Feds rebuff Alberta's request to reallocate pandemic-era well cleanup funds

The federal government rebuffed Alberta’s request, saying the province failed to spend the $1-billion fund

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Alberta is asking the federal government to allow it to keep $137 million in funding it failed to use for oil and gas well cleanup for the same activities on Indigenous land.

The federal government meanwhile says it has already granted Alberta an extension to spend the full $1-billion fund, arguing the province “ailed to spend a large portion of the fund created to give jobs to oil and gas workers laid off in the first months of the COVID-19 pandemic.

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Alberta’s request to allocate the funding to site cleanup on Indigenous lands has received backing from chiefs from Treaty 6, 7 and 8 territories, and the Indian Resource Council.

At the heart of Alberta’s request is funding created by the federal government early in the COVID-19 pandemic that was structured to save jobs and jump-start efforts to reduce the number of abandoned wells in Alberta.

In late April 2020, the federal government announced a wide-scale economic response plan that included its Site Rehabilitation Program (SRP) — a $1-billion fund to chip away at Alberta’s backlog of abandoned oil and gas wells. The funding came as thousands of oilfield workers were unemployed during the height of COVID-19, resulting in more than 4,000 jobs being created.

With that program coming to a close, $137 million of that $1 billion in grant funding remains unused. The federal government is requesting it be returned to Ottawa, according to the Alberta government, which currently holds the money.

Cleaning up an abandoned well can cost between $100,000 to several million dollars, according to the federal government.

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‘They’ve already allocated this on the books’: Jean

“Even though the money has lapsed, it’s just simply a time in the calendar,” said Alberta Energy Minister Brian Jean. He did not say why the funding hasn’t been fully spent.

“They’ve already allocated this on the books. Just let us keep it, manage it and clean this up.”

In a statement to Postmedia, Katherine Cuplinskas, press secretary to Deputy Prime Minister and Finance Minister Chrystia Freeland, said the federal government has asked the Alberta government several times to return the remaining SRP funds. The initial agreement required Alberta to return outstanding funds in May 2023.

“Given that (the Alberta government) failed to invest a large portion of the $1 billion we provided them, even with an extension of timelines, and that the economy is well into its recovery, we expect the Government of Alberta to abide by the agreement that they signed, and return all unspent funds, as other provinces have,” Cuplinskas wrote.

“Any allegation that the federal government is not helping Indigenous Peoples share in Canada’s economic prosperity, including from the energy industry, is false.”

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Cuplinskas added that with the oil and gas sector’s recovery in recent years, Alberta should be able to return the remaining funds without issue.

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An Enoch Cree Nation chief said the First Nation has a growing population and limited land base, meaning imminent land stewardship is needed.

“This is a liability of the lessees, and the Alberta government is holding them accountable through the Well Closure Program. However, time is not on our side,” said Chief Cody Thomas of the Enoch Cree Nation.

The SRP has resulted in 1,824 inactive well sites being closed amid the Indigenous community grant program, which set aside $133.3 million to clean up inactive wells in Indigenous communities.

Grand Chief Cody Thomas
Grand Chief Cody Thomas, Confederacy of Treaty 6 First Nations. David Bloom/Postmedia

‘This is essentially now an industry subsidy’: lawyer

Martin Olszynski, a University of Calgary resource lawyer and frequent critic of the province’s remediation policies, said the federal program “wasn’t intended to subsidize well cleanup” despite it indirectly having that effect.

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“The primary rationale was about sustaining jobs in the context of broader COVID relief,” Olszynski said. As oil and gas companies have rebounded sharply from low commodity prices, both preceding and during the pandemic, some have in recent years posted all-time record profits.

In that context, the SRP’s intended use has come and gone, Olszynski said.

“This is essentially now an industry subsidy. What we’re talking about here is subsidizing well cleanup that should have been done and should be the responsibility of the operators of those wells,” he said. The funding does present economic opportunities for Indigenous communities, he said, but questioned why oil and gas companies aren’t being required to clean up those wells.

Internal documents obtained in January by University of Calgary researcher Drew Yewchuk suggested Alberta’s energy regulator believes the total cost of well cleanup in Alberta to be about $88 billion — significantly more than the $33 billion it publicly estimated earlier this year.

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