Last year’s dive in oil prices has caused Alberta to change the way it calculates payments due from tar sands/oil sands mines make to ensure there’s enough money to clean up the mess they leave behind.
“The interim solution we’re putting in place addresses the impact of this temporary drop,” said Lisa Fairweather of Alberta Environment and Parks, the department that manages the mine security program.
The program is intended to make sure the industry pays for its own cleanup when tar sands/oil sands mines close, The Canadian Press reports. Companies make annual payments into a fund held by the province.
Those payments were premised on companies maintaining three times as many assets as environmental liabilities. Failure to meet that target would force them to make extra payments.
However, for a brief period last year, oil prices crashed into unprecedented negative territory. That reduced the value of assets to the point at which companies would have had to pay “billions and billions” of dollars more, Fairweather said.
Prices have since rebounded and asset-to-liability ratios have recovered.
But companies, if they so choose, will have their 2020 payments assessed on a formula based on their revenue that doesn’t consider the overall value of their assets, CP says.
Fairweather emphasized the move is temporary. Energy Minister Sonya Savage has promised an overall review of the program this summer. The review is to be done by Alberta Environment.
The province’s auditor general has said the program is underfunded and leaves the province exposed to clean-up costs.
The program now holds just under C$1.5 billion—just under $1 billion from oil and gas companies—a small fraction of what remediation costs would be.
Martin Olszynski, a University of Calgary professor with expertise in resource law, criticized last Thursday’s announcement. The one situation that would have forced the industry to pay into the fund has now been nullified, he said.
“Why does this one (price) blip matter? The fund isn’t nearly big enough. Anything that puts more money in there is a good thing.”
Olszynski told CP there’s little need for a review of the security program. Plenty of research has already shown that Alberta needs better guarantees that resources will be there to clean up the landscape after the tar sands/oil sands are gone, he said.
“What’s the problem?” he asked. “Why shouldn’t (industry) put more toward this program that everybody knows is underfunded?
“We keep punting this issue down the road.”
In a release Friday, the Calgary-based Pembina Institute said the provincial announcement sends the wrong message.
“To date, the oilsands sector has only posted $0.9 billion of an estimated $31-billion liability,” said Nina Lothian, Pembina’s associate Alberta regional director. “This means that if anything happens to the sector, Alberta taxpayers could be on the hook for $30 billion of cleanup.”
The announcement “further erodes this inadequate system by lowering the oilsands operators’ security payments when times are tough—which is the opposite of what this program is designed to do,” she added. “The program is designed ‘to protect the public from paying the end-of-life project closure costs,’ in other words to ensure operators do not leave behind tailings ponds, disturbed landscapes, and industrial infrastructure.”
The main body of this report was first published by The Canadian Press May 6, 2021.