Two Canadian oil giants benefitted big from federal cleanup subsidies

A $1 billion government oil and gas cleanup program is coming to an end in Alberta. Data analyzed by The Narwhal shows over half of known spending flowed through just three oil and gas companies and a municipality.

The program was announced in 2020, after the federal government pledged $1.7 billion for B.C., Saskatchewan and Alberta, the bulk of which went to Alberta. 

Two companies, Canadian Natural Resources Limited and Cenovus, accounted for 44 per cent of Alberta’s spending. Canadian Natural (CNRL), the largest oil producer in Canada, received at least $172 million in subsidies. Cenovus received almost $66 million.

The other two big recipients were the City of Medicine Hat, which owns natural gas facilities, at $22 million and IPC Canada Ltd. at $18 million. Collectively, the four entities accounted for 51.5 per cent of known spending.

Those figures only apply to a little over half of the billion dollars that the federal government sent to Alberta. There is no public data on which companies received money for the first three granting periods, accounting for approximately $416 million in spending. Two other granting periods gave money directly to First Nations and Métis communities to pay for clean up on their lands and the figures don’t include how much went to each oil and gas company.

The money went to service companies contracted to do everything from capping inactive wells to site assessments and reclamation work. While the money was not given directly to the oil and gas companies, it offset their expenses by covering costs to clean up wells owned by those companies.

The program also focused on supporting Indigenous-owned businesses doing the actual cleanup work. 

Public data shows four of the top five companies, accounting for $156 million of almost $700 million listed so far, were either directly owned by First Nations, were an Indigenous-owned company, or, in the case of Vertex Resource Group, partnered with First Nations and Indigenous-owned companies.

Those figures include all granting periods, but not all invoices have been paid at this time. 

Cenovus, Canadian Natural and IPC did not respond to interview requests. A spokesperson for the City of Medicine Hat said they were unable to set up an interview prior by publication time.

The Site Rehabilitation Program and its critics

When he first announced the funding in April 2020, Prime Minister Justin Trudeau said the government’s goal was to “create immediate jobs in these provinces while helping companies avoid bankruptcy, and supporting our environmental targets.” 

At the time, the oilpatch languished under collapsing prices due to the pandemic and an oil price war between Russia and Saudi Arabia. 

The intent was to put oilfield service companies to work cleaning up wells instead of drilling new ones, but critics were quick to question the federal largesse, particularly as a violation of the polluter pay principle — where a company that makes a mess ought to pay to clean it up.

Despite Trudeau saying the program would help clean up orphan wells — a growing problem in Alberta that refers to wells which no longer have an owner with the resources to clean them up — none of the money was directed at the issue. 

“Trudeau does this really kind of eloquent announcement about the program saying, yes we need jobs, but also we need to clean up orphan wells — he said inactive and orphan wells — we need to help struggling companies avoid bankruptcies,” says Megan Egler, a researcher and PhD candidate who wrote a report on the program for the Parkland Institute and Oxfam Canada.  

She says the prime minister also touched on the impact of orphaned and inactive wells on landowners, municipalities and Indigenous communities. 

“These goals all kind of got distilled down to two by the Alberta government,” Egler says, noting it’s hard to say whether the program was successful given those terms. 

“So now we’re just talking about jobs and cleanup activities. Which, I guess that shift in narrative is important because, did it create jobs? It did. Did it clean up? Well? It did, but it completely erases any talk about the polluter pays principle, which it completely violated.”

She says the metrics to measure the success of the program ignore environmental outcomes, including things like methane emissions from old wells, and there is insufficient data on which wells were capped or cleaned in order to determine if they were the highest risk locations.

There are currently over 7,000 orphan sites in Alberta waiting to either be decommissioned or to undergo environmental remediation, according to the Orphan Well Association, an industry-funded group that cleans up wells left behind by bankrupt companies. 

When the Parliamentary Budget Office released a report into the program in January, 2022, it found more than half the money distributed in Alberta was going to companies that were financially steady. 

The report said there was a risk the program would not be successful in reducing Alberta’s oil and gas liabilities if the money was not directed at firms in “acute financial risk.”

According to the Alberta Energy Regulator, there are currently a further 76,000 inactive wells — those owned by solvent companies but which are not producing oil or gas. Some of those have been inactive for decades. 

In addition, there are 170,000 wells in the province that have been abandoned — capped and put out of service — but which have not been reclaimed. 

CNRL, which posted $2.8 billion in earnings in the third quarter of 2022 alone, tops the regulator’s list with 22,536 inactive wells, followed by Cenovus with 5,638.

CNRL also said in its third quarter report that in 2022, it has so far returned approximately $4.9 billion to shareholders through dividends, “an increase of approximately $2.8 billion, or 127 per cent  from 2021 levels.”

Other major oil and gas companies, including Cenovus and IPC have posted significant profits over the past year.

The Alberta Energy Regulator said it did not have data on the Site Rehabilitation Program and directed questions to Alberta Energy. 

A spokesperson said the program was the responsibility of the government and the regulator did not “track any information about the program or its impacts.” 

Over 30,000 oil and gas sites covered under the program

The program did, however, deliver some results. 

According to the province, as of Feb. 10, there was work completed on 31,925 sites — 16,605 for abandonment, 7,344 for environmental assessments, 7,181 for reclamation and 1,552 for remediation.

The province says the program temporarily generated 4,700 jobs to date, short of its original projection of 5,300. 

A report by the auditor general of Alberta from March 2022, noted Alberta Energy was specifically looking at the number of jobs created and the total number of approved grants in order to evaluate the success of the program. 

It also noted the method for determining job creation could overstate the impact. 

The energy minister’s office says the province will continue to process invoices, which will take several weeks, and a final tally on who received funds will then be calculated. 

The Narwhal asked the minister’s office why there is no data for the first three reporting periods. Gabrielle Symbalisty, the acting press secretary for the minister, says there is no information on the first two periods because the provincial government applied a different funding formula for those grants. When asked to clarify why this prevented the government from releasing figures, she did not respond.

In period three, every licensee “determined by the Department of Energy to be an active oil and gas producer in Alberta” each received up to $139,000 in funding, but Symbalisty did not respond to a question about why those producers certified by the government were not listed.  

“There has been a significant acceleration in the pace of closure of inactive oil and natural gas infrastructure in Western Canada,” says Richard Wong, director of regulatory and operations at the Canadian Association of Petroleum Producers, when asked if the program reduced oil and gas liabilities. 

He said the program supported the sector during the pandemic and downturn and helped create jobs. 

A spokesperson for Chrystia Freeland, Canada’s finance minister, did not respond to a request for comment prior to publication.

‘Raining money from Ottawa’

Regan Boychuk has been pushing for better regulations to force companies to clean up their inactive wells for years. 

Boychuk, who worked as a researcher for the Albert Liabilities Disclosure Project when the federal program was announced, says they pushed the Trudeau government to offer loans instead of grants for the clean up of wells and urged there to be conditions tied to the money. Neither of those suggestions were included in the program. 

And, while he says there are some positives coming out of the program, the work was only done because “it was raining money from Ottawa.”

“The main beneficiaries, the big, incredibly profitable, money coming out of their pockets companies, that’s not who we should be giving free money to, they don’t need it, we can make them simply follow the law and they can spend their own money,” he says. 

He laments there is not more data on the outcomes of the program and what exactly was achieved. (Boychuk is running for the Green Party in the next provincial election.)

The end of the Site Rehabilitation Program comes just as the province enters a fresh debate on subsidies to oil and gas companies to clean up the mess left behind by their operations. 

The province has launched a pilot project that would give royalty credits on new production to companies for cleaning up wells that have been inactive for at least 20 years — a scheme Premier Danielle Smith lobbied for before she was elected. 

Wong says his lobby group is looking forward to consultations with the government on that plan — first called RStar and now renamed the Liability Management Incentive Program. 

Boychuk says he’s not surprised that it’s being introduced now and worries that no one is interested in enforcing the polluter pay principle. 

“It takes a real feat of ideological blindness not to see how much money is coming out of the ground, how big of a mess is being left behind and how we’re being cheated,” he says. “It could not be more transparent or clear.”