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Both Notley and Kenney Hiding from a $260-Billion Cleanup Problem

The Alberta government may well leave taxpayers to clean up the oil and gas industry’s mess.

Andrew Nikiforuk 9 Apr

Andrew Nikiforuk is an award-winning journalist who has been writing about the energy industry for two decades and is a contributing editor to The Tyee. Find his previous stories here.

The main thing Jason Kenney and Rachel Notley have in common, other than their affinity for pipelines, is their joint fear of the possible $260-billion cleanup bill for the province’s aging oil and gas fields. 

Neither Kenney, the United Conservative Party leader, nor NDP Premier Notley have said much on the hustings about this astounding liability, which includes tens of thousands of inactive wells, abandoned gas plants, oil sands tailing ponds and 400,000 kilometres of pipelines. 

The mountainous size of the cleanup costs dwarfs the puny pile of security deposits the province has collected from industry to pay for the cleanup — $1.5 billion.

Regan Boychuk, a 41-year-old Calgary roofer, independent researcher and a driving member of the Alberta Liabilities Disclosure Project, understands why Kenney and Notley don’t want to talk about such embarrassing math.  

“I think this issue is too big and too scary for both government and industry to face. It is a can of worms,” said Boychuk in a Tyee interview. 

But if not corrected, the scale of the problem could affect the province’s credit rating, bankrupt hundreds of smaller oil and gas firms and leave Canadian taxpayers with the mother of all cleanup bills.

This has happened before.

Decades ago, Canada’s mining industry grossly underestimated what it needed for cleaning up acidic tailings and set aside paltry deposits for the job, just like the oil patch is doing today. 

As soon as the mines stopped producing money, corporate Canada walked away from an estimated 10,000 abandoned or orphaned mines throughout the country, arguing they had run out of cash.  

Taxpayers still need to spend billions on rehabilitating these mining sites.

Canada’s appalling mining legacy explains why the Alberta Liabilities Disclosure Project has a simple mandate: bring more transparency to the problem and spark a public debate about Alberta’s cleanup liabilities before taxpayers get whacked. 

Boychuk reckons that Alberta’s politicians understand the scale of the issue, but no politician really wants to name the monster hiding in the province’s economic closet, because that would mean owning up to decades of government mismanagement.

The $260-billion figure, by the way, comes not from foreign-funded radicals but from internal studies done by the industry-funded Alberta Energy Regulator two years ago.

Last year Robert Wadsworth, the agency’s vice president responsible for cleanup, gave a public presentation that indicated the regulator had lowballed the cleanup figure at $58 billion. 

The $58 billion didn’t include the cost of retiring pipelines (a $30-billion liability) severely underestimated the cleanup of the province’s nearly 400,000 wells (a $100-billion problem), and miscalculated oil sands mining liabilities by $100 billion.

Wadsworth also said that the collection of security funds from industry was “insufficient” due to a “deeply flawed” system for monitoring liabilities.

Alberta’s Liability Management Rating program, for example, has tracked inactive wells in the oil patch for nearly two decades. But it doesn’t collect money for cleaning up abandoned wells until the companies are “already showing declining financial capacity,” said Wadsworth.

Which is often too late to get any money. The system is engineered to dump corporate liabilities on the public.

Boychuk recently submitted a freedom of information request to see the internal Alberta Energy Regulator studies used by Wadsworth to calculate his $260-billion cleanup bill. 

The government refused to release information on unfunded oil sands mining liabilities or unfunded liabilities for pipeline abandonment. 

But Boychuk did get some interesting spreadsheets and data on what it costs to retire inactive or unreclaimed well sites.  

“I was flabbergasted,” Boychuk said. 

The data show that the regulator came up with 128 cost scenarios for various kinds of wells, based on their age, depth and type (oil or gas).

But instead of doing different calculations for the various types of wells, the regulator decided on an average cost of $270,000 and then multiplied that figure by the number of unreclaimed wells. 

“They didn’t finish the job,” said Boychuk. 

So Boychuk applied his own cost scenarios for more than 300,000 wells in the province. 

His total wasn’t $18 billion. It was between $40 and $70 billion.

Shamefully, the province has only collected $200 million as security deposits on what is possibly a $70-billion liability. 

“No one can now claim that it will cost less than $40 billion to clean up Alberta’s oil and gas wells, and no one can wave away the Wadsworth report as being inaccurate,” concluded Boychuk. (Alberta Energy Regulator regulator has disavowed Wadsworth's presentation as “a hypothetical worst-case scenario.”)

Boychuk says the province is running out of time. “The issue has been building for decades and Alberta can’t afford another four years of inaction and lack of transparency.”

Yet the United Conservative Party and the New Democrats barely mention the problem, let alone its scale, in their political platforms. 

The New Democrats promise, for example, to introduce “clear timelines for when companies need to clean up their abandoned oil and gas wells,” a reform that should have been introduced decades ago. 

Meanwhile the UCP proposes to “streamline” the process for abandoning wells and ask the federal government — taxpayers — to provide “tax incentives and financial support” for energy corporations facing cleanup costs.

None of these “matches the scale of the problem,” says Boychuk.  [Tyee]

Read more: Energy, Politics, Environment

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