CALGARY — Alberta Premier Jason Kenney unveiled the first step in his jobs plan on Monday but noted he’s frustrated the province has the potential to be “sideswiped” by the potential economic impact of the coronavirus.
Kenney and the province’s energy minister Sonya Savage announced they would make a $100-million loan available to the province’s Orphan Well Association to speed up environmental remediation of old oil and gas wells in the province, whose owners have gone bankrupt and can’t pay for the clean up.
“Our government recognizes the need to turn the tide on oil and gas liabilities in the province,” Savage said at an event outside of Edmonton, where many oilfield service companies are based.
The loan is expected to result in 500 new jobs for unemployed oilfield service workers in the province, who have been hit hard and struggling with high levels of unemployment since the 2014 downturn, and result in 1,000 orphan wells being cleaned up.
“We have seen far too many Albertans lose their jobs and too many… looking for work,” Kenney said, noting that the provincial unemployment rate for men aged 18 to 25 is currently 17 per cent.
“That is bad news for an entire generation,” Kenney said, adding that it’s “desperately important” to get unemployed young men back to work.
Last week, Alberta’s government unveiled a budget that predicted 2.3 per cent real GDP growth over the coming year, but also assumed West Texas Intermediate oil prices to average US$58 per barrel this year.
On Monday, after a week of steep declines, WTI traded up 4 per cent to US$46.57 per barrel.
Eight Capital analyst Phil Skolnick said in a research note Monday that energy and oil prices were “the key victims of the market correction given the impact that falling demand in China associated with (the virus) has had on the space.”
The threat of the coronavirus to impact Alberta’s oil-dependent economy is frustrating, Kenney said, noting there is potential for an economic rebound in the province to be “sideswiped by events that are beyond our control.”
“Our industry is better prepared for a low-price scenario than they ever have been,” Kenney said. “We may be in for a bumpy ride with respect to the coronavirus.”
He said the threats to global economic growth and the potential for a slowdown are “exactly why we need announcements” such as Monday’s $100-million loan to the OWA.
Our industry is better prepared for a low-price scenario than they ever have been
Jason Kenney
Lars DePauw, executive director of the OWA, said there are currently 6,500 orphan oil and gas sites across the province and those numbers are still expected to climb as more struggling oil and gas companies declare bankruptcy.
As of Nov. 1, 2019, that figure included 3,406 orphan wells that need to be cleaned up, 3,531 orphaned pipeline segments and 251 other facilities, which could include storage tanks or processing sites.
DePauw said the OWA cleaned up 800 orphan oil and gas wells last year, is on pace to clean up 1,000 wells this year and, with the funding announced Monday, will clean up 2,000 wells next year.
“Our focus is going to be on private land,” DePauw said, adding the association is focused on cleaning up older infrastructure in southern Alberta, where there are a large number of wells that have not been remediated.
The OWA is funded by levies paid by oil and gas companies such as Canadian Natural Resources Ltd. and Suncor Energy Inc., who fund the majority of the association’s clean up efforts. The levies afford the OWA a $30 million per year budget to clean up orphaned sites.
“It’s not making the polluter pay, it’s making the competitor of the polluter pay,” said Daryl Bennett, a landowner rights advocate in Taber County in southern Alberta.
Bennett said the new loan will help curb the number of orphan oil and gas wells in the area in the short term. However, landowners are concerned that a handful of struggling oil and gas producers in the area are near bankruptcy and could dump another 5,000 to 10,000 wells on the OWA in the near future, he said.
“There’s no way that this is going to take care of the problem,” Bennett said, adding that the previous NDP government had similarly announced a $235-million loan to the OWA but the size of the problem is too great.
“Landowners want the wells cleaned up,” Bennett said.
Financial Post
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