Last year’s dive in oil prices has caused Alberta to change how it calculates the payments oilsands mines make to ensure there’s enough money to clean up the mess they leave behind.
“The interim solution we’re putting in place addresses the impact of this temporary drop,” said Lisa Fairweather of Alberta Environment and Parks, the department that manages the mine security program.
The program is intended to make sure the industry pays for its own cleanup when oilsands mines close. Companies make annual payments into a fund held by the province.
Those payments were premised on companies maintaining three times as many assets as environmental liabilities.
Failure to meet that target would force them to make extra payments.
However, for a brief period last year, oil prices crashed into unprecedented negative territory. That reduced the value of assets to the point at which companies would have had to pay “billions and billions” of dollars more, Fairweather said.
Prices have since rebounded and asset-to-liability ratios have recovered.
But companies, if they so choose, will have their 2020 payments assessed on a formula based on their revenue that doesn’t consider the overall value of their assets.
Fairweather emphasized the move is temporary. Energy Minister Sonya Savage has promised an overall review of the program this summer.
The province’s auditor general has said the program is underfunded and leaves the province exposed to clean up costs.
It now holds just under $1 billion, a small fraction of what remediation costs would be.
Fund ‘isn’t nearly big enough,’ expert says
Martin Olszynski, a professor with expertise in resource law at the University of Calgary, criticized Thursday’s announcement.
The one situation that would have forced the industry to pay into the fund has now been nullified, he said.
“Why does this one [price] blip matter? The fund isn’t nearly big enough. Anything that puts more money in there is a good thing.”
Olszynski said there’s little need for a review of the security program. Plenty of research has already shown that Alberta needs better guarantees that resources will be there to clean up the landscape after the oilsands are gone, he said.
“What’s the problem?” he asked. “Why shouldn’t [industry] put more toward this program that everybody knows is underfunded?
“We keep punting this issue down the road.”