws its name.

The province of Alberta followed by announcing some details of its directly-related Site Rehabilitation Program, some of which details are similarly contrary to the polluter pays principle.  Like the dated Inactive Well Compliance Assurance Program briefly explain in an Alberta Energy Regulator (“AER”) video, Alberta programs circumvent Alberta’s comprehensive laws.

The provincial press release refers to a different focus on priority compared to the federal focus on the problem that even solvent producers are increasingly refusing to pay their municipal tax bill:

This $100-million increment will focus on sites where some operators have failed landowners and where government is paying compensation to landowners as required under the Surface Rights Act.

Alberta Government Site Rehabilitation Program Press Release

If adherence to law and law enforcement was our history, rather than circumvention of laws and looking the other way, Alberta’s current, interrelated predicaments would never have arisen.  The Canadian taxpayer would not be placed in the position of potentially having to bail out both the province and the industry that created the mess.  Wells and facilities would have been properly abandoned as required by law (see Appendix A) long ago.

The federal government has promised a grant of up to $1 Billion for retirement of Alberta’s inactive wells.  The problem is that, in terms of how to prioritize which wells will be retired with the limited funds available, provincial and federal conditions, as outlined above, clash with each other.

Federal conditions are designed as incentive for companies to address municipal tax arrears problems.  On the other hand, provincial priorities are focused on retiring wells for which the province is making payments to landowners on behalf of polluters who refuse to pay or cannot pay compensation to cover actual landowner damages and losses as required by Alberta laws including, inter alia, the Surface Rights Act. Many of those not paying municipal tax are also not paying landowners.

The Polluter Pay Federation is first and foremost a property and taxpayer rights advocacy and lobby group.  The movement is conceived to provide a countervailing lobby to that of industry’s constant lobby to circumvent the principle that the polluter alone must pay for its actions, which is entrenched in Alberta’s written laws.

The Steering Committee of the Federation has effectively dusted the federal and provincial program announcements for fingerprints.  Like a thief in the night during the COVID-19 pandemic, the Canadian Association of Petroleum Producers (CAPP) has quietly ensured that its members are the primary benefactors of a program at the expense of other industry members, the taxpayer, and Alberta landowners and municipalities.  The federal and provincial prioritization factors surreptitiously ensure this. CAPP members can ensure their taxes are up to date, broke smaller producers cannot do so.

The Redwater Approach to Site Prioritization

The Polluter Pay Federation proposes a very different approach than those announced by federal and Alberta government to date, outlined in Appendix A attached hereto and this video:

The So-Called Inactive Well Compliance Assurance Program

The laws listed in Appendix A, Page 2, which govern well suspension and abandonment, have been ignored in Alberta for decades. As such a video about Inactive and Suspended wells produced by the Alberta Energy Regulator is largely misleading and inaccurate. Note the failure to refer to the laws outlined in Appendix A in this video and the AER’s website page on well suspension and inactive wells.

However, the deadline date to suspend all inactive wells properly in Alberta was April 1, 2020. This deadline was already a circumvention of Alberta law but industry should absolutely be belatedly compliant by now. The time for law enforcement by the AER, rather than making policy that is contrary to law like the Inactive Well Compliance Program that circumvents public safety laws and allows producers to ignore the polluter pay principle entrenched in law, has come.

Return to the Rule of Law

The solution for all of Alberta’s complex energy problems is to follow judicial guidance that will lead us out of the physical and legal messes that decades of failure to observe the rule of law has created.

Concentrating on the wells and facilities that must be abandoned by law, as confirmed by the Supreme Court of Canada, shall clean up legal and physical messes in every corner of the province as shown in Appendix B

This approach also solves the problem caused by clashing federal and provincial conditions, and ensures federal funds are widely spread around.  This instead of accomplishing the hidden agendas of CAPP members, who are not as financially stressed as other producers, at the expense of other segments of the upstream oil and gas industry and society as a whole.

The Redwater Decision of our highest court reads as follows at para. 17:

[17]   “A licensee must abandon a well or facility when ordered to do so by the Regulator or when required by the rules or regulations. The Regulator may order abandonment when “the Regulator considers that it is necessary to do so in order to protect the public or the environment” (OGCA, s. 27(3)). Under the rules, a licensee is required to abandon a well or facility, inter alia, on the termination of the mineral lease, surface lease or right of entry, where the Regulator cancels or suspends the licence, or where the Regulator notifies the licensee that the well or facility may constitute an environmental or safety hazard (Oil and Gas Conservation Rules, Alta. Reg. 151/71, s. 3.012). Section 23 of the Pipeline Act requires licensees to abandon pipelines in similar situations. The duty to reclaim is established by s. 137 of the EPEA. This duty is binding on an “operator”, a broader term which encompasses the holder of a licence issued by the Regulator (EPEA, s. 134(b)). Reclamation is governed by the procedural requirements set out in regulations (Conservation and Reclamation Regulation, Alta. Reg. 115/93).” 

Orphan Well Association v. Grant Thornton Ltd., 2019 SCC 5 (CanLII) at paragraph 17

[Underline emphasis added]

Appendix C and Appendix D added on May 2, 2020, are comprised of illustrations of rural and urban illegal operations and abandoned well risks further to the thrust of the Redwater Approach video.

The Polluter Pay Federation is committed to saving Canadian and Alberta taxpayers by supporting host landowners, who possess the necessary rights to force a return to the rule of law in all matters energy related in Alberta. 

The time for landowner and taxpayer organization, solidarity, and for an overdue return to the rule of law to commence, is now.

Addenda

Appendix A deals with matters not being covered by mainstream media, which tends to rely on quotes from uninformed think tanks and biased industry and NGO sources. Covered are the following aspects of the proposed Redwater Approach:

  • Highlights of the Polluter Pay Federation / ALDP Joint Position
  • Explanation: When Wells and Facilities Must be Abandoned by Law
  • Explanation: When Abandoned Wells Must be Re-Abandoned by Law
  • Shortcomings of Program Details Announced to Date
  • Benefits to Society as a Whole of the Redwater Approach

Appendix B includes a Clean-up Cost and Job Creation Analysis (Table 1) with a graph. Also provided as Table 2 is a breakdown by county of inactive wells and related cleanup costs estimates (AER and our members for the Alberta Liabilities Disclosure Projectg or “ALD”). These are examples of the sort of work and transparency citizens are entitled to but are not getting from governments. The ALDP’s central mandate is to call for transparency within government, including the AER, related to unfunded upstream oil and gas liabilities, which go well and far beyond operational “end of life” obligations. Note that the data employed are obtained from the AER via many freedom of information requests.

Appendix C deals with misunderstood well “abandonment” (as the term is used by industry and the AER) and related risks. Included is a list of example wells and a facility that must be abandoned by law. Related photographs and comments on some of the listed sites are provided.

Appendix A – Redwater Approach Details

Link to PDF Version (Active Law Hyperlinks)

Highlights of the Redwater Approach

When wells must be abandoned or re-abandoned, with reference to applicable law

Shortcomings of programs announced and benefits to society of the “Redwater Approach”

Appendix B: Calculations of Key Indicators

Table 1 With Graph – Job Creation

Based on low, average, and high reclamation (including abandonment) cost estimates, our members calculated key indicators such as job creation numbers such as value of job creation, GDP, and number of jobs created. Data used include industry data related to actual well abandonment and site cleanup costs submitted to the AER (information obtained through freedom of information requests

$1 Billion in federal spending barely tackles the inactive well problem. Up to $13.5 Billion may be required in total

Table 2Job Creation Potential Across the Province, Inactive Well Cleanup Costs by County

The Alberta Liabilities Disclosure Project (ALDP) average cleanup cost estimate (abandonment and site remediation/reclamation, as well as the AER estimates associated with the Licensee Liability Rating (LLR) system, are shown in Table 2 below. These figures provide some indication of the total value of inactive well work to be potentially done broken down by counties and municipal districts.

Few if any counties in Alberta won’t benefit from retiring inactive wells

Appendix CWell Abandonment Including Mandatory/Forced Abandonment

The Alberta Energy Regulator is not sufficiently carrying out the enforcement aspect of its mandate, set out in Section 2(2) of the Responsible Energy Development Act. Nor is the AER carrying out it’s quasi-judicial oversight mandate. Just some of the unacceptable results of this, which are contrary to the Supreme Court of Canada’s binding decision in the “Redwater” matter, are illustrated below. It is as if the Supreme Court has no authority in the minds of Alberta decision makers and some industry executives.

The New Economy in a Return to the Rule of Law

The wells in the Redwater Approach Video are listed in the table below with other examples of wells and facilities that must be abandoned by law. The Alberta Energy Regulator has been formally requested to conducted proceedings to deal with the issues associated with some of the wells in the table below, but refused to do so. Paragraph 17 of the Supreme Court’s Redwater decision condemns the AER’s past decisions in such regards and is an insight into how to expand cleanup and related job creation well beyond that funded by the federal government. Landowners can force well abandonment in precise circumstances outlined in Appendix A. The Alberta Energy must begin acting on landowner relief requests for well abandonment orders and environmental protection orders.

Land Contaminated by Liquid Spills is Commonly Never Cleaned Up to Provincial Regulated Standards

Appendix D: Re-Abandonment of Wells, Including in Urban Areas

Plugging a well and cutting its casing (pipe cemented in the ground) off below surface to be vented to atmosphere (called abandonment in Alberta) is not necessarily a safe means of retiring oil or gas wells. Circa 2012, because of problems with leaking wells in the Town of Calmar (natural gas releases), new laws relating to subdivision and development of residential lands where abandoned wells exist were created (and have since been largely ignored). The new rules were implemented by way of amending the law governing subdivision and development of urban lands (Subdivision and Development Regulation, Alta Reg 43/2002, Section 11).

The fact in Alberta is that oil and gas well cement (a unique substance that does not have indefinite integrity) is often all that stands between oil and gas bearing rock formations (of which there can be many penetrated by a well bore) and the air we breath and the water we and other life forms rely on for life. The result is that, over time, almost all wells will have to be re-abandoned from time to time. The most urgent focus should be on the wells in proximity to the most humans. Alberta Health Services and the Alberta Energy Regulator are said to be working on the issue. If so, this work is urgent and is not being transparently conducted.

Also fact is that many (perhaps most) Alberta cities, towns, hamlets, and country residential areas have active, suspended, or previously abandoned wells near or within corporate municipal boundaries. These are the portions of Alberta where the population is more concentrated and the public health and safety risks are therefore increased, These are also the locations of some of the most hidden and overlooked dangers. (Learn about an orphan leaking well in a schoolyard, Town of Vermillion.)

The Alberta Energy Regulator’s OneStop Public Map Viewer is a useful, free, publicly accessible tool. Albertans can look up their town, city, or rural lands and see how close they live, work, travel, and sleep to active, suspended, and abandoned wells. Be careful! Some wells that are shown as abandoned by the AER in its map viewer still unsafely exist on the land. AER data simply cannot be trusted! Some examples are provided below:

The Greater Red Deer Area is Reported to Have Some of the Worst Air Quality (Hydrocarbon Gases) in the World, the Highest in Alberta
The City of Medicine Hat is Unique. The City is the Licensee of Many Wells (Presumably the Mineral Owner)

Badly Abused: The rights of urban and country residential landowners are arguably the most abused of any surface rights owners in Alberta. The rights of such “urban landowners” to be safe and to be properly compensated are terribly abused. As such the Polluter Pay Federation supports the work of owners of land that has a highest and best use greater than for agricultural use (usually the only use left once oil and gas is on the land, which is often not a safe or healthy use. Non-observance of the polluter pays principle is the problem faced by all Albertans – NOT JUST FARMERS AND RANCHERS.

By way of job preservation funding, the massive liability and public safety problems caused by non-observance of Alberta’s comprehensive energy laws have spilled over to become the financial problem of all Canadians. COVID-19 is not the only pandemic Canadians failed to adequately prepare for.

The mandate of the Polluter Pay Federation Steering Committee is to create a property rights and taxpayer protection lobby that stands for and promotes a return to the rule of law in all matters energy-related in Alberta. The rule of law cannot be observed, and taxpayer and landowner justice cannot be achieved, until significant reform at the Alberta Energy Regulator occurs.