Yahoo Finance Alberta's oilsands cleanup piggy bank 'unfit for purpose,' researchers say
The Alberta Energy Regulator’s (AER) plan for making sure taxpayers are not stuck with a multi-billion dollar cleanup bill from oilsands producers is “entirely unfit for purpose,” say researchers at the University of Calgary calling for a public inquiry on the issue.
The AER describes itself as Alberta's full life-cycle energy regulator, tasked with ensuring safe, orderly, and environmentally responsible development of the province’s oil, natural gas, and coal.
Its Mine Financial Security Program (MFSP) is a liability management program designed to strike a responsible balance between protecting Albertans from oilsands and coal mine closure costs, and maximizing the industry’s opportunities.
In Alberta, companies are required to return mine sites to their previous condition after projects are no longer in service.
“The AER estimates over $45 billion in remediation and reclamation liabilities in the oilsands. This number may be a dramatic underestimate, with figures in leaked, official presentations suggesting as much as $130 billion in liabilities covered by less than $2 billion in security deposits,” University of Calgary School of Public Policy researchers Martin Olszynski, Andrew Leach, Drew Yewchuk wrote in a recent paper.
Their report alleges the MFSP allows mine owners to overestimate asset values, while remaining “deliberately blinkered to potential structural changes in oil markets and prices caused by international and domestic climate change policies.”
“The structural issues with MFSP are as significant as they are plain,” the authors wrote. “Fundamentally, the entire MFSP regime rests on an incredibly uncertain foundation.”
The AER did not respond to a request for comment.
The researchers say international efforts to transition away from fossil fuels underscore the importance of ensuring the oil and gas industry puts enough money aside for future cleanup costs.
“Especially when [oil] prices are expected to decline or costs are expected to increase . . . security represented by those assets will not be there when that security is needed most,” they wrote.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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