EDMONTON — The Alberta government says it will triple the financial guarantees it gets from oilsands companies to protect taxpayers from being stuck with cleanup bills.
But critics say the approach still leaves the public exposed to billions of dollars in risk during a mine’s early years.
“There’s a short-term risk under this policy,” Nathan Lemphers, an analyst with the Pembina Institute, an environmental think-tank, said Thursday.
Alberta already requires oilsands operators to post financial guarantees to pay for environmental cleanups if a company fails or is otherwise unable to pay the cost. The government has nearly $1 billion in the fund, but the Pembina Institute and the provincial auditor general, among others, have long pointed out that’s not nearly enough.
The province has been negotiating with the industry since 2004 and on Thursday Environment Minister Rob Renner announced a new deal will take effect by early next year.
“Albertans will never have to foot the bill for the cleanup of affected lands,” Renner said. “Under this program, the total amount of security collected under the long term will be considerably higher than under our previous policy.”
The current program bases the amount of security on how much land a company plans to disturb in the coming year. But the new plan will require companies to put up $30 million in guarantees for a mine and $60 million for a mine and an upgrader. Buildings and other facilities will be covered for the first time.
But the government won’t require any additional surety until a mine enters the final 15 years of its life. Renner said that’s because the mine’s value would be high enough in its early years to cover the cost of reclamation. It’s when an operation is in its final phase, when most of the bitumen has been removed, that the public needs a backstop to pay for a cleanup, he suggested.
“That inherent value in the mine diminishes quite considerably towards the end of life,” Renner said. “That’s the point at which we have to ensure we have sufficient capacity to cover the contingency that the operator walks away.”
That means the industry will actually post lower financial guarantees until about 2020, even though most observers agree the numbers are already inadequate.
“Albertans will actually collect about half a billion dollars less than they would have otherwise in the first 10 years of this plan,” said NDP environment critic Rachel Notley.
Lemphers said it’s inherently risky to use a mine’s value to financially guarantee its cleanup.
Industry is prone to overstate the value of its assets and minimize its liabilities, he said, and those evaluations under the new plan will be confidential.
As well, mine assets can swing in value with changing markets or unforeseen events.
“You’re linking (financial guarantees) to an asset that could be quite devalued.”
Thomas Schneider, a business professor at the University of Alberta, said using a mine’s value to backstop its environmental liability is reasonable.
“It frees up capital at the start for job creation and investment,” he said.
The risk that the asset’s value could plummet is remote, he suggested.
“That’s a risk I’d be happy taking.”
The new program does provide more opportunity for government audits of industry cleanup estimates. It also contains provisions for guarantees of about $75,000 per hectare if a company were to fall behind on its reclamation targets or declined too far in net value.
“We welcome that there is increased government scrutiny and accounting safeguards,” said Lemphers.
Government officials were unable to provide an average figure for reclaiming land and water. They said different aspects of remediation — cleaning up a building versus filling in a mine — are too different to provide a meaningful number.
Based on previous remediation projects, Pembina estimates cleanups cost between $220,000 and $320,000 per hectare.
A total of 104 hectares have been officially reclaimed out of about 67,000 hectares of disturbed land. Industry officials say another 6,500 hectares are nearly reclaimed.