Written by Anna Fitz and JoAnn Jamieson, McLennan Ross LLP
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 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.
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.
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.
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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
About the Authors
JoAnn P. Jamieson’s practice is dedicated to environmental, regulatory and Aboriginal law matters. With over 20 years of experience, she has worked on major resource development throughout western and northern Canada including oil sands, oil and gas, coalbed methane, pipelines, co-generation, hydro, petrochemical, diamond and uranium mining, in situ coal gasification, power, renewables and clean energy technology. JoAnn has extensive experience in environmental impact assessment, land and water regulation, municipal planning, climate change, species at risk, corporate social responsibility and regulatory compliance issues.
Anna Fitz is a student-at-law in the Edmonton office of McLennan Ross LLP. Anna completed her Juris Doctor at the University of Ottawa, where she graduated cum laude. She also received her Bachelor of Arts in English Literature at McGill University and graduated with distinction.