Alberta’s energy minister said he needed to design incentives for the industry to clean up oil wells

Directions from Alberta Premier Danielle Smith to her new energy secretary show that the United Conservative government has failed to abandon a controversial program that would cause taxpayers to hold back the clean-up of old oil and gas wells, which companies are committed to are already required by law.

In her mandate letter to Brian Jean, Smith accuses him of “developing a strategy to effectively encourage reclamation of idle old oil and natural gas sites and enable future drilling while respecting the polluter pays principle.”

That language mirrors the old RStar and Liability Management and Incentive Program proposals, where companies would have received royalty breaks on the production of new wells corresponding to how much money they spent cleaning up their old ones. That tax benefit would come despite the site remediation being a permit requirement for any operator in the province.

It was condemned by landowners, rural communities, energy analysts and even experts within Alberta Energy.

Critics said it would reward companies for disobeying the terms of their permits, provide an unnecessary tax break during high oil prices and violate an important principle of environmental law – the principle that polluters pay for their own cleaning.

Before the last election, the government had planned a $100 million pilot project on the idea. After the outcry, the pilot was shelved.

Now, after the vote, it’s back.

“The UCP didn’t want to talk about the program during the election, but it looks like they’re going to do it anyway,” said Kathleen Ganley, energy critic for the New Democrat Opposition.

Ganley attaches little importance to the clause about respecting the polluter’s reward. The whole idea runs counter to the polluter’s reward, she said.

“It seems self-contradictory,” she said. “The whole program is designed to make the government pay to clean up [old] sites.

“It doesn’t make any sense. It seems [like] a communication exercise.”

‘They should sell this’

Martin Olszynski, professor of resource law at the University of Calgary and RStar critic, called the wording in Jean’s letter “smart marketing.”

“They realize this is a marketing problem,” he said. “They need to sell this to Albertans.”

It is impossible for an RStar-type program to honor the polluter’s reward, Olszynski said.

“You can’t square that circle.”

In an emailed statement, Jean insisted that he can.

“We will absolutely support the ‘polluter pays’ principle,” he said. “Many of these sites have been left behind by actors who no longer exist – but for those owned by companies that are still operating, I will explore all the resources at my disposal to ensure that the sites are operators are cleaned up.”

Incentives can take different forms, he said.

“It could be anything from easing regulatory burdens, speeding up permitting procedures, or creating rules that favor new permits for companies that excel at cleaning up old sites. Those decisions have yet to be made.”

Offering incentives to energy companies to meet their regulatory requirements was a goal of Smith’s before re-entering politics.

She promoted it as a corporate lobbyist. After becoming prime minister, she put it on her prime energy minister’s to-do list and placed a prominent driver of the program on the public payroll as “special projects manager.”

Kris Kinnear remains on the staff list of Smith’s Calgary office.

Well cleanup is a major problem in Alberta.

In December, the county’s energy regulator said there were 172,236 wells that were abandoned or inactive. This does not apply to unsanitized pipelines, buildings or other industrial infrastructure.

The stock of such wells is growing. A 2021 University of Calgary study found that the number of idle wells increased by more than 50 percent between 2015 and 2020.

Estimates for the cost of cleanup vary widely.

The Alberta Energy Regulator puts the price tag at $18.5 billion. The Alberta Liabilities Disclosure Project, a coalition of landowners and academic experts, has valued it at $70 billion.

An internal regulator estimate, officially rejected, ran as high as $260 billion.