Alberta auditor general's report flags problems with environmental liabilities

Alberta's auditor general says $125 million of federal funding earmarked for the cleanup of inactive oil and gas wells in the province went unspent and remains in limbo.

The finding is among several concerns about environmental regulation and management the auditor general flagged in a 228-page report released Thursday.

The auditor's team said that last they heard, the province and the federal government had yet to agree on whether Alberta could give the remaining money to another agency to clean up more environmental liabilities.

"It was arguably a very challenging time to set up that program and do it very quickly and make sure that money could be deployed for the purposes as efficiently as possible," said Eric Leonty, one of four of the province's assistant auditors, in a Thursday interview.

The site rehabilitation program (SRP) was a $1-billion economic infusion the federal government handed over as part of a national economic response plan to the COVID-19 pandemic in 2020.

The province had to award all grants for site cleanup by March 31, 2022, and the money was supposed to be spent by the end of 2022.

The auditor says the province approved 35,000 grant applications and paid more than $864 million to 560 contractors, creating nearly 4,200 jobs.

In an emailed statement, Energy and Minerals Minister Brian Jean said he had asked the federal government whether Alberta can keep the leftover money to offer grants for further well-cleanup contracts on Indigenous land. Jean noted that work was a particularly successful part of the SRP.

"These are obligations that the federal government will have to take on at some point, and now is the best time to do it," Jean's statement said.

In a previous 2022 look at the SRP, the auditor general found that the province hadn't identified potential risks, such as contractors not spending all the money or failing to do the work on time.

The federal environment minister's staff did not respond to a request for comment on Thursday.

TIER underpayment

University of Calgary law associate professor Martin Olszynski, who studies environment and natural resources law, said the unspent funds illustrate the need for Alberta to set deadlines for when inactive industrial sites must be cleaned up.

Grants for the cleanup work alone aren't enough incentive when companies could use those workers instead to extract oil and gas and make more money, he said.

The auditor also found that when a large industrial greenhouse gas emitter underestimated their emissions when paying the industrial carbon levy, the company underpaid by $30 million.

When the environment department discovered the error, staff initially believed they didn't have the authority to ask for the underpayment to the Technology Innovation and Emissions Reduction (TIER) fund.

The auditor team concluded the government was wrong – that it does have the authority to collect past owed industrial carbon taxes.

The report said that failing to pursue missing carbon tax funds could hinder the province's climate adaptation efforts and could lead to Alberta misrepresenting how the industry is following the law.

The report also reiterated the auditor general's previous concerns that Alberta doesn't have an accurate picture of its environmental liabilities. The team said the government has yet to take action on recommendations from June 2021, stating the province must determine who is responsible for cleaning up industrial sites with no solvent owners or owners unable to remediate the site.

The report concludes the province's books may not accurately reflect the amount of money Albertans will need to spend to clean up abandoned sites.

Leonty said the problem extends beyond the oil and gas industry. He said there are abandoned coal sites and no equivalent organization to the Orphan Well Association to step in and take responsibility for cleanup.

The Environment and Protected Areas department have 19 outstanding auditor recommendations, some of which date back to 2008. Eleven of those recommendations are more than three years old.

Olszynski said the report is "frustrating and disappointing" and underlines longstanding problems with the government's attention to environmental management and fear of running afoul of industry.

"Albertans increasingly are going to say, 'Who is minding the store?' " he said. "These are serious, chronic issues that need to be addressed."

Ryan Fournier, press secretary to Environment Minister Rebecca Schulz, said Alberta Environment and Protected Areas is now working to recoup the $30-million underpayment in industrial carbon taxes.

He said the minister's office is reviewing the auditor's report, and the government is already working to address the auditor's previous recommendations. The department has a plan to improve challenges such as environmental liabilities, he said.