Potential Implications of Alberta’s Rescission of the Coal Policy

by Gavin Fitch, Q.C.


On June 1, 2020 the provincial government rescinded a decades-old policy that placed restrictions on the mining of coal in Alberta’s Eastern Slopes.

A Coal Development Policy for Alberta was issued in 1976 and was widely known as the “Coal Policy”. The Coal Policy covered many aspects of the coal development process, from the acquisition of exploration rights and coal leases to royalties, prices and marketing. However, the Coal Policy was best known for dividing a large area of the Eastern Slopes of the Rocky Mountains (where there are substantial coal deposits) into four different land use categories (“Coal Categories”) where coal development was prohibited (Category 1), restricted (Category 2) or generally encouraged (Categories 3 and 4).

In a media release announcing the rescission of the Coal Policy, Alberta Energy stated that with various regulatory, policy and planning advances over the past 45 years, the Coal Policy “became obsolete”. The announcement also stated:
Former category 1 lands will continue to be protected from coal leasing, exploration and development on public lands but will not infringe on private lands or freehold mineral rights. This will support critical watersheds, biodiversity (including numerous species at risk), as well as recreation and tourism activities along the eastern slopes of Alberta’s Rocky Mountains. Leasing outside of these areas will be subject to the same land use planning and management rules that apply to all other resources and industrial uses.
All coal development projects will continue to be considered through the existing rigorous Alberta Energy Regulator review process. This review is based on each project’s merits, including its economic, social and environmental impacts.


To understand what the rescission of the Coal Policy means, and in particular the elimination of the Coal Categories, it is critical to know how the Coal Policy defined the categories, in particular Categories 1 and 2. Category 1 lands were defined as those:

in which no exploration or commercial development will be permitted. This category includes National Parks, present or proposed Provincial Parks, Wilderness Areas, Natural Areas, Restricted Development Study Areas, Watershed Research Study Basins, Designated Recreation Areas, Designated Heritage Sites, Wildlife Sanctuaries, settled urban areas and major lakes and rivers. These are areas for which it has been determined that alternate land uses have a higher priority than coal activity. Category 1 also includes most areas associated with high environmental sensitivity; these are areas for which reclamation of disturbed lands cannot be assured with existing technology and in which the watershed must be protected.

Category 2 lands were defined as those:

in which limited exploration is desirable and may be permitted under strict control but in which commercial development by surface mining will not normally be considered at the present time. This category contains lands in the Rocky Mountains and Foothills for which the preferred land or resource use remains to be determined, or areas where infrastructure facilities are generally absent or considered inadequate to support major mining operations. In addition this category contains local areas of high environmental sensitivity in which neither exploration or development activities will be permitted. Underground mining or in-situ operations may be permitted in areas within this category where the surface effects of the operation are deemed to be environmentally acceptable.

The map from the Coal Policy showing the location of the various categories of land can be found here. Category 1 lands are yellow; Category 2 lands are blue.

As part of the rescission of the Coal Policy, Alberta Energy issued Information Letter 2020-23, which states:
With the rescission of the Coal Policy, all restrictions on issuing coal leases within the former coal categories 2 and 3 have been removed. Alberta will continue to restrict coal leasing, exploration and development within public lands formerly designated as coal category 1. This prohibition on coal activities is being continued to maintain watershed, biodiversity, recreation and tourism values along the Eastern Slopes of Alberta’s Rocky Mountains.

Having regard for how the Coal Policy defined Category 2 lands, and the map showing their location, it is clear that in fact a substantial amount of land in the Eastern Slopes that was formerly restricted from coal development has been now been opened to development. Under the Coal Policy, “limited exploration” was permitted in Category 2 lands but “commercial development by surface mining” was effectively prohibited. This prohibition has been removed.

One of the reasons stated for the rescission of the Coal Policy is that when the Coal Categories were created in 1976 “land use planning hadn’t yet been completed”; and that the categories are no longer needed given “today’s modern regulatory, land use planning and leasing systems.”

Alberta enacted the Alberta Land Stewardship Act (“ALSA”) in 2009 to “provide a means to plan for the future” and to “provide for the co-ordination of decisions by decision-makers concerning land, species, human settlement, natural resources and the environment”. Under ALSA, the province was divided into 7 areas for which a regional plan was to be created. To date, only 2 regional plans have been completed: the Lower Athabasca Regional Plan and the South Saskatchewan Regional Plan (“SSRP”).

The SSRP covers a portion of the southern Eastern Slopes that was also covered by the Coal Policy. However, a large portion of the Eastern Slopes north of the headwaters of the Oldman and Livingstone Rivers fall outside the SSRP and are not subject to any other regional plan. Thus, it seems fair to say that land use planning for the Eastern Slopes is still not completed. Further, with the rescission of the Coal Policy and the elimination of the Coal Categories, there is no land use plan in place for these lands.

The SSRP was adopted in 2014 and last amended in 2018. It is intended to guide development in the South Saskatchewan River basin until 2024. The SSRP addresses potential coal development and specifically states that the government will review the coal categories established by the Coal Policy:

to confirm whether these land classifications specific to coal exploration and development should remain in place or be adjusted. The review of the coal categories will only be for the South Saskatchewan planning region. The intent is for the SSRP and implementation strategies of the regional plan or future associated subregional or issue-specific plans within the region to supersede the coal categories for the purposes of land use decisions about where coal exploration and development can and cannot occur in the planning region.

This suggests that the SSRP contemplated the Coal Categories being replaced or superseded by new “adjusted” land use classifications developed under the SSRP that would guide decision-makers about where coal exploration and development can occur. What has happened instead is the Coal Categories have been eliminated but not replaced with anything new. Further, the intent of the government’s new policy appears to remove the categorization of lands for coal development. Instead, development will be reviewed by the Alberta Energy Regulator on a project-by-project basis, without the benefit of the guidance that would be provided by adjusted land use classifications under SSRP.

 It appears that the Coal Policy was rescinded to spur coal exploration and development in Alberta. The foregoing analysis suggests, however, that the elimination of the Coal Categories without them being replaced by a new planning regime may have unintended consequences.

First, as noted above, it raises the issue of the need to revise the SSRP. This could lead to legal challenges. Second, the environmental assessment process for major resource extraction projects like surface coal mines is already slow and cumbersome. Removing any guidance as to where coal development is appropriate arguably will burden the existing environmental assessment process even more by opening it up to debates about the appropriateness of coal development in a specific location.

Update on Site Rehabilitation Programs in Alberta, British Columbia and Saskatchewan

by Anna Fitz, Student-at-Law, and JoAnn P. Jamieson


On April 17, 2020, the federal government announced $1.7 billion in funding to clean up oil and gas sites in Alberta, British Columbia, and Saskatchewan. The goal of the federal funding was to create immediate jobs in the three provinces while helping companies avoid bankruptcy during the COVID-19 pandemic. 

All three provinces were quick to announce programs in the hopes of creating jobs and getting people back to work. This article provides an update on the programs in each province.

Alberta
Alberta received $1.2 billion, the bulk of the federal funding. On April 24, 2020, the Government of Alberta announced its “Site Rehabilitation Program,” which provides up to $1 billion in grants to oil field service contractors to perform well, pipeline, and oil and gas site closure and reclamation work. 

The goals of the program are to:
·       immediately get Alberta’s specialized oil field workforce back to work,
·       accelerate site abandonment and closure efforts, and
·       quickly complete a high volume of environmentally-significant work.

Inactive oil and gas sites may be nominated by landowners and Indigenous communities. Landowners can nominate inactive sites by emailing the required information (including the legal description of the land, landowners on the land title, and contact information) to the government. Indigenous communities can also nominate inactive sites by email; required information includes the name of the First Nation or Métis settlement, the legal description of the site, and the licensee information sign at the site. A detailed overview of the nomination process can be found here.

In order to be eligible for funding to do the work, service contractors must be located in Alberta and must offer jobs to Albertans. Eligible work includes closure on inactive wells and pipelines, Phases 1 and 2 environmental Site Assessments, remediation, and reclamation. Interested parties can apply on the Site Rehabilitation Program website.

The Alberta government will provide funding for the Site Rehabilitation Program in multiple increments. The first increment, which has now ended, reportedly received significant interest. The second increment is currently on-going, and will close for applications on June 18, 2020. Third and later increments will also become available.  

In addition to the Site Rehabilitation Program, the government of Canada has extended a $200 million repayable loan to the existing Orphan Well Association (“OWA”). Under the OWA, an orphan site is “a well, pipeline, facility or associated site that does not have a legally responsible and/or financially viable party to deal with its decommissioning and reclamation responsibilities.”

The OWA has a procurement process through which it selects from a list of prime contractors, who are then normally responsible for choosing their own subcontractors. However, with the new federal funding, the OWA is planning to collaborate with its prime contractors to select subcontractors (interested parties will be able to apply) for the additional work. The OWA anticipates allocating the new funding through a “staged process.” After further planning, OWA will be providing information about the process on its website.

British Columbia

On May 13, 2020, the Government of British Columbia (“BC”) announced its “Dormant Sites Reclamation Program” with which it is channeling its $100 million in federal funding toward cleaning up dormant sites. In BC, well sites are deemed “dormant” if they do not reach a threshold of activity for five years consecutively, or if they have failed to produce for at least 720 hours yearly.

The program is specifically for B.C. companies and contractors with experience in environmental contracting and/or oil and gas infrastructure abandonment. Applicants must have a valid contract with a BC-based oil and gas activity permit holder for a dormant site.

Eligible applicants can apply online, where the information they will need to provide includes the company details, permit holder name, well authorization number, and estimated cost of each work component.

The B.C. government will provide its funding in two increments, the first from May 25, 2020 to October 31, 2020. Funding for this first increment is up to $50 million. The second increment will commence on November 1, 2020 and run to May 31, 2021.

In both funding increments, the B.C. government will provide financial contribution up to 50% of the total estimated or actual costs (whichever is less), up to a total of $100,000 per application and per closure activity. The program has already received significant interest; in a news release, the province noted it received over 1,100 applications on the first day, which means the program was nearly fully subscribed.

B.C. landowners, local governments, and Indigenous communities can nominate dormant oil or gas sites on their land through an online process beginning June 15, 2020. The BC government noted that such nominations will be a priority in the second increment of funding.

Saskatchewan

On May 22, 2020, the Government of Saskatchewan initiated the “Accelerated Site Closure Program” (“ASCP”). Through this program, the Ministry of Energy and Resources will manage $400 million from the federal government for the abandonment and reclamation of inactive oil and gas wells and facilities.

The ASCP involves multiple phases, the first for up to $100 million (the future funding and applicable phases have not yet been announced). In order to be eligible, licensees must be in good standing regarding debts owed to the Crown as of March 1, 2020 (e.g. the Oil and Gas Administrative Levy, the Orphan Well Levy, etc.). Eligible licensees will receive a minimum of $50,000 toward their abandonment and reclamation projects.

The program provides that licensees nominate their wells and facilities through the IRIS system (Integrated Resource Information System). Service companies, interested in performing the work, must apply through SaskTenders beginning in the first week of June 2020. Further details on the application process, and who to contact with questions, can be found in the following bulletin.

The Saskatchewan government anticipates that up to 8,000 wells and facilities will be abandoned and reclaimed through the ASCP, which in turn will support approximately 2,100 full-time jobs. Saskatchewan plans to develop an Indigenous procurement strategy further into the program.

The first phase of the ASCP is now complete, and eligible licensees have received notice of their allocation.  

Moving Forward

The federal funding is a welcome boost to cleaning up inactive oil and gas sites in Western Canada. This is a significant step to subsidize old, inactive sites and lower the associated environmental risks. As the three programs also create jobs and contracting opportunities for local parties, the federal funding appears to be a big win for both the energy industry and the environment in all three provinces during these difficult times.

If you have further questions about any of the three cleanup programs in Alberta, British Columbia or Saskatchewan, please reach out to JoAnn P. Jamieson or Sean Parker, co-chairs of McLennan Ross LLP’s Energy, Environment and Regulatory Practice Group.