Written by Brad Gilmour, Keely Cameron, Stephanie Ridge
NOTE: Further information on the Alberta Site Rehabilitation Program can be found on our blogs addressing the announcement of the Program and an update on Program operations following the first few weeks of the Program's implementation. Please also see our blogs on concurrent oil and gas site reclamation and abandonment programs being implemented in British Columbia and Saskatchewan.
After receiving thousands of applications within only two weeks of opening the Site Rehabilitation Program (Program) to applications on May 1, 2020, Alberta Energy has declared the first $100-million increment of funding of the Program fully subscribed in the face of overwhelming interest. As Alberta Energy processes those applications for grants of up to $30,000 per activity, per site, new details are being released on the implementation of the second increment of funding.
The second $100-million increment period, or Period 2, opened on May 21, 2020. In this increment, applications will only be accepted for oil and gas sites on land where government is paying compensation to landowners as required under Section 36 of the Surface Rights Act that require 100% funding (Section 36 Sites).
A Shift in Approach
Three changes are particularly notable in Period 2 of the Program.
First, applications are only being accepted for Section 36 Sites. Section 36 Sites are sites where, upon an application by the landowner to the Surface Rights Board (SRB) for unpaid lease payments and failure by the licensee to respond, the SRB may direct the Minister of Environment and Parks to pay the landowner the unpaid rent from the Alberta Government's general revenue. While a number of Section 36 Sites are with the Orphan Well Association (OWA) as a result of there no longer being a licensee to pay the rent, orphan sites are excluded from the Program. A list of the eligible Section 36 Sites has been posted to the Program website. From a review of the sites included, it appears that the Program may most benefit working interest participants subject to abandonment orders from the Alberta Energy Regulator (AER), provided that there is a licensee available to negotiate and contract with the service companies as a number of the companies listed currently have assets with the OWA, outstanding orders with the AER and are either in insolvency proceedings or were previously subject to them.
Second, in Period 2 Alberta Energy has replaced the more piecemeal approach to activities and sites seen in the first increment with a closure-based approach that is closely aligned with the programs being introduced in British Columbia and Saskatchewan. There is no upper limit to the contract cost eligible for Program grants and the full suite of activities required to complete site closures appear to be eligible for funding at this stage. Alberta Energy notes that "…applicant service contractors may apply for full closure of a single Section 36 site or multiple Section 36 sites within the same application, and, if desired, under a single contract." This notable change from Period 1, in which funds were allocated on a site-by-site basis to a maximum of $30,000, will likely reduce the administrative burden associated with assessing and granting funds in the first increment.
Finally, Period 2 introduces a nomination system to engage other stakeholders. Landowners, First Nations, and residents of Métis Settlements may now nominate an inactive site for cleanup. While the decision as to whether work will be completed on a site remains with a landowner, Alberta Energy will develop and publish a list of nominated sites to its website to facilitate coordination between contractors and licensees. The list of sites is expected to be published on www.Alberta.ca/siterehab in the near future.
In removing the grant cap and permitting contractors to apply to complete all activities required to achieve closure at one or more sites, this second increment of funding has the ability to apply Program funds to more complex closure activities that could not be captured in Period 1. The additional measures to connect contractors with eligible inactive sites—either by nomination or by the Section 36 list—may also help to reduce the administrative difficulties encountered in Period 1 and assist is pairing contractors with licensees.
This Period 2 marks a stark contrast from the approach being taken in Saskatchewan, where rather than assist and reward compliant companies, Alberta's Program targets those companies that are in non-compliance with AER requirements and seems to require cooperation in terms of entering into agreements with contractors in order to qualify.