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Governments Are Making Taxpayers Subsidize Corporate Cleanup of Oil and Gas Wells

Companies are responsible for dormant wells, but the public is helping foot the bill.

Andrew MacLeod 19 Mar 2021TheTyee.ca

Andrew MacLeod is The Tyee’s Legislative Bureau Chief in Victoria and the author of All Together Healthy (Douglas & McIntyre, 2018). Find him on Twitter or reach him at .

The B.C. and Canadian governments have promoted a $100-million fund to clean up dormant oil and gas wells in the province as a “win-win” for the environment and the economy.

But the biggest winners may be the major oil and gas companies that own the sites.

“To find out the major recipients of this are companies that are perfectly able to clean up their own mess is not surprising, but disappointing,” said Peter McCartney, climate campaigner with the Wilderness Committee environmental group.

“It’s another subsidy,” he said.

McCartney received information on the grant recipients from B.C.’s Ministry of Energy, Mines and Low Carbon Innovation in response to a freedom of information request that he shared with The Tyee. The document provides details on the first $50 million to be distributed in the province.

A quarter of that money, $12.4 million, is dedicated to cleaning up sites where Canadian Natural Resources Ltd. is the permit holder. The corporation, based in Calgary, is worth $45 billion.

The second biggest share, $7.9 million, is for Petronas Energy Canada Ltd. sites. The Canadian subsidiary’s parent company is owned by the Malaysian government.

Media contacts for CNRL and Petronas didn’t respond to requests for comment.

Other prominent companies among the 41 permit holders listed include Enerplus Corp., Ovintiv Canada ULC, ExxonMobil Canada Energy, Husky Oil Operations Ltd., Imperial Oil Resources Ltd., Cenovus Energy Inc., Painted Pony Energy Ltd., Tourmaline Oil Corp. and Whitecap Resources Inc.

Also on the list is Shanghai Energy Corp. The Globe and Mail reported in 2018 that Shanghai Energy Corp. has an “opaque ownership structure” but is backed by the Chinese Communist Party, which has an ownership stake.

“I think British Columbians would be surprised public money was going for cleanup to a company that is owned by the Chinese Communist Party,” McCartney said.

Bruce Ralston, B.C.’s minister of energy, mines and low carbon innovation, said the oil and gas industry is dominated by large international companies who own many of the sites where the work is being done.

“Yes, the industry is getting some benefit, but I believe the environmental and economic benefits to field services companies, to communities, are really important,” he said.

The program is accomplishing what it was intended to do, said Ralston.

“It’s federal funding designed to keep people working during the pandemic,” he said. “It’s supporting employment in the northeast and reducing the long-term environmental impacts. It addresses those objectives.”

The money for the program comes from B.C.’s $120-million share of the $1.7 billion the federal government announced in 2020 for orphan and inactive wells in western Canada as part of its economic response to the COVID-19 pandemic.

According to a recent release from the province, the first $50 million supported nearly 1,000 jobs for local workers with cleanup work completed at 139 sites.

The funding was earmarked for B.C.-based oil and gas service companies and contractors to work on sites that landowners, municipalities and Indigenous communities identified as priorities.

Most contractors appear to be small companies, but the list also includes $1.9 million to SNC-Lavalin Inc., which is based in Montreal.

The program provides 50 per cent of the cost per “work activity,” up to $100,000, on dormant wells.

Ralston said that since the public funding covers no more than half the costs of the work, the program creates an incentive for the companies to spend their own money on cleanup as well.

The program has been popular and had few critics, while mayors and Indigenous communities have been happy with it, added Ralston. “It’s a very successful program. Lots of uptake.”

Earlier this month the province closed applications for the second round of funding to clean up dormant wells, which provides another $50 million.

When the application period opened, the announcement quoted federal Environment and Climate Change Minister Jonathan Wilkinson saying, “cleaning up inactive and orphan wells is good for the environment and the economy.”

BC Green MLA Adam Olsen, who represents Saanich North and the Islands, said that while British Columbians support cleaning up potentially polluting sites, it’s disappointing that many of the ultimate beneficiaries of the funding are large multinational companies.

“It’s darn near impossible for me to stomach that,” he said.

Companies that have benefited from extracting B.C.’s resources, often with support from government subsidies, should be responsible for cleaning up their own sites, said Olsen.

“The taxpayers in our province are subsidizing exploration and extraction, they’re subsidizing the power, they’re subsidizing the building materials, giving tax breaks, going to have to pay billions of dollars to address climate change, have the erosion of healthy environments around our communities, and now we’re paying these same companies that we’ve subsidized to do all this work to clean it up,” Olsen said.

According to the provincial government, out of the roughly 25,000 oil and gas well sites in the province about 8,527 are dormant, meaning they have been inactive for at least five consecutive years and are unlikely to be returned to service.

Another 770 are considered orphan, where the operator is insolvent, no longer exists or cannot be located.

The Wilderness Committee’s McCartney said the goals of cleaning up the environment and supporting local jobs are positive.

But it makes little sense to subsidize work that major companies are legally responsible for funding.

“It should be the companies who created this mess who are responsible for paying to clean it up,” McCartney said. Unlike orphan wells, it’s completely clear the companies are required to clean up their old wells, he said.

“We know exactly who created the mess. For the public to be cleaning it up is just one more in a whole network of subsidies that we are giving this industry.”

The federal government funding also includes $15 million B.C. is using to reclaim orphan sites and $5 million for addressing “legacy” impacts of oil and gas development, including replacing soil and vegetation and improving caribou habitat.  [Tyee]

Read more: Energy, Politics, Environment

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