'A lost opportunity': Alberta gives back $137M to Ottawa in unspent funds to clean up inactive wells

The Alberta government has officially handed back more than $137 million to the federal government after running out of time to spend the cash to clean up old oil and natural gas wells.

Questions remain about why the provincial government was unable to use the much-needed funding, considering there are tens of thousands of inactive wells. 

Many companies are also disappointed that the full amount wasn't spent because of the loss of reclamation work it would have created.

The cash was part of the federal government's $1.7-billion funding pledge in 2020 aimed at reducing the environmental risk of aging oil and gas infrastructure, while also providing work for the oilfield service sector after the pandemic began and oil prices crashed.

The money was divided between B.C. ($120 million), Alberta ($1 billion) and Saskatchewan ($400 million). Alberta's Orphan Well Association received a $200-million loan to support the cleanup of wells left over when companies go bankrupt.

Saskatchewan dispersed all of its share, while B.C. had to return a small amount of unspent money, the federal government confirmed.

Last year, Alberta began lobbying the federal government to keep the leftover funds to continue remediation work in the oilpatch, specifically to clean up wells on Indigenous land, even though the deadline for the funding had passed.

"Though much effort was spent in trying to convince the federal government to see the value in this continuation, they demanded the return of the unexpended funds," said Alberta Energy Minister Brian Jean, in an emailed statement.

The money was returned last month, Jean said. It will de deposited with the government's general revenue, according to Katherine Cuplinskas, press secretary for federal Finance Minister Chrystia Freeland.

"Why was that money not spent?" asked Duane Bratt, a political science professor at Mount Royal University in Calgary. "The sector agrees it's important, the provincial government thinks it's important, the federal government has said it's important, resources were put in play and they weren't used or they weren't fully used."

Bratt also pointed to the political optics of the situation, considering Premier Danielle Smith and her cabinet "complain all the time about federal spending powers in Alberta and that there's inequitable transfer payments between Ottawa and Alberta compared to other provinces."

Initially, the Alberta government struggled to launch its Site Rehabilitation Program (SRP) as government staff were overwhelmed by a flood of applications. Eventually, tens of thousands of projects were approved to use up all of the federal funding. 

Still, after a few years, a portion of the money remained unspent as some of the approved cleanup work was not completed.

Some industry leaders point to poor weather and labour shortages to help explain the unfinished work.