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Polluter pay advocate slams royalty credits for energy industry cleanup

Energy industry proposal would give companies royalty break in return for well cleanup
Polluter Pay Federation is against a proposal to give energy industry companies royalty breaks to encourage well cleanup (File photo from The Canadian Press)

Taxpayers should not be helping pay the cleanup bills for an energy industry reaping record profits, says the Polluter Pay Federation.

Mark Dorin is the organization’s vice-chair and he is among those concerned that the government of Premier Danielle Smith plans to bring in an industry-developed program called RStar that would enable oil and gas companies to offset the money they spend on reclaiming wells to gain credits against revenue earned from new production to reduce royalty payments.

It has also been proposed that insolvent companies could get twice as much in royalty credits as they spend on reclamation, said Dorin, who lives in Red Deer and has been involved in the oil and gas industry for 45 years. As well, the royalty credits would be marketable, meaning they could be sold to other oil companies.

“It’s an unnecessarily complex method of massive wealth transfer from citizens to oil and gas,” said Dorin.

“It’s a way of saying (to the industry) we’re going to give you free oil. It’s not tax dollars per se, it’s royalty-free oil.

“So, we’re giving away the assets owned by the citizens of Alberta for free to oil companies so that they can pay for their cleanup. So, it may as well be tax dollars.”

He believes the proposal is being supported by industry because they do not want to pay the tens of billions — estimates peg it at $40 to $70 billion — it will cost to clean up Alberta’s orphan oil and gas wells. Companies pay into an Orphan Well Fund to help pay for cleanup, but it is nowhere near enough, he said.

Dorin said the scheme goes against the province’s self-touted polluter pay policy.

The proposal got attention earlier this week when Energy Minister Pete Guthrie confirmed his department is studying an industry proposal intended to encourage the cleanup of old wells and drilling of new ones by granting royalty credits.

Estimates suggest that if the so-called RStar program grants the $20 billion in credits industry is seeking, Alberta taxpayers would forgo $5 billion in revenue.

“We are working internally on this,” Guthrie told reporters at a news conference for a hydrogen energy initiative, adding any announcement is “weeks if not months away.”

Asked for comment, Guthrie’s press secretary Scott Johnston said in an email that “we are working hard to shrink the inventory of inactive and orphaned wells across Alberta. A lot of work has already been done through the Site Rehabilitation Program and the province’s new Liability Management Framework, which will help improve reclamation and cleanup work for years to come.

“However, we know that there is more work to do. That’s why, as Minister Guthrie noted, we are exploring ways to help clean up some of the most expensive projects and older inactive oil and gas sites by providing more incentives to industry.

“No decisions have been made yet. We will be consulting with impacted stakeholders, and we will keep Albertans updated as this work unfolds.”

Dorin believes the renewed interest in the royalty credit program is partly because of steps the provincial government took to push oil and gas companies to speed up cleanup by requiring companies clean up a percentage of their inactive wells every year.

“Everybody has to do it, and the small guys can’t do it. They don’t have any money to do it. In my opinion, that’s why RStar is coming out, that and the big cost of the orphan wells.”

Dorin said Alberta’s current law is polluter pay, so why should taxpayers have to contribute, especially at a time when oil and gas companies are reaping huge profits.

“The industry that originally drilled those wells and made the profit, why can’t they clean them up? That’s the deal we made.”

—With files from The Canadian Press

Polluter Pay Federation is against a proposal to give energy industry companies royalty breaks to encourage well cleanup (THE CANADIAN PRESS/Jeff McIntosh)
Polluter Pay Federation is against a proposal to give energy industry companies royalty breaks to encourage well cleanup (THE CANADIAN PRESS/Jeff McIntosh)