Anger over Alberta royalty plan to reward companies for cleaning up oil wells

Alberta's United Conservative Party government is facing growing criticism for a plan to give oil companies a royalty credit for cleaning up their old wells.

An Independent legislature member and former member of the UCP caucus has called the plan a "government boondoggle."

Analysts with Scotiabank said in a report that it "has the potential to generate negative public sentiment" toward the oil and gas sector, and "goes against the core capitalist principle that private companies should take full responsibility for the liabilities they willingly accept."

And a Calgary political scientist has raised questions about Premier Danielle Smith's support for the Liability Management Incentive Program, her former work as a business lobbyist and the support that helped her win the party leadership.

"It's a disgrace on so many different levels," said Duane Bratt of Mount Royal University. "You've got the corporate welfare element but you've also got the corruption element."

The provincial government is planning a pilot project that would give $100 million in royalty breaks to companies that fulfil their legal obligations to restore old oil and gas wells. A royalty is the price Alberta charges a company to develop a resource.

Energy Minister Peter Guthrie met with some landowner groups Thursday to discuss the project.

Environmentalists, economists, landowners and analysts within Alberta Energy have all opposed the program, formerly known as RStar.

On Thursday, Drew Barnes, who was expelled from the governing UCP caucus for comments that the government's COVID-19 restrictions were too tough, added his voice.

"I'm 100 per cent against RStar," he said. "It's corporate welfare."

Meanwhile, Bratt pointed out that less than a year ago, Smith was a registered lobbyist for the Alberta Enterprise Group, a Calgary-based association of 100 companies that bills itself as “Alberta’s most influential business organization.” As group president, Smith wrote then-energy minister Sonya Savage promoting RStar.

Since then, Smith won the leadership of the United Conservatives. After winning, she made RStar a priority, writing it into Guthrie's mandate letter on his appointment to cabinet.

"You've got someone who was a paid lobbyist to promote this program," Bratt said. "Then that paid lobbyist becomes premier and produces that same program she was lobbying for."

Elections Alberta reported Thursday that Smith's leadership campaign raised $1.3 million. The donors are not identified.

"Are some of the people who were donating to Danielle Smith's leadership campaign the same companies who were paying her to lobby on behalf of RStar?" Bratt asked.

He said Alberta legislation mandates a cooling-off period for senior civil servants joining the private sector. There are no rules going the other way.

Bratt said, to his knowledge, there has never been a situation like this in Canadian politics.

Barnes said the program violates conservative principles.

"I believe there will be concerns from many, many of my former UCP colleagues," he said.

"I would ask them to live up to what UCP members have put forward at conventions. It's about less regulation and lower taxes.

"It's not about more complicated corporate cronyism."

Scotiabank's analysis indicates that the companies that stand to benefit most from the program are Canadian Natural Resources, Cenovus Energy, Paramount Resources and Whitecap Resources. In their last quarterly reports, those companies recorded a combined net income of nearly $5 billion.

Smith defended the program to reporters Thursday, saying the government shares responsibility for the cleanup.

"There are a lot of practices that were approved by government that would not be acceptable today," she said. "We think there's a joint obligation, especially for the wells, because environmental rules changed over time."

Smith said previous attempts to address Alberta's 170,000 abandoned and orphaned wells haven't worked and it's time to do something different.

"We have always taken the view to allow companies to keep more of what they earn."

Smith did not immediately respond to an emailed question about her leadership campaign.

Brad Herald, vice-president of the Canadian Association of Petroleum Producers, said RStar could be part of a "dramatic acceleration" in well cleanup. Governments are already playing a role, he said.

"We look forward to the consultation process with the Alberta government on their proposed Liability Management Incentive Program and will work to ensure the momentum built in the reclamation of legacy sites in Alberta continues.”

Alberta New Democrat Opposition Leader Rachel Notley criticized Smith's promotion of a program she once lobbied for.

"The issue is one that Danielle Smith is arguably conflicted on," Notley said Thursday.

"We don't give people bonuses for cleaning up after themselves. It sends the wrong message to companies that have chosen to follow the law and live up to their obligations."

This report by The Canadian Press was first published Feb. 9, 2023.