Both the federal and provincial governments have provided targeted support for the energy sector in response to the COVID-19 crisis and the crash of energy commodity prices. On April 17, 2020, the federal government announced new targeted actions totalling more than $2 billion, with dedicated funding for the clean up of orphan wells in Western Canada and the creation of an emissions reduction fund, as well as expanded credit support for small and medium-sized energy companies through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). The Alberta government is also implementing similar targeted relief measures to support Alberta's energy sector, including certain levy and reporting relief.
Federal government measures
The federal government has announced that it will be supplying $1.7 billion to clean up orphan and inactive wells in Western Canada, including: $1 billion to the government of Alberta, $400 million to the government of Saskatchewan and $120 million to the government of British Columbia. The federal government states that this measure should provide 5,200 jobs in the province of Alberta alone. $200 million of the $1.7 billion dollars dedicated will be directed to Alberta's Orphan Well Association. The government of Alberta has also provided a $100 million loan to the Orphan Well Association. Alberta Premier Jason Kenney has stated that there will be strict criteria on the use of the funds and that the money can only be used for actual work - "folks in the field doing the actual work and not armies of consultants issuing endless reports".1
The federal government has also announced that $750 million will be dedicated to a new repayable loan program to work with conventional and offshore oil and gas companies. The focus of this program will be to support eligible energy firms making capital investments to reduce methane and other greenhouse gas emissions. The federal government has confirmed that $75 million of the funds will be dedicated to help the offshore oil and gas industry cut emissions and that a portion of the loans under the program will be convertible to grants, but no other details have been provided.
Finally, the federal government is also working with BDC and EDC to expand credit support being made available for viable energy sector companies. BDC is providing loans between $15 million and $60 million at commercial rates, which are repayable within four years. While the government has not provided further details on the credit liquidity relief, companies are encouraged to contact BDC and EDC for more information on how this initiative can assist their business.
Alberta Premier Jason Kenney has expressed his gratitude for the federal measures to protect Alberta's energy sector but suggested that they do not go far enough and reiterated the need for $15 billion to $30 billion of support to allow for credit liquidity.2
Alberta government measures
In March 2020, the government of Alberta announced a number of measures intended to provide relief to Alberta's energy sector, including:
- $113 million in relief by covering six months of the 2020 Alberta Energy Regulator (AER) industry levy (it is expected that the levy relief will cover the first six months of the AER's fiscal year which commenced April 1, 2020);
- $100 million loan to Alberta's Orphan Well Association to assist immediate reclamation efforts and the decommissioning of roughly 1,000 wells; and
- extending the term of mineral agreements expiring in 2020 by 1 year to provide for increased certainty for industry.
Alberta Energy and Alberta Environment and Parks have also suspended a number of reporting requirements – more information can be found on AER's website. However, the AER notes that industry must continue to record and retain complete documentation and make it available upon request. The AER has also confirmed that "[l]icensees remain responsible to pay any remaining balances for the 2019/2020 orphan levy" but that the "timing for collection of the 2020/2021 orphan fund levy is under review."3
Alberta government invests in Keystone XL Pipeline
On March 31, 2020, after six months of negotiations, the Alberta government announced its decision to provide support for TC Energy Corporation's Keystone XL Pipeline, including a $1.5 billion equity investment in 2020 and a $6 billion loan guarantee in 2021. The government is backstopping the project to enable TC Energy to begin immediate construction on the Alberta portion of the pipeline and ensure the earliest possible date of completion. The Keystone XL Pipeline is expected to create more than 1,400 direct and 5,400 indirect jobs in Alberta and will significantly increase Alberta's takeaway capacity, making it an important component in protecting the value of Alberta's energy resources.4
Footnotes
4 https://www.alberta.ca/release.cfm?xID=69965D6D6EE7A-92F8-DD89-BBB9E1FE323BD2DD
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