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.
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