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43rd PARLIAMENT, 2nd SESSION House of Commons Debates Official Report (Hansard) Volume 150 No. 029 Monday, November 16, 2020 Speaker: The Honourable Anthony Rota CONTENTS (Table of Contents appears at back of this issue.) 1875 HOUSE OF COMMONS Monday, November 16, 2020 The House met at 11 a.m. Canadian oil and gas producers are world leaders in environmen‐ tal remediation and reclamation, but one consequence of this per‐ fect storm of challenges is that the record numbers of business bankruptcies have caused the number of orphan wells to increase Prayer by over 300% since 2015. It is an urgent economic and environ‐ mental challenge for rural municipal governments, for landowners, on Crown land and in indigenous communities. PRIVATE MEMBERS' BUSINESS ● (1105) [English] Mark Dorin’s family farm in Didsbury, Alberta, is at risk. He ENVIRONMENTAL RESTORATION INCENTIVE ACT said that the value of the land is at stake and is rendered literally Mrs. Shannon Stubbs (Lakeland, CPC) moved that Bill worthless. Michelle Levasseur, economic development officer for C-221, An Act to amend the Income Tax Act (oil and gas wells), be the Town of Calmar says that it is a financial burden that is “not fis‐ read the second time and referred to a committee. cally responsible…to ask our current residents to fund”. She said: Mr. Speaker, I am really pleased to speak about my pri‐ vate members bill, Bill C-221, the environmental restoration incen‐ tive act, which I introduced on February 25, earlier this year. Normally, orphaned wells become the responsibility of the Although the world has changed in many ways over the past nine provincial orphan well associations and funds. In strong economic months, the Canadian oil and gas sector continues to face a state of conditions, they are remediated on schedule through levies on all uncertainty. The families whose livelihoods depend on the sector the other active producers, but these orphan well funds are being still face what many say is an unprecedented struggle, with major overwhelmed, putting taxpayers at risk of eventually having to bear anxiety about their futures and complete financial despair. Entire 100% of the cost for decommissioning, closure, remediation and communities are at risk because of the steady decline of oil and gas reclamation. Between 2015 and 2018 in Alberta alone, the number activity and historic levels of bankruptcies and investment losses in of orphan wells skyrocketed from 768 to over 3,400. Today there Canadian oil and gas, and that damage has rippled across the coun‐ are a total of 97,000 inactive wells in Alberta. The Alberta Orphan try. Well Association has an inventory of 2,983 orphan wells for aban‐ Since 2015, more than 200,000 jobs have been lost in the Cana‐ donment and 3,284 sites for reclamation. dian energy sector. It has devastated families and entire communi‐ ties. There are many social consequences. A recent study from the University of Calgary’s school of public policy said that for every 1% increase in unemployment, 16 Albertans will die by suicide. In B.C., there are over 300 orphan wells that need to be decom‐ Never has a Canadian industry faced such a severe triple threat: missioned. Half of those wells are on protected farmlands and there global oversupply and demand drops, a collapse of global prices are over 7,000 more inactive wells. B.C.'s auditor general estimates and a lack of market access. Even before COVID-19, a combina‐ that it could cost up to $3 billion to reclaim all the orphan wells and tion of economic policy and legislative and regulatory factors in facilities in B.C. By percentage, B.C. actually has the largest in‐ Canada led to a historic and major collapse in investment, small crease of orphan wells since 2015, at 600%. Saskatchewan has businesses and jobs, while energy sectors in the United States and more than 600 orphan wells and 30,000 inactive wells. The across the country were thriving. COVID-19 only exasperated what province’s auditor general estimates that it would cost $4 billion to energy workers in my backyard of Lakeland would characterize as decommission all of their existing wells. In Ontario, there are al‐ “carnage”, a dire situation shared by energy workers across Canada most 900 inactive wells that could become orphaned if more com‐ from B.C. to Ontario to Come By Chance in Newfoundland and panies go bankrupt, mostly throughout the southwestern part of the Labrador. province. 1876 COMMONS DEBATES November 16, 2020 Private Members' Business Overall, there are more than 130,000 inactive, orphaned and paying for the company’s environmental liabilities first, such as oil abandoned wells in Canada. It is estimated that it could cost be‐ and gas wells, before lenders and investors are paid back. One con‐ tween $30 billion and $70 billion to fully decommission all current sequence, of course, is that the ruling dried up private sector active and inactive oil and gas wells in Canada. That is why it is so sources of investment, compounding all the other challenges that crucial for the federal government to lead and to continue to take are harming small and medium-sized producers in Canada. Oil and action on this national environmental and fiscal challenge. There is gas producers are cutting spending and capital investment plans ag‐ no doubt that it is complex and it requires a multipronged effort gressively just to try to survive. from provincial and federal governments and, importantly, from the private sector. This year, the Alberta government announced an additional $100 I want to stress that, from my perspective, the growing number million loan to the provincial orphan well fund to remediate 1,000 of suspended and inactive wells awaiting decommissioning is not wells. In April, the federal government announced $1 billion for evasion nor neglect by small and medium-sized oil and gas produc‐ Alberta, $400 million for Saskatchewan and $120 million for B.C. ers in Canada. It is in fact a stark reality of their precarious eco‐ for abandoned and orphaned wells. nomic positions. It is a consequence of all of the damaging policies ● (1110) that have undermined competitiveness and tanked Canadian oil and gas investment. Therefore, it is the duty of the federal government I supported that one-time funding as a first step, but I think the to help figure this out. Smaller producers simply do not have the government must adopt a permanent fiscal incentive to enable the money left in their businesses, and if the status quo continues, they private sector to raise funds dedicated solely to reclamation and re‐ simply cannot raise the money needed to proactively address their mediation. Such an initiative recognizes the financial and economic inactive wells in the current conditions. reality that Canadian oil and gas producers face, while it empha‐ sizes the primary role of the private sector to fulfill the environ‐ mental duties inherent in their responsible development of oil and gas resources in Canada. In 2009, the previous Conservative government committed to ending inefficient and wrong-headed subsidies to oil and gas. De‐ What Bill C-221 proposes is a non-refundable tax credit that spite the rhetoric from others, the current Liberals removed any re‐ could eventually enable a flow-through share provision to encour‐ maining, as well as some benchmark industry tax treatment from age small and medium-sized producers to take action on the press‐ oil and gas, but not other industries. I support those measures. ing challenge of suspended and inactive wells, and immediately create service jobs in communities and regions that need them most. I hope Canadians will note that my bill applies only to small and medium-sized producers that are struggling the most, which are The previous Conservative government advanced the polluter- responsible for about one-quarter of total Canadian oil production. pay principle in Canadian law. Bill C-221 reinforces the standard of These producers have, on average, one well for every 10 wells of polluter pay and protects taxpayers from the potential burden of bil‐ the large multinational operators, which will not qualify for this tax lions of public dollars needed for remediation and reclamation. The credit. In 2017 and 2018, more than two-thirds of those small and federal government’s finance department confirms that this propos‐ medium-sized companies lost money, so it is urgent. al is not a subsidy. The department defines a subsidy as “federal tax The first part of Bill C-221 creates a non-refundable tax credit expenditures that provide preferential tax treatment that specifically that will help small and medium-sized oil and gas producers right supports the production or consumption of fossil fuels.” away. The second part makes the case for this credit to qualify for the flow-through share provisions of the Income Tax Act, which is the government's part to do, so that when a producer wants to raise The International Energy Agency does not consider this measure money from private investors, the producer can attach the value of to be a subsidy either. Its definition of a subsidy is “any govern‐ this tax credit to a share of the company, which is sold to an in‐ ment action that lowers the cost of energy production, raises the vestor. revenues of energy producers or lowers the price paid by energy The investor buys the share and the tax credit, and in this way the consumers”. value of the tax credit flows through to the shareholder. What this means is that the tax credit the producer gives up becomes the prof‐ it margin for the investor who purchases these shares.
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