During the COVID-19 crisis there has been a huge amount of discussion around the oil and gas industry in Canada and how to respond to tanking oil prices and the shuttered industry.
In the last few weeks, we’ve seen a lot of talk about a bailout (or ‘liquidity package’ as industry spin doctors like to call it), and federal funding for orphan wells and methane emissions reductions. We’ve seen the Canadian Association of Petroleum Producers, a notorious lobby group for the oil and gas industry, meet with government numerous times and submit an extensive wish-list of changes to energy regulation that have very little to do with responding to COVID-19. We’ve seen health professionals, Indigenous communities and thousands of Council of Canadians supporters calling for fossil fuel work camps to be shut down due to public health concerns. The news has been coming fast. Read more for our analysis on the funding announced by the federal government, what it means for workers, and what we’d rather see instead.
Federal funding for oil and gas sector
Last week the federal government announced the following funding packages for the oil and gas industry (from Canada.ca):
“Up to $1 billion to the Government of Alberta to support the province’s work to clean up inactive oil and gas wells across the province”
Up to $400 million to the Government of Saskatchewan to support work to clean up orphan and inactive oil and gas wells across the province;”
“Up to $120 million to the Government of British Columbia to support work to clean up orphan and inactive oil and gas wells across the province;”
"$200 million to the Alberta Orphan Wells Association (OWA) to support its work to clean up orphan oil and gas wells and well sites across Alberta. The OWA will fully repay this amount.”
$750M to conventional and offshore oil and gas companies to reduce methane emissions to meet federal standards. $75M of that is for offshore oil operations. “A portion of these loans will be convertible to grants.”
An unquantified expansion of the Business Credit Availability Program. This is a loan program to “to help Canadian businesses obtain financing during the current period of significant uncertainty”
What does that all mean? Are these just fossil fuel subsidies? Let’s look at the inactive wells funding, methane funding, and corporate loans.
Orphan and inactive well cleanup
A lot of the federal money is for cleaning up inactive oil wells. Inactive and orphaned oil wells are a scourge across the prairies and B.C., leaving landowners – especially farmers – with toxic and dangerous wells on their properties. Cleaning up inactive wells is a huge job creation opportunity in Alberta and elsewhere, and it’s ecologically necessary. However, we’re concerned about the precedent this federal funding sets. The cleanup costs should be paid by the companies that made the mess – this is the Polluter Pays Principle.
Another distinction should be made: the terms ‘orphaned’ and ‘inactive’ are not interchangeable. An orphaned well is one that is inactive and no longer has a functional parent company (maybe the parent company has shut down or gone bankrupt). An inactive well may have a solvent parent company but that company has not yet cleaned up the well. The $1.52B given to Alberta, B.C. and Saskatchewan “to support orphan and inactive oil well clean up” can include wells owned by existing companies. In fact, the federal announcement said, “funding will be prioritized to companies that are in good standing with respect to municipal taxes.” Public funding for well cleanup is being given to solvent companies. This is not in line with the Polluter Pays Principle.
The well cleanup announcement includes $200M for the Orphan Well Association (OWA), which is a non-profit association that cleans up orphaned wells in Alberta – these are wells that have no parent company. The OWA has community and First Nations oversight and the funding could be a great part of the reclamation boom we’re hoping to see in the future. Unfortunately, the $200M for the OWA is a repayable loan. It’s unclear at this point whether the far more substantial funds going to active companies for well clean-up is repayable or not.
The verdict: most of the inactive and orphan wells money can be considered a subsidy.
Methane emission reductions funding
The purpose of this $750M is to help companies adhere to methane emission reduction regulations set in 2018. Notably, these methane emissions regulations only apply to upstream emissions, created through the extraction of fossil fuels. The regulations do not apply to the burning of those same fuels, which is where the majority of greenhouse gas emissions come from. (Worth noting: the implementation of these regulations was seriously delayed by heavy lobbying by CAPP at the time.)
The verdict: this funding is a direct subsidy to fossil fuel companies.
Business Credit Availability Program
This is a financing program through Export Development Canada (EDC) and the Business Development Bank of Canada. The federal government has long subsidized the fossil fuel industry by providing low-rate loans through EDC. Environmental Defense estimates that subsidies to the industry given through EDC between 2012 and 2017 total $62B.
We didn’t like EDC funding the fossil fuel industry before the COVID-19 pandemic, and we don’t like it now.
The verdict: the EDC is the typical vehicle for federal financial support to the oil and gas industry. We can consider this program to be business-as-usual support for fossil fuel interests. It’s a fossil fuel subsidy!
Polluter Pays, or Polluter Gets Paid?
On the surface some of these financial programs look good – the federal government appears to be staying firm on methane reduction targets and is investing in cleaning up inactive oil wells. Digging a little deeper, we learn that these programs are direct subsidies to oil and gas companies. Public money – our money – is being used to subsidize private oil companies meeting their legal and regulatory standards.
I see the federal commitment to the methane regulations and inactive wells as a distraction from the larger issue – the continued subsidization of the oil and gas industry. While it’s good that the federal government isn’t following CAPP’s list of demands and delaying the enforcement of these regulations, we should recognize that we are all collectively paying for these mega-polluters to adhere to our climate policies without any mechanisms leading us to the best climate policy of all – the wind-down of the fossil fuel industry.
This is the opposite of the Polluter Pays Principle. This is the Polluter Gets Paid Principle.
What about workers?
Corporate bailouts do not have a history of benefiting workers. If we look back to the 2008 financial crisis and the mega bailout to the auto industry, we see that GM and Chrysler received more than $13B in support from governments on the condition that cost-saving measures were implemented. These cost-saving measures included job loss, cuts to pay, benefits and pensions to workers, and a two-tiered wage system where new hires made up to 40 per cent less than established workers. Just over a decade later, GM and Chrysler have both effectively packed up and left the country.
We must learn from this lesson and put workers ahead of oil and gas profits. Oil and gas workers, like all workers from all sectors, need to be able to immediately access income support in order to preserve personal and public health, including migrant and undocumented workers. Stimulus money should offer immediate relief directly to workers and provide opportunities for training, education and employment in existing and emerging low-carbon sectors. Money for orphan well cleanup should be administered by an independent fund with representation from Indigenous communities, local governments and landowners.
We wrote this open letter to Prime Minister Trudeau to demand supports for workers and a just transition today. Please sign and share with your friends.
Challenging corporate power – and winning
Since the threat of a massive bailout to the fossil fuel industry was raised in mid-March, the pushback from our movements has been fierce. Within days of that first threat, organizations representing 1.3M people in Canada signed a letter calling for any financial support to the industry to go directly to workers, not CEOs, and for investment in low-carbon sectors instead. Numerous petitions opposing an oil and gas bailout garnered many thousands of signatures and letters poured into MP’s offices.
The current mobilization of opposition to a major oil and gas bailout was possible because of years of organizing by grassroots communities, within organizations like the Council of Canadians, and by Indigenous communities.
Our opposition to an oil and gas bailout over the past month made it impossible for the federal government to act on CAPP’s most recent lobby wish list and deregulated huge pieces of the oil and gas industry.
We must continue to be vigilant – CAPP is a powerful lobby group and the government continues to make decisions that benefit corporations. At this moment we can take stock of the power of our movement to effectively challenge that corporate power.