Today, the Alberta Government announced new reclamation guidelines for oil sands mining operations and for coal mines. Reclamation liabilities associated with the activities from the oil sands should be front-of-mind for the Government, and with activity growing all the time, the liability held by the Province in excess of escrow holdings is also growing. Pembina’s figures for the scale of the current un-funded liabilities are $15 billion (full Pembina report here), and I have to agree with them that to shift further into the future the collection of payments sufficient to provide full financial security for the Province is simply not an acceptable solution. At first blush, it appears that this continues a disturbing trend of the Government implicitly subsidizing activity in the oilsands through either under-valued resources or through risks and liabilities borne by those who own the resource and on whose behalf our Government is supposed to be acting. It turns out, on further investigation, that we might be better off fiscally collecting the costs later since we will end up paying for less of them in gifted bitumen through the royalty regime. However, I believe that the costs of deferring the liabilities, in terms of both the incurred risk and the signal it sends to companies doing business here, is much higher than the potential savings on royalties or the potential increase in investment.
Andrew Leach's energy and climate blog