Oilsands cleanup may not be adequately funded: Alberta auditor general

Alberta’s auditor general says the province may not be requiring oilsands companies to save enough money to ensure their gigantic mines are cleaned up at the end of their life.

EDMONTON — Alberta’s auditor general says the province may not be requiring oilsands companies to save enough money to ensure their gigantic mines are cleaned up at the end of their life.

“If there isn’t an adequate program in place to ensure that financial security is provided by mine operators … mine sites may either not be reclaimed as intended or Albertans could be forced to pay the reclamation costs,” says a report released Monday by Merwan Saher.

Saher says current rules allow companies to overestimate the value of their resources. That allows them to delay increases to the amount of money they sock away to fund cleanup.

As well, Saher says the government hasn’t even met its own targets when it comes to ensuring each operator is assessed a large enough amount to pay for reclamation. Only about one-quarter of the audits promised in 2011 have been completed.

“The level of verification activity has been insufficient,” says the report.

The Mine Financial Security Program was instituted in 2011 and currently holds security deposits from eight oilsands mines and 19 coal mines. The fund holds $1.6 billion to cover about $21 billion in eventual liabilities.

The program allows companies to keep remediation funds low until the mine has less than 15 years of life left, or until the company has less than three times as many assets as liabilities.

But current rules, which allow companies to do things such as give equal value to probable and proven reserves, can help companies inflate the asset side of that equation. Saher also noted the rules don’t take into account how long-term price swings such as the current oil downturn can change a company’s financial position.

“The department has accepted the risk of not protecting against the risk of a broad based and rapid structural decline in the oilsands sector,” the report says.

Saher also says there aren’t enough checks on how the base security deposit companies must put up is set.

Current rules allow companies to calculate their own cleanup liabilities, subject to government audit. Saher points out that while Alberta had promised eight such top-level audits by this time, only two have been conducted.

“There is presently no evidence that the level of audit activity is commensurate with the risks that exist,” the report says.

Comment from industry and government wasn’t immediately available.

Saher’s report also criticizes the government’s handling of Crown grazing leases, which it says allows private ranchers to collect compensation payments from industry for damage to land they don’t own.

And the report criticizes the management of Alberta’s Specified Gas Emitters Regulation, the rules under which the province’s carbon pricing system works.

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