Federal COVID-19 Funding to Alberta’s Oil Patch “Not Well Spent”

July 7, 2021

EDMONTON and OTTAWA – A new report by the Parkland Institute and Oxfam Canada exposes how $1 billion in federal COVID-19 emergency funding transferred to the Alberta government is failing to achieve its intended social and environmental objectives.  

When funding to clean up orphaned and abandoned oil wells in Western Canada was announced in April 2020, the federal government framed it as an opportunity for greenhouse gas emissions reduction, job creation, Indigenous reconciliation and part of Canada’s inclusive economic recovery.  The majority of the $1.72 billion in federal funding – $1 billion – was transferred to the Alberta government, which has approximately 168,000 inactive and abandoned oil and gas wells in need of remediation within its territory. 

The new report, Not Well Spent: A review of $1-billion federal funding to clean up Alberta’s inactive oil and gas wells, finds that, based on available data, the federal funding amounts to little more than a bailout to the oil and gas industry, and the $1 billion dispersed by the Government of Alberta’s program – the Site Rehabilitation Program (SRP) – was not well spent. 

“The public should not be paying to clean up the mess left by oil and gas companies,” says report author Megan Egler, a natural resources PhD student and researcher with the Parkland Institute. “Given what we’ve seen with the Site Rehabilitation Program, greater public accountability and oversight mechanisms will be required to ensure that the Alberta government’s new Liability Management Framework is equipped to hold industry responsible for environmental liabilities.”  

Key findings: 

  • Job creation costs are $41,800/job higher than previous programs and will fall short of the target by 500 jobs;
  • Gender-based analyses conducted at the federal level intended to balance COVID-19 emergency funding toward those most in need. This did not translate to the provincial level in Alberta, where the roll-out of COVID-19 supports for the male-dominated workforce were prioritized over those for female-dominated sectors;;
  • Environmental risk was not prioritized in the cleanup, and any methane emission reductions were not tracked;
  • Indigenous participation and priorities are not meeting targets ;
  • Public dollars likely replaced industry’s clean-up budget;
  • Public dollars covered private sector’s environmental liabilities;
  • A small number of contractors did most of the clean-up work; and
  • Data availability and transparency is lacking.

“This funding fails to deliver its intended social and environmental benefits,” says Ian Thomson, manager of policy at Oxfam Canada. “It’s highly questionable whether oil and gas cleanup should receive any public dollars, especially with so little transparency or co-management with Indigenous peoples.” 

The report recommends that stronger regulations are needed to ensure that cleanup liabilities are accounted for on the balance sheets of companies, and that adequate funding is secured to cover these costs.  

Furthermore, beyond improving regulations so polluters pay for their cleanup, federal funds disbursed to provinces should require performance criteria that meet or exceed federal standards, including requirements to incorporate gender equity, respect Indigenous rights and achieve climate commitments to reduce emissions. More effective federal-provincial collaboration will be needed for Canada to reduce greenhouse gas emissions in line with our international commitments.  

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For more information or to arrange an interview please contact: 

Sarah Pratt
Communications co-ordinator
Parkland Institute
  

Paula Baker
Media relations
Oxfam Canada
(613) 240-3047
  

Additional information 

Key Findings of the Report 

  • Job creation target were nearly achieved, but at much higher cost: Though the SRP has only created roughly 1740 jobs so far, if job creation continues at the current pace, the program will reach 90 per cent of its job creation target. This is 500 jobs short of the government target for job creation. However, each job is $41,800 more expensive than jobs created by previous Alberta government cleanup spending. The SRP is on track to create or maintain 5,300 jobs at $188,680 per job. This is $41,800 more per job than those created by the Orphaned Well Association in 2018 to do similar work. There has been no clear explanation regarding why per job spending is higher in the SRP.   
  • COVID-19 supports for male-dominated workforce prioritized in roll-out over those for female-dominated sectors: The Alberta government moved quickly to get this federal funding out to oil and gas companies while delivery of COVID-19 supports for female-dominated sectors and occupations was much slower.  Meanwhile, the COVID economic recession led to biggest job losses in female-dominated sectors.  
  • Environmental risk not prioritized in cleanup, and any methane emission reductions not tracked: Cleanup of wells should reduce methane emissions, however, this is not being measured or tracked under the SRP.  With no tracking of methane emissions, it is unclear how significant a reduction will be achieved by this federal investment. Overall, the SRP has no means of prioritizing wells based on environmental risk. Instead, sites were targeted for remediation that relieved the financial obligations of the Alberta government and of oil and gas producers in the province. 
  • Modest progress made to prioritize Indigenous participation and priorities: Cleanup on Indigenous land and participation of Indigenous businesses in the cleanup was a priority for the SRP. However, Alberta government data shows little evidence that measures to increase in Indigenous participation are working. While 10 per cent of the total SRP funding ($100 million) was earmarked for cleanup on Indigenous lands, implementation has been slow with less than 1 per cent of completed well remediation sites having been selected by Indigenous peoples. Only 5.5 per cent of the sites nominated for remediation by Indigenous communities have been cleaned up. 
  • Public dollars likely replaced industry’s clean-up budget: Despite intentions to uphold the ‘polluter pays principle’ by giving grants to contractors rather than oil and gas producers, funding for cleanups that are the legal responsibilities of producers do amount to a displacement of corporate dollars that should have otherwise been spent on the activity. 

Alberta’s SRP may have displaced much of industry’s own cleanup spending. The SRP launch nearly halted all cleanup activity as companies awaited grant funding, although there is not enough publicly available information to assess exactly how much public funding replaced planned industry spending. Comparing industry investments in 2019, through Alberta’s voluntary Area-based Closure Program ($340 million representing 70% of all industry activity) to the SRP funds approved in April 2020 ($363.2 million), there is not much difference, which suggested displacement is highly likely.  

  • Public dollars covering private sector’s environmental liabilities: More than 20 per cent of the funding benefited only one company, Canadian Natural Resources Limited. Aside from CNRL, roughly 50 per cent of the funding allocated to date went remediation costs of only 15 license holder companies, or roughly $250 million in traceable funds. 
  • Small number of contractors did most of the clean-up work: Nearly 25 per cent of the funding allocated so far went to only five oilfield service contractors. 
  • Data availability and transparency is lacking: Data on the SRP and the industry’s cleanup activity presented barriers to both availability and usability. The Alberta government’s performance measures to assess the program are not publicly available, nor are the locations of sites being cleaned up under the program. 

Ways to improve future programs 

  • Before public funding is considered as a viable solution for oil and gas cleanups, regulation needs to ensure that cleanup liabilities are accounted for on the balance sheets of companies and that adequate funding is secured to cover these costs. 
  • A minimum requirement for oil and gas cleanups that utilize public dollars should be the reporting of the relevant variables needed for program evaluation. Programs should consider and report publicly on both the quality of jobs being supported through the funding and who these jobs are benefiting. Importantly, governments should track and provide publicly the necessary information for program assessment, including the public disclosures required to assess where private sector spending is being replaced by public funding. 
  • Public funding toward oil and gas cleanup should allocate a portion of the funds directly to Indigenous communities, who are best able to evaluate risk and set priorities on their own lands. 
  • Oil and gas cleanup programs should prioritize sites based on environmental risk while allowing for public participation and meaningful Indigenous consultation and consent. 

Background 

There are hundreds of thousands of inactive and abandoned oil and gas wells across Canada. Some are sitting idle but others have been left without decommissioning or cleanup after an oil and gas company has gone bankrupt or is no longer financially viable – also known as orphaned. The growing problem of inactive and abandoned wells is exceptionally pronounced in the province of Alberta. While British Columbia have approximately 16,000 inactive and abandoned wells, Saskatchewan around 75,000, the Alberta Energy Regulator estimates approximately 168,000 inactive and abandoned well within the province. These wells, alongside other aging oil and gas infrastructure, present human health and environmental risks through surface, soil, and ground water contamination, as well as serious implications for climate change. Wells that are not properly cleaned up are a serious source of methane gas leaks, a potent greenhouse gas emission. 

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