The Oil Industry Makes Its Own Rules in Canada’s Tar Sands
An oil refinery processing tar sands crude without permits for over two decades showcases Alberta’s need for regulation. But with the Trudeau Liberals’ history of giving Big Oil no-strings-attached cash, it’s doubtful that the cavalry is coming anytime soon.
An oil sands mining facility near Fort McKay, Alberta, September 7, 2022. (Ed Jones / AFP via Getty Images)
An oil refinery in northern Alberta was recently discovered to have been operating without environmental permits for twenty-two years, demonstrating that the industry extracting the province’s tar sands is a rogue entity that makes its own rules. The Enerchem refinery, located 250 kilometers northwest of Edmonton, has turned tar sands crude into fuel and fluid for fracking and drilling since 2001. It was only subject to an environmental enforcement order on June 20, 2023, according to reporting from the CBC, Canada’s public broadcaster.
The order revealed that no approval “has been issued to any person for the construction, operation and reclamation of the plant,” thereby violating the province’s Environmental Protection and Enhancement Act. Despite this finding, the order guarantees that there will be no consequences for its owner, AltaGas, because the plant is permitted to continue operations as it seeks necessary approval.
“The idea of a significant industrial development operating without approval for years, it’s off the charts,” commented University of Calgary law professor Nigel Bankes, who described the company’s actions as “negligence” in an interview with CBC. Allowing the plant to continue operations is based on the assumption that it adheres to environmental regulations, but as Bankes points out, there is no concrete evidence to support this assumption, and no means to verify compliance.
Regulatory Capture
According to Alberta Environment, the ministry tasked with oversight of refineries, the plant was authorized in 2001 by the Alberta Energy and Utilities Board and received an industrial development permit in 2002. But due to changes in legislation, industrial development permits were discontinued in 2011, leaving the plant in regulatory limbo, according to the ministry.
Bankes said that this claim is a dodge, since the plant would have still needed Alberta Environment approval under the act, which has been in place since 1992. “If you’re running a refinery, you’re presumably putting out some pretty nasty stuff into the atmosphere, so you’d need an air-quality approval and all sorts of things like that,” he said. “The industrial development permits never, ever dealt with that aspect of an operation.”
AltaGas, which purchased the plant last year, echoed the ministry’s claim that this is all just a big misunderstanding. “As regulations and regulatory bodies have changed since operations began, we have and will continue to work collaboratively with our regulators to ensure we continue to operate in compliance,” a company spokesperson told the CBC. No doubt the company will continue to collaborate with Alberta’s captured regulators.
Carbon Trading Undermined
Three days after the ministry brought an enforcement order against the Enerchem facility, Alberta Environment issued its first-ever charge against a company for providing false information relating to carbon offsets. Carbon offsets are purchased by companies that have surpassed a government-imposed cap on CO2 emissions from companies actively taking measures to reduce their reliance on fossil fuels. This system was established under the 2007 Emissions Management and Climate Resilience Act during the tenure of former premier Ed Stelmach’s conservative government.
The ministry filed twenty-five charges against Amberg Corp., an environmental services company, and Olga Kiiker. It’s hard to believe that the decision to lay the charges so soon after the ministry admitted that it had allowed an unregulated refinery to operate for twenty-two years is a coincidence. Amberg essentially serves as an auditor for carbon emissions, ensuring that those selling credits are legitimately entitled to them. Charges include providing false information, providing functions of a third-party assurance provider without the required qualifications, and violating other rules related to auditing and verifying carbon offsets.
Given Alberta’s notoriously lax regulatory environment for oil and gas companies, it’s hard to believe that Amberg is the only company that could be accused of fudging numbers — it’s just the first to get caught doing so. But even if it is the only company to have done so, its alleged practices undermine the entire carbon offset system.
Graham Gilchrist, an agronomist who advises farmers on how to reduce emissions in their soil and crops, suggested in an interview with the CBC that the charges against Amberg demonstrate the need to have a federal government regulator audit emissions rather than offloading the task on the private sector. The federal government has a carbon-trading program slated to begin next year, but there’s no indication that it has plans for the rigorous oversight necessary to ensure the system’s integrity.
Alberta Is a Petrostate
Any semblance of oversight for the oil and gas industry will seemingly have to be handled by the federal government, as Premier Danielle Smith’s track record indicates her strong inclination to reward the industry, no matter its chicanery and unscrupulousness. This is evident in her ill-conceived proposal to subsidize fossil fuel companies for merely fulfilling their legal obligation to clean up their environmental impact.
Smith was loath to talk about it on the campaign trail earlier this year, but her July 10 mandate letter to Energy Minister Brian Jean instructs him to “effectively incentivize” the reclamation of environmental liabilities to “enable future drilling while respecting the principle of polluter pay.” In other words, Jean is being told to incentivize fossil fuel companies to clean up their mess so that they can create new messes, which will somehow abide by the polluter pay principle. Jean reassured the Edmonton Journal that “incentives don’t necessarily mean just financial incentives,” but cautioned that he’s “not ruling out anything.”
Oil and gas companies have been drilling on rural land without paying rent to landowners, and the government covered the $14 million cost last year. Despite soaring oil prices since Russia’s invasion of Ukraine, the government was only able to recoup less than $28,000 from the companies drilling in Alberta. Given this pattern, it wouldn’t be surprising if Smith and Jean’s cleanup scheme involved lending money to fossil fuel companies that they never intend to repay.
The Alberta Energy Regulator (AER), which is supposed to have oversight over drilling and mining, can deny companies permits for future drilling if they haven’t fulfilled their environmental obligations, or if they’re in poor financial shape. However, the AER’s failure to exercise this power raises concerns. Smith’s directive to Jean to “streamline” the AER’s approvals process to promote greater natural resource production doesn’t instill confidence in the organization’s commitment to environmental oversight.
Nor does Smith’s decision to keep secret a report she ordered earlier this year to outline a strategy on the future of Alberta’s energy industry from a five-person panel consisting solely of energy executives. “Of course I’m going to take advice from CEOs,” the premier said. “Who else would I take advice from?”
Smith added that she wouldn’t release the panel’s recommendations because she doesn’t want to give Albertans the impression that she’s actually going to implement them. But given the fact that the panel’s mandate includes evaluating the RStar proposal and that chairman David Yager owns a company that rents out equipment for companies to reclaim their abandoned wells, there’s certainly the appearance of an ulterior motive.
The provincial government and its agencies have been captured by the oil and gas industry. The question is whether the federal government will step up to the plate to save Alberta from itself. But the federal government’s display of handing out no-strings-attached cash to Big Oil during the COVID pandemic doesn’t inspire confidence in its ability to firmly say “no” to the industry’s requests, either.