A program that aims to protect Albertans from the costs of cleaning up contamination from the tarsands is underfunded, say First Nations critics.
Alberta is preparing to change how it ensures tarsands companies are able to pay for the mammoth job of cleaning up their operations. But critics fear a year of consultations isn’t enough to avoid repeating past mistakes.
Melody Lepine, a member of the Mikisew Cree First Nation, attended a feedback session held by the government to voice concerns.
“What we are seeing is that the mining security program is significantly underfunded,” Lepine told APTN News.
Official estimates price that cleanup at $33 billion while internal estimates from the Alberta Energy Regulator put it closer to $130 billion.
Even at the lower figure, industry has only put up about four per cent of the money required, a percentage that is shrinking as the liability grows.
Lepine says that there are concerns about tailings ponds and the toxicity from community members at Mikisew Cree First Nation.
“It’s definitely a concern expressed by community members seeing changes in water, traditional foods and changes in their health.
“More data and information is necessary to answer these questions… but there are toxic sludge and tailings ponds here… these leak into the watershed,” said Lepine.
Last summer, APTN News reported on a story where Keepers of the Water, an Indigenous environmental group, raised alarm over the proposed dumping of treated tailings pond water from the Alberta oil industry into the Athabasca River.
The proposal would allow oil companies to release treated water from tailings ponds into Alberta waterways.
New federal regulations, expected to be finalised in 2025, will govern how tailings could be safely drained into the Athabasca
Critical reception to government actions to-date
After two highly critical reports from the province’s auditor general, Alberta’s United Conservative government began considering reforms to the cleanup funds program in January 2022 through a series of meetings with industry and area First Nations.
Consultation ended this month. No public hearings were held and no public input was sought.
Alberta’s New Democrat Opposition says a government review of the program should have been public.
Environment critic Marlin Schmidt has said that the government needs to be more transparent about these changes and make sure that the program is not underfunded.
“The UCP has shut out the public from this process, and ignored concerns from First Nations and experts.
“The UCP needs to halt this process immediately, open up consultations to the public, and listen to the concerns of First Nations and experts so we can protect the health of Albertans and our environment,” says Schmidt.
Cumulative tarsands effects
Robert Houle, research fellow at the Yellowhead institute told APTN News that a recent precedent-setting case from British Columbia is changing the way many First Nations view the cumulative effects of tarands extraction.
“They argued that with the amount of development the B.C. government has obtained over the last 30, 40 years, there were not adequate mitigation efforts to limit the cumulative impacts on their treaty rights of their hunting, fishing, trapping up in the northeastern part of British Columbia.
“And the Supreme Court in B.C. agreed with that,” said Houle.
On June 29, 2021, the British Columbia Supreme Court released its decision in Yahey v British Columbia.
The court ruled that the rights of the Blueberry River First Nations (BRFN) under Treaty 8 in northeast British Columbia had been infringed by the cumulative impacts of industrial developments within Blueberry’s traditional territory, including forestry, oil and gas, renewable energy and agriculture.
The court heard more than 84 per cent of the nation’s territory is within 500 metres of an industrial disturbance.
“I think everyone’s got these ideas about cumulative impacts and long-standing projects at the top of mind now because there is some increased liability created now,” said Houle.
BRFN has now signed a $300 million settlement with B.C. as a result of the court ruling.
Program to launch 2024
In Alberta, the program to ensure there are funds for cleaning up contamination is set to begin in early 2024.
“We anticipate completing the review of this program in 2023, with implementation of any changes, if necessary, beginning in 2024,” said Alberta Environment and Protected Areas spokesperson Jason Penner in an email to the Canadian Press.
The provincial government did not address concerns raised by the First Nations in response to queries.
After attending all the meetings, four First Nations submitted a document to the government, obtained by The Canadian Press, that suggests they fear meaningful reform is not forthcoming.
“(The Athabasca Region First Nations’) overall assessment is that the review was often perfunctory, especially in the initial phase, and that (Alberta Energy Regulator) and (Alberta Environment and Parks) staff were often defensive and less than forthcoming,” it said.
The document outlines a series of concerns with the direction First Nations fear the government is going.
Not designed for low carbon world
“It is a lot of the same concerns the (auditor general had),” said Martin Olszynski, a University of Calgary resource law professor who worked as a consultant to the groups.
The document said the program is not designed for an increasingly low carbon world.
Mine closures are slated to coincide with worldwide net-zero targets, meaning oil demand (and its price) are likely to start falling just as that money is needed for cleanups.
University of Alberta energy economist Andrew Leach was also hired as a consultant to the First Nations. He concluded the assumptions used in the government’s modelling of the industry’s future were unconvincing and simplistic.
“The models provided to me provide a false and dangerous sense of security,” he wrote.
Leach said the government’s direction will work if oil prices remain stable or increase. If they don’t, Alberta, and its taxpayers, risk having to cover a vast liability left stranded.
“Within the bounds of current scenarios examined by major energy analysts, there are several scenarios under which existing tarsands projects cease to be viable,” Leach wrote.
Companies still are not required to release projected cleanup costs, the document said.
Although companies are required to return their operations to “equivalent land usage,” the First Nations group say they have not been consulted on what that means.
Regulator overvalues tarsands assets
The document said the regulator consistently overvalues tarsands assets, a calculation used to gauge how much companies must set aside. It points to one case where a tarsands asset that was sold for $5.5 billion was valued by the regulator at $37 billion.
The First Nations say the integrity of the process was undermined when, midway through the process, the government changed the rules on how companies guarantee they will pay for cleanup.
The Alberta Energy Regulator now accepts a type of demand bond issued by an insurance company instead of cash reserves or a line of credit. A spokesman for the regulator said some companies are using such bonds, but information on how many, who they are or the size of the bonds is “confidential.”
Using insurance allows companies to delay setting money aside
Thomas Schneider, associate professor of accounting at Toronto Metropolitan University, said accepting an insurance policy instead of requiring companies to set resources aside will allow producers to delay reserving the billions of dollars the cleanup will take even as some mines approach end of life.
“As these liabilities grow and grow and grow (industry) is trying to figure out as many ways as they can to delay the timing that they have to tie up capital,” said Schneider.
As well, documents released under freedom-of-information legislation suggest the government has considered accepting bonds from so-called captive insurance companies, which are wholly owned by tarsands companies.
The government hired consultants to study whether such bonds put taxpayers at risk. In a heavily redacted report, Marsh consulting said the bonds themselves weren’t inherently riskier than lines of credit.
But Marsh warned that it wasn’t possible to make a reliable estimate of risk from captive insurance companies, a corporate structure enabled by legislation passed in 2022.
“To complete the assessment for a captive insurance company would be challenging as each captive could be differently capitalized,” the report said.
“Thus, it would be difficult to assess the inherent likelihood of default without making very broad assumptions.”
The regulator does not currently accept bonds from captive insurance companies.
Mark Cameron of Pathways Alliance, an association of Canada’s six largest tarsands producers, said the group is waiting for the government’s decision on reforms.
“The Pathways Alliance appreciates the opportunities provided by Alberta Environment and Protected Areas to engage with and hear from Indigenous communities,” he said in an email.
High stakes for community
The stakes, said Lepine, could not be higher. Taxpayers have billions of dollars on the line, but First Nations have even more.
“We got nowhere else to go. It’s been our home for thousands of years,” she said.
“But if it becomes a toxic wasteland, will we be forced to leave? I don’t know.”
With files from The Canadian Press