'A lost opportunity': Alberta gives back $137M to Ottawa in unspent funds to clean up inactive wells

The Alberta government has officially handed back more than $137 million to the federal government after running out of time to spend the cash to clean up old oil and natural gas wells.

Questions remain about why the provincial government was unable to use the much-needed funding, considering there are tens of thousands of inactive wells. 

Many companies are also disappointed that the full amount wasn't spent because of the loss of reclamation work it would have created.

The cash was part of the federal government's $1.7-billion funding pledge in 2020 aimed at reducing the environmental risk of aging oil and gas infrastructure, while also providing work for the oilfield service sector after the pandemic began and oil prices crashed.

The money was divided between B.C. ($120 million), Alberta ($1 billion) and Saskatchewan ($400 million). Alberta's Orphan Well Association received a $200-million loan to support the cleanup of wells left over when companies go bankrupt.

Saskatchewan dispersed all of its share, while B.C. had to return a small amount of unspent money, the federal government confirmed.

Last year, Alberta began lobbying the federal government to keep the leftover funds to continue remediation work in the oilpatch, specifically to clean up wells on Indigenous land, even though the deadline for the funding had passed.

"Though much effort was spent in trying to convince the federal government to see the value in this continuation, they demanded the return of the unexpended funds," said Alberta Energy Minister Brian Jean, in an emailed statement.

The money was returned last month, Jean said. It will be deposited with the government's general revenue, according to Katherine Cuplinskas, press secretary for federal Finance Minister Chrystia Freeland.

Unfinished work

"Why was that money not spent?" asked Duane Bratt, a political science professor at Mount Royal University in Calgary. "The sector agrees it's important, the provincial government thinks it's important, the federal government has said it's important, resources were put in play and they weren't used or they weren't fully used."

Bratt also pointed to the political optics of the situation, considering Premier Danielle Smith and her cabinet "complain all the time about federal spending powers in Alberta and that there's inequitable transfer payments between Ottawa and Alberta compared to other provinces."

Initially, the Alberta government struggled to launch its Site Rehabilitation Program (SRP) as government staff were overwhelmed by a flood of applications. Eventually, tens of thousands of projects were approved to use up all of the federal funding. 

Still, after a few years, a portion of the money remained unspent as some of the approved cleanup work was not completed.

Some industry leaders point to poor weather and labour shortages to help explain the unfinished work.

"You can't expect us to spend all of this in minus-35 degree weather when the ground is frozen," said Gurpreet Lail, president and CEO of Enserva, an association representing oilfield service companies.

"If we had a little bit more time, we would have spent this money," she said.

A portion of the SRP focused on cleaning up wells and other old oil and gas infrastructure on Indigenous land, which took time to provide training to local communities.

The unused funding is "1,000 per cent a lost opportunity," but the overall program was critical in helping the industry through an "extremely difficult" time for the sector, said Lail.

She wishes the leftover money could have stayed in the province to continue cleanup efforts, specifically on Indigenous land.

"This is the first time we've been able to train Indigenous people to work on their own land in reclamation and dealing with abandoned wells alongside all our member companies. And why wouldn't you want to continue that work?" she said.

Impact of program

The Alberta government had agreed to a federal government deadline for the funds to be committed to specific cleanup efforts by March 31, 2022, which was extended to May 15, 2022. The actual cleanup work had to be completed and invoiced by Feb. 14, 2023.

"I'm sure they are disappointed," said Joe Chowaniec, executive director of the Environmental Services Association of Alberta, about how his members companies are feeling about the unspent money.  

"It could have been used to put people to work," he said.

While industry is still thankful for the SRP, there are critics who feel it was a lost opportunity to address the province's inactive well problem. 

Not only was the program slow to launch, but some of the money went to wealthy oil and gas companies which didn't need a helping hand, says Drew Yewchuk, a former staff lawyer with the University of Calgary's Public Interest Law Clinic.

He also questions the usefulness of the program in helping oilfield service companies, since oil and natural gas prices recovered less than a year after they crashed in April 2020. By early 2022, oil prices had surged to multi-year highs.

"By the time [the Alberta government] really got it going and enough work was being done to pull people into employment, oil and gas prices were already starting to recover or had recovered and so the goal ended up being a total wash," he said.

"They couldn't get it going fast enough and the money they did manage to spend extremely quickly was sent to companies that could have afforded to do the work anyway," he said.

The number of inactive and marginal producing wells in Alberta has declined slightly in recent years from 206,800 in 2020 to 177,801 this year, according to the Alberta Energy Regulator.