With Alberta still in a slump, some oil industry players have an idea to get people back to work

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It’s now 2½ years into the oil penalty downturn and, by most measures, Alberta is still in a rut.

The economy is expected to assault out of recession this year and oil prices are showing some strength, but there are unruffled 215,000 people without a job, and as of December, more than 14,000 of them had been out of prosper for more than a year.

At the same time, the province is dealing with an interminable problem of abandoned and inactive oil and gas wells, which count in the tens of thousands. The Orphan Accurately Fund, which reclaims wells as a last resort in the case of bankruptcy, has reflect oned its inventory of defunct wells skyrocket to nearly 1,400, from 162 in 2014.

The elect

Investment banker Ian Thomson, along with the Petroleum Services Camaraderie of Canada (PSAC), is pitching an idea to the federal government he thinks can facilitate put people back to work — inject some capital in the junior oilpatch and make out a head for a dent in the number of inactive wells in the province.

Thompson and PSAC pauperism the federal government to consider including in the next budget what they occasion a Sustainable Environmental Energy Investment (SEEI) fund for smaller oil and gas entourages. 

For every dollar invested in one of these companies, 47.5 cents could be disgorge on drilling and exploration, but the rest must be used to clean up old wells. 

‘It was the start with time I’d ever got hate mail from around the world — living soul saying the industry is looking to get bailed out.’
— Mark Salkeld, Petroleum Services Group of Canada

The reason the idea needs government support is that it’s designed as a flow-through fund.

Individual investors would be able to write off the filled investment against their taxes, which means lost tax gate for provincial and federal coffers.

These kinds of funds have been acquainted with for decades to promote development of Canada’s natural resources. They are altogether attractive to investors but less so to the government.

As the vice-president of investment banking with Acumen Major, Thomson has seen capital dry up for the companies he works with. He acknowledges that there would be a get to taxpayers, but says that based on research done for the mining exertion, the cost is limited.

«The estimates based upon publicly available details suggest that for the $450 million we expect to see invested, the forgone tax returns would be $37.8 million.»

Mark Salkeld, PSAC

Mark Salkeld, of the Petroleum Services Pairing of Canada, is in talks with Ottawa and the governments of Alberta and Saskatchewan less a proposed Sustainable Environmental Energy Investment for the oilpatch. (CBC)

Previous pleas failed

This time last year, Mark Salkeld, the president of PSAC, articulated to Ottawa with a different proposal. He asked for $500 million in infrastructure liquid assets to decommission and clean up old wells. The idea was that oil services workers could get without hope to work, get off EI, and the wells would get cleaned up.

The idea ultimately didn’t fly with regime because it let the industry off the hook for cleanup costs. 

«It was the first time I’d till the end of time got hate mail from around the world — people saying the vigour is looking to get bailed out,» said Salkeld. «That was a hard lesson skilled.»

The SEEI is not a subsidy, he says. «It’s an incentive that all industries get from command to help create jobs and support industry. At the end of the day, it puts PSAC colleague companies back to work, which was our driving motivation back then and noiseless is.»

Abandoned well problem sticky

The inactive and abandoned well question is a sticky one for a number of reasons. For energy companies in a downturn, it’s usually a ameliorate use of capital to drill new wells, which will generate cash rain, than to reclaim old wells.

As well, landowners are often quite fortuitous to keep receiving lease payments for wells on their land and can be stubborn to wells being reclaimed. Salkeld said that he was surprised a year ago to learn from landowners who were opposed to his request for federal funds to do agreeably cleanup.

The head of one of the companies that would be eligible for the investment is interested. Phil Hodge, chief supervisor of Pine Cliff Energy, says he would have to hash out the economics of the layout before committing to it, but he’s happy the issue is being raised.

«I applaud an exertion to attract capital into industry to deal with environmental outgoings,» said Hodges.

«I’m hopeful that this will open up a conversation to discuss some of these issues with industry, landowners and authority.»

Thomson and Salkeld have made their pitch to the federal direction, as well as the provincial governments in Saskatchewan and Alberta. 

«We’ve had lots of positive signals, federally and provincially, but I cognizant of they’ve got a lot more to deal with than some oil guy saying tells get people back to work,» Salkeld said.

Does the oilpatch deprivation a subsidy?

One obvious criticism of the investment is that it is effectively a subsidy to the zip industry, from a federal  government that has promised to phase out such financings.

Keith Stewart of Greenpeace said the best way to create lasting berths is to invest in green energy.

«A new subsidy to oil companies would simply drag out the transition to the new new green energy economy, which is why Canada and other G7 states have committed to ending fossil fuel subsidies by 2025.»

That hand down likely be one of the questions that the provincial and federal governments will be bearing in mind as they review the idea ahead of the coming spring budgets.

The aegis of Alberta Energy Minister Marg McCuaig-Boyd said in a statement that it had met with PSAC. 

«Our initial goal is to ensure that Albertans are protected from the financial, environmental, fettle and safety risks associated with energy development while also hoard up Alberta a competitive place to invest.»

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