Bill C-221 (Historical)

Environmental Restoration Incentive Act

An Act to amend the Income Tax Act (oil and gas wells)

This enactment amends the Income Tax Act to establish a tax credit for the closure of oil and gas wells. It also sets out a requirement for the Minister of Finance to make an assessment respecting the implementation of possible tax incentives for the closure of oil and gas wells.

Environmental Restoration Incentive Act

[Shannon Stubbs, Conservative, Lakeland, AB]

moved that Bill C-221, An Act to amend the Income Tax Act (oil and gas wells), be read the second time and referred to a committee.

Mr. Speaker, I am really pleased to speak about my private members bill, Bill C-221, the environmental restoration incentive act, which I introduced on February 25, earlier this year.

Although the world has changed in many ways over the past nine months, the Canadian oil and gas sector continues to face a state of uncertainty. The families whose livelihoods depend on the sector still face what many say is an unprecedented struggle, with major anxiety about their futures and complete financial despair. Entire communities are at risk because of the steady decline of oil and gas activity and historic levels of bankruptcies and investment losses in Canadian oil and gas, and that damage has rippled across the country.

Since 2015, more than 200,000 jobs have been lost in the Canadian energy sector. It has devastated families and entire communities. There are many social consequences. A recent study from the University of Calgary’s school of public policy said that for every 1% increase in unemployment, 16 Albertans will die by suicide.

Never has a Canadian industry faced such a severe triple threat: global oversupply and demand drops, a collapse of global prices and a lack of market access. Even before COVID-19, a combination of economic policy and legislative and regulatory factors in Canada led to a historic and major collapse in investment, small businesses and jobs, while energy sectors in the United States and across the country were thriving. COVID-19 only exasperated what energy workers in my backyard of Lakeland would characterize as “carnage”, a dire situation shared by energy workers across Canada from B.C. to Ontario to Come By Chance in Newfoundland and Labrador.

Canadian oil and gas producers are world leaders in environmental remediation and reclamation, but one consequence of this perfect storm of challenges is that the record numbers of business bankruptcies have caused the number of orphan wells to increase by over 300% since 2015. It is an urgent economic and environmental challenge for rural municipal governments, for landowners, on Crown land and in indigenous communities.

Mark Dorin’s family farm in Didsbury, Alberta, is at risk. He said that the value of the land is at stake and is rendered literally worthless. Michelle Levasseur, economic development officer for the Town of Calmar says that it is a financial burden that is “not fiscally responsible…to ask our current residents to fund”.

Normally, orphaned wells become the responsibility of the provincial orphan well associations and funds. In strong economic conditions, they are remediated on schedule through levies on all the other active producers, but these orphan well funds are being overwhelmed, putting taxpayers at risk of eventually having to bear 100% of the cost for decommissioning, closure, remediation and reclamation. Between 2015 and 2018 in Alberta alone, the number of orphan wells skyrocketed from 768 to over 3,400. Today there are a total of 97,000 inactive wells in Alberta. The Alberta Orphan Well Association has an inventory of 2,983 orphan wells for abandonment and 3,284 sites for reclamation.

In B.C., there are over 300 orphan wells that need to be decommissioned. Half of those wells are on protected farmlands and there are over 7,000 more inactive wells. B.C.'s auditor general estimates that it could cost up to $3 billion to reclaim all the orphan wells and facilities in B.C. By percentage, B.C. actually has the largest increase of orphan wells since 2015, at 600%. Saskatchewan has more than 600 orphan wells and 30,000 inactive wells. The province’s auditor general estimates that it would cost $4 billion to decommission all of their existing wells. In Ontario, there are almost 900 inactive wells that could become orphaned if more companies go bankrupt, mostly throughout the southwestern part of the province.

Overall, there are more than 130,000 inactive, orphaned and abandoned wells in Canada. It is estimated that it could cost between $30 billion and $70 billion to fully decommission all current active and inactive oil and gas wells in Canada. That is why it is so crucial for the federal government to lead and to continue to take action on this national environmental and fiscal challenge. There is no doubt that it is complex and it requires a multipronged effort from provincial and federal governments and, importantly, from the private sector.

This year, the Alberta government announced an additional $100 million loan to the provincial orphan well fund to remediate 1,000 wells. In April, the federal government announced $1 billion for Alberta, $400 million for Saskatchewan and $120 million for B.C. for abandoned and orphaned wells.

I supported that one-time funding as a first step, but I think the government must adopt a permanent fiscal incentive to enable the private sector to raise funds dedicated solely to reclamation and remediation. Such an initiative recognizes the financial and economic reality that Canadian oil and gas producers face, while it emphasizes the primary role of the private sector to fulfill the environmental duties inherent in their responsible development of oil and gas resources in Canada.

What Bill C-221 proposes is a non-refundable tax credit that could eventually enable a flow-through share provision to encourage small and medium-sized producers to take action on the pressing challenge of suspended and inactive wells, and immediately create service jobs in communities and regions that need them most. I hope Canadians will note that my bill applies only to small and medium-sized producers that are struggling the most, which are responsible for about one-quarter of total Canadian oil production. These producers have, on average, one well for every 10 wells of the large multinational operators, which will not qualify for this tax credit. In 2017 and 2018, more than two-thirds of those small and medium-sized companies lost money, so it is urgent.

The first part of Bill C-221 creates a non-refundable tax credit that will help small and medium-sized oil and gas producers right away. The second part makes the case for this credit to qualify for the flow-through share provisions of the Income Tax Act, which is the government's part to do, so that when a producer wants to raise money from private investors, the producer can attach the value of this tax credit to a share of the company, which is sold to an investor.

The investor buys the share and the tax credit, and in this way the value of the tax credit flows through to the shareholder. What this means is that the tax credit the producer gives up becomes the profit margin for the investor who purchases these shares. That is a big incentive for outside private investors to contribute funds and capital to companies specifically for the purpose of decommissioning wells, even when the company's share price is not expected to increase.

Another reason this federal leadership is necessary is the 2019 Redwater Supreme Court decision, which was the right ruling but at a very challenging time. It says that when an oil and gas company goes bankrupt, the assets from that company have to go toward paying for the company’s environmental liabilities first, such as oil and gas wells, before lenders and investors are paid back. One consequence, of course, is that the ruling dried up private sector sources of investment, compounding all the other challenges that are harming small and medium-sized producers in Canada. Oil and gas producers are cutting spending and capital investment plans aggressively just to try to survive.

I want to stress that, from my perspective, the growing number of suspended and inactive wells awaiting decommissioning is not evasion nor neglect by small and medium-sized oil and gas producers in Canada. It is in fact a stark reality of their precarious economic positions. It is a consequence of all of the damaging policies that have undermined competitiveness and tanked Canadian oil and gas investment. Therefore, it is the duty of the federal government to help figure this out. Smaller producers simply do not have the money left in their businesses, and if the status quo continues, they simply cannot raise the money needed to proactively address their inactive wells in the current conditions.

In 2009, the previous Conservative government committed to ending inefficient and wrong-headed subsidies to oil and gas. Despite the rhetoric from others, the current Liberals removed any remaining, as well as some benchmark industry tax treatment from oil and gas, but not other industries. I support those measures.

The previous Conservative government advanced the polluter-pay principle in Canadian law. Bill C-221 reinforces the standard of polluter pay and protects taxpayers from the potential burden of billions of public dollars needed for remediation and reclamation. The federal government’s finance department confirms that this proposal is not a subsidy. The department defines a subsidy as “federal tax expenditures that provide preferential tax treatment that specifically supports the production or consumption of fossil fuels.”

The International Energy Agency does not consider this measure to be a subsidy either. Its definition of a subsidy is “any government action that lowers the cost of energy production, raises the revenues of energy producers or lowers the price paid by energy consumers”.

It is not unprecedented. For example, in the mining sector, flow-through share financing contributes over 65% of the funds raised for mining exploration across Canada, a measure Conservatives have always supported and the Liberals recently extended. Provinces have called for action on the growing challenge of orphaned and abandoned wells, but the $1.7 billion from the federal government is, unfortunately, a drop in the bucket compared to the overall up to $70 billion liability in active and inactive wells in Canada right now.

Alberta is calling for flow-through shares in order to allow the private sector to accelerate oil and gas well reclamation. Premier Scott Moe of Saskatchewan has also made similar calls.

Premier Jason Kenney advocates it to get the oil field service sector back to work while reducing an environmental liability. Alberta finance minister Travis Toews supports the proposal. He says, “Bill C-221 builds on the work Alberta has undertaken,” and “Flow-through shares are a game-changer for helping producers raise money from the private sector to decommission oil and gas wells.”

The industry wants to do its part to continue being a world leader in environmental stewardship and innovation.

Mark Scholz, the president and CEO of the Canadian Association of Oilwell Drilling Contractors also supports the environmental restoration incentive act. He said, “Programs designed to incentivize private investment in well reclamation, for instance, would help provide consistent work over time, which is the foundation for building a steady labour force again in the oilfield services sector.”

The Canadian Association of Petroleum Producers says, “Tools to temporarily or more permanently find ways to encourage these companies to raise capital would be exceptionally welcome at this point in time. Things such as flow-through shares...to help assist with reclamation and remediation are...tools”.

The Lloydminster Oilfield Technical Society in Lakeland says that it believes Bill C-221, combined with changes to share structures within Canada, will represent another avenue for the oil and gas industry to repair the damage with which it has been inflicted, and that any positive environmental impact, in the form of asset retirement, will always be looked upon favourably by its group and by the industry. The ability to achieve multi-party support of this initiative is indicative of Canadian society’s aim to maintain our oil and gas industry as the world leader in responsible development.

In my view, the solution to this environmental and financial challenge must prioritize the private sector and should not be solely dependent on taxpayers through big government programs. As a federal MP, this is just one thing I can do to bring forward a solution now.

It would not fix every issue overnight, but Bill C-221 is good for the environment, would help struggling small and medium-sized producers and would build an opportunity for immediate job creation for experienced, highly skilled workers in the oil and gas service sector now.

In order to make the greatest impact and to actually implement the flow-through shares part, I am asking all members to partner with me. This must be a collaborative effort with all members of Parliament to succeed.

During the last Parliament, I had the opportunity to bring forward Motion No. 167, which called for action to combat rural crime. I worked with all parties and secured support from hundreds of organizations and thousands of Canadians across the country. We accepted amendments and ultimately it passed the House of Commons with unanimous support.

My first goal is always to do what is in the best interests of the people I represent, for Alberta and for all Canadians. What ultimately matters most to me is doing the right thing and helping to advance meaningful initiatives for people, not politics and not partisanship.

Similarly, the current situation with orphan wells is escalating with many different impacts in western Canada, but I believe the objectives of Bill C-221 are important to all Canadians. The choice members of Parliament from all parties will have to make is whether the federal government creates a path for the private sector to address the surge in inactive and suspended wells to prevent adding to the number of orphaned wells, or leaves it to the Canadian taxpayers to foot the bill.

I want to close by saying Alberta has a long history, an unmatched history, of leadership on environmental stewardship and innovation in Canada. This is just another small but creative way to generate jobs, address environmental concerns and protect taxpayers in Alberta and across the country.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Madam Speaker, I know my colleague from Lakeland is very concerned about the problem of orphaned wells. We are talking about inactive wells here today. I am particularly concerned about the flow-through share aspect. We use flow-through shares a lot in the mining industry to incentivize investment in exploration and development of mines at a very risky time in that development. We want our resources to be developed, but it is risky so we give investors that incentive.

Here we have an obligation companies have, which they have had since they started drilling the well. We know it is there, they know it is there and we should not have to incentivize them to put aside that money ahead of time so that taxpayers are not obliged to do it. I am just wondering why Canadian taxpayers should come in and foot the bill for companies that are just—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

There are only five minutes of questions and comments, so I want to get in as many as I can.

The hon. member for Lakeland.

[Shannon Stubbs, Conservative, Lakeland, AB]

Madam Speaker, I enjoyed working with the member on the natural resources committee in the last term.

My perspective on this is “woulda, coulda, shoulda”. We need to address the situation we are in now. This challenge is complex. It is primarily the regulatory legislative responsibility of provinces. I did work in the department of energy for the Government of Alberta, and as I have said internally and publicly, I think there have been lots of missed opportunities in the past regarding regulatory and financial incentives, business development rules and determining the definitions and outcomes desired for reclamation and remediation.

In the reality we are in now, because of the drop in investment, there is an increase of hundreds of percentages of orphaned and abandoned wells. It is therefore our duty to partner with provinces to figure out how to solve this problem. Industry says flow-through share provisions are a tool that will—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Questions and comments, the hon. member for Jonquière.

[Mario Simard, Bloc, Jonquière, QC]

Madam Speaker, much of what my Conservative colleagues have been saying just does not add up. I remember a conversation I had with a Conservative colleague a while ago. He told me that what the Conservatives want when it comes to oil is not more federal money but less legislation. They want the government to get out of the way.

This morning, however, it seems very clear to me that my colleague's bill is not about making the government get out of the way. It is about tax credits. Once again, the Conservatives are asking for more financial support for the oil industry, which has probably received more financial support than any other industry in Canada.

In my opinion, this bill is at odds with the polluter pays principle. My colleague says the bill is compatible with that principle, but that is not even remotely the case.

[Shannon Stubbs, Conservative, Lakeland, AB]

Madam Speaker, the member must have missed the first part of my speech when I said that this is not a subsidy and is not about taxpayers' money being given to oil and gas companies. In fact, that is exactly what we are seeking to prevent. It is the Conservatives who are leading on this issue to ensure reclamation and remediation of all the outstanding oil and gas wells by enabling the private sector to use an incentive to raise funds from investors to meet these responsibilities. I would love to see any Ontario or Quebec MP stand up and say they do not support this measure for the mining sector, for example, or for other industries in Canada.

The government needs to get rid of its antienergy legislation, remove red tape, remove regulation and allow the Canadian oil and gas sector to thrive. However, because of consequences from global factors and its domestic decisions, this issue has been created. It is an enormous—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Questions and comments, the hon. parliamentary secretary.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the President of the Queen’s Privy Council for Canada and to the Leader of the Government in the House of Commons]

Madam Speaker, it is interesting to look at the reality of the situation. We have a national government today that is investing hundreds of millions of dollars in orphaned wells in an attempt to work with our prairie provinces to actually make a difference for the environment and industry as a whole.

The member made a comparison: Ottawa has spent about a billion dollars in the the Province of Alberta and the Province of Alberta has spent about $100 million. Does the member not recognize or believe that Ottawa and Alberta need to work together to achieve good results?

[Shannon Stubbs, Conservative, Lakeland, AB]

Madam Speaker, I do, which is exactly why I am bringing forward this legislation. I look forward to the member working with this Albertan to help get the private sector funding into the industry that is required for full remediation and reclamation of oil and gas wells in Canada, and to protect taxpayers.

However, the member is not correct. The federal government has not invested hundreds of millions of dollars in oil and gas well remediation and reclamation, aside from, if that is all he is talking about, the $1.7 billion that was split among three provinces.

The outstanding liability for all active and inactive oil and gas wells in Canada stands to potentially be between $30 billion and $70 billion. The reality is that oil and gas investment, because of the government's policies in this country, is plummeting, and companies can no longer get private sector investment to meet their environmental responsibilities while they develop the resource. It is the government's job to help fix that.

[Julie Dzerowicz, Liberal, Davenport, ON]

Madam Speaker, it is an absolute pleasure for me to rise in this venerable House to speak to Bill C-221, an act to amend the Income Tax Act, a private member's bill sponsored by the hon. member for Lakeland. Not only do I appreciate the opportunity to participate in today's debate, but I would like to thank the hon. member for raising the important issue of support for Canada's oil and gas sector.

The federal government knows that COVID-19 has been a profound shock to our economy and has dramatically changed the way we go about our daily lives, especially for those working in Canada's energy sector. Right now, oil and gas workers and their families are struggling because of things that are beyond their control. Both the devastating effects of the pandemic and the low prices caused by a surge in global crude oil supplies are a challenge. As a result, companies have had to slow down or pause their operations, leaving far too many people out of work.

That is why the Prime Minister announced earlier this year, in April, that the federal government would provide up to $1.72 billion to the Governments of Alberta, Saskatchewan and British Columbia, as well as to Alberta's Orphan Well Association, to clean up orphan and inactive oil and gas wells. These wells, which are no longer in use, can be detrimental not only to our environment, but also to people's health.

Think of the farmer whose family cannot grow anything on their land because of an abandoned well a few steps away from their home. Think of the small towns or indigenous communities struggling with this issue, which has been festering for years and even in some cases for decades. Cleaning them up will bring people back to work and help many landowners who have had these wells on their property for years but have not been able to get them cleaned up and get their lands restored. By investing in the remediation of inactive oil and gas wells, our goal is to create immediate jobs in these provinces while helping companies avoid bankruptcy and supporting our environmental targets.

Alberta estimates that its share of the federal support, up to $1.2 billion, will help the province maintain 5,200 jobs and clean up 30,000 wells. The cleanup cost per well can range from $100,000 to several million dollars, but actual costs can vary significantly depending on the complexity and size of the well or facility, or the amount of contamination that is present.

As part of the funding agreement, the Governments of Alberta and Saskatchewan have committed to implementing strengthened regulatory systems to significantly reduce the future prospects of new orphan wells. The goal is that these improvements will lead to sustainably funded systems that ensure companies are bearing the costs of their environmental responsibilities. Federal-provincial monitoring committees have been established to track the progress of provincial programs as part of these agreements, and these committees will work with local governments and indigenous organizations to ensure that important stakeholders are engaged in each process.

There has been widespread support for the $1.2 billion announcement, and I want to share quotes from a few people that relate the importance of this funding and its anticipated impacts.

In a statement, the Business Council of Alberta said that the funding announcement is “welcome news for energy companies, working Albertans, and for the environment.” It said this is a “win-win that will keep thousands of Albertans working in some of our hardest-hit industries, while also improving the environment.” However, they believe “considerable support is still needed, specifically liquidity, for some of Canada’s most significant energy companies”.

We also heard from the Canadian Association of Petroleum Producers, which echoed positive sentiments. It said, “Reducing environmental liabilities is a priority for the oil and natural gas industry and this initiative will allow important work to accelerate, while supporting thousands of jobs.”

Alberta's NDP environment critic, Marlin Schmidt, said the funding will help “put thousands of Albertans back to work while supporting responsible resource development,” and added that the UCP government must use its money in a way that ensures polluters will pay for the cleanup of their sites. He said, “They must also set clear targets and timelines for well cleanup now and into the future. I also hope the UCP will ensure landowners and municipalities are compensated for wells on their land.”

As we can tell, there is widespread support for this. It is a really wonderful example of federal and provincial co-operation.

It is also important to mention that the provinces, as well as the Alberta Orphan Well Association, are responsible for the detailed design and implementation of inactive and orphan-well cleanup programming. Detailed information on these programs will be provided by the recipients. Since April, Alberta, British Columbia and Saskatchewan have all announced programs to clean up orphan and inactive oil and gas wells.

It may also interest the hon. member for Lakeland to know that the government has previously provided indirect support to the Alberta Orphan Well Association, also known as OWA. In budget 2017, the government provided $30 million as a grant to the Government of Alberta to stimulate economic activity and employment during that challenging period. Alberta used the funds to pay the OWA's interest expenses on a $235 million loan extended by Alberta to the OWA. The OWA has a good track record of generating employment in the service sector by cleaning up orphan wells. The OWA estimates that the loan has supported the cleanup of approximately 637 wells and created 225 jobs. This proves that federal support to help clean up orphan and inactive wells is helping to stimulate employment and economic activity in the energy sector, and ensures that it can continue to support middle-class families and communities.

We have listened to the concerns of landowners, municipalities and indigenous communities that want to make sure that the polluter-pay principle is strengthened and that their voices are heard. I want to thank the Government of Alberta for working with us and for listening to their concerns. Appropriately cleaning up well sites will prevent methane leakage and ensure that the sites are remediated and returned to their original state.

I should also mention that the federal government has established a $750 million emission reduction fund, with a focus on methane, to create and maintain jobs through pollution reduction efforts. This includes $75 million to help the offshore industry cut emissions in Newfoundland and Labrador. This fund will primarily provide repayable contributions to firms to make them more competitive, reduce waste and pollution and, most importantly, protect jobs. Right now, many energy firms are experiencing a cash crunch, so they do not have the funds to invest in technologies to reduce emissions or fix methane leaks. The fund will allow for this kind of work to be done and create jobs that people need during this difficult time. Through the wells and the methane initiative, we estimate that we will maintain more than 8,800 jobs across the country. Just because we are in a health crisis does not mean we can neglect the environmental crisis.

When the Prime Minister announced support to help clean up orphan and inactive wells in April, he also announced that Export Development Canada was increasing its financial capacity to support Canada's small and medium-sized oil and gas companies. This added capacity is available to eligible companies so they can access the liquidity they need to keep their operations running and support their employees during this crisis. Many businesses have already taken advantage of the program. The added business support is being provided through various financing and insurance solutions, including risk-bearing guarantees for loans obtained through the company's bank and guaranteed by the EDC, and through EDC's bonding and accounts receivable insurance products. This commercial support is aimed at bringing liquidity into the market and helping Canadian companies during the crisis.

We know that the second wave is even harder for those who get hit, and that is why our response needs to be targeted and effective. Small and large businesses create jobs, drive our economy and make our communities stronger. The government will continue to do whatever it takes to support them. These measures are part of the Government of Canada's comprehensive economic plan to help Canadians and businesses through this period of uncertainty. We will continue to monitor this evolving situation closely, and we will take additional actions as needed to protect our health and safety and stabilize the economy.

I want to thank you, Madam Speaker, and I thank again the hon. member for Lakeland for raising this important issue of support for Canada's oil and gas sector and for allowing me to comment on it.

[Mario Simard, Bloc, Jonquière, QC]

Madam Speaker, this will come as no surprise, but I do not see how my party can support this bill, especially since it flies in the face of one of the guiding principles of environmental policy, namely the polluter pays principle. This is miles away from that principle.

Before I begin, I want to set the record straight. If I am told I will be given a $10,000 tax credit or a $10,000 subsidy, at the end of the day, it amounts to the same thing. My colleague argued that this is not support for the oil industry because it is not a subsidy but rather a tax credit. It amounts to six of one and half a dozen of the other, since this provides more financial support to one of the industries that already receives the most in Canada.

Getting back to what I was saying, it would be difficult for us to support this bill because it flies in the face of one of the guiding principles of environmental policy, namely the polluter pays principle. As everyone knows, it is up to businesses to cover these kinds of costs. The forestry industry did so in Quebec by paying for the remediation of sites where it operates. I do not see why it should be any different for the oil and gas industry.

There is something about this bill that surprises me. It seems to me that a typical Conservative would think that businesses must be the ones to bear the risk. It seems like that is part of the Conservatives' ideology. However, in this bill, they are trying to socialize the risks without socializing the profits. Businesses do not want to assume the environmental risk because it would cost too much, so it would be up to the government to do so; yet, it is the businesses that would benefit from the profits. I think there is a contradiction there. A red light should have gone off for a typical Conservative.

Simply put, this bill would fund what is likely the most environmentally damaging industry in Canada rather than funding the energy transition. We need to take the energy transition into account in today's discussion, and I think that massive support for the oil industry harkens back to another era, especially today.

I would like to remind the House that the federal government has already announced $1.7 billion in funding to cleanup and decommission orphan wells. That is a lot of money. I would like to maybe come back to that and say what bothers me the most about this bill. My colleague from Lakeland was asking why it should be up to Alberta to pay 100% of the cost of decommissioning orphan wells. That question bothers me a bit because about 22% of Canada's fiscal capacity comes from Quebec taxes.

There is a number that I like to quote and that keeps coming up. Between the early 1980s and 2015, the Government of Canada invested $70 billion in the oil sands. If I go back to the well-known figure of 22%, that means that approximately $14 billion from Quebec was used to fund the oil sands. I feel like asking my colleague how much money from Alberta was used to fund Hydro-Québec, but I believe the answer to that question is zero dollars. I therefore do not see why Quebeckers should have to take responsibility for the environmental fiasco currently happening in Alberta.

My colleague told the Liberals that they have done nothing for the oil sector. That is amazing. Just for fun, I asked research services to find out how much was invested in oil and gas between 2017 and 2020. The Liberals spent $24 billion, including $17 billion on buying the pipeline, but my colleague finds that the Liberals have done nothing for the oil and gas industry. If they did any more it would be obscene.

Allow me to make a comparison. During the same period, Quebec's forestry industry received $950 million, 75% of which was in the form of loans only. In my opinion, these are not direct investments.

My colleague tells us that it is not Alberta's responsibility to cover the entirety of the cost of capping the wells. However, it should be noted that the oil sands are causing other types of adverse consequences that some of our Conservative friends might not want to hear about.

As an example, let's talk about the famous Dutch disease that is well documented by many economists. When the Canadian dollar rises, Quebec's manufacturing industry completely falls apart. From 2002 to 2007, that industry lost 55,000 jobs with the currency rise caused by the Canadian extractive industry.

I am told that Alberta takes on the lion's share of the risk and that Quebec and the other provinces should take a bite out of it. However, if I add up everything I just mentioned, it seems like we have already taken more than a bite and we are starting to get full. We are losing out to this very troublesome industry.

We could propose solutions, since orphan wells are a significant environmental concern. However, before we come up with a solution, we must set the conditions for its implementation. If the government adopts a policy of closing wells, the first condition must focus on an energy transition.

This policy must not become a type of subsidy for an industry that has already gotten too much. We need to focus on the polluter pays principle, and nothing will convince me that tax credits would help us achieve this. That is certainly not the case. We also need clear regulatory measures that do not perpetuate the problem we are seeing now. Ultimately, this policy must be consistent with Canada's greenhouse gas reduction targets.

In my opinion, companies should be responsible, in all cases. I do not see why oil companies should not have to pay a security deposit before embarking on an oil sands extraction project, as is the case in the mining sector.

Let me touch on what I think is the major issue. Before the pandemic, oil prices had dropped rather significantly, and a barrel of oil was priced between $60 and $70. During the pandemic, the price per barrel has dropped as low as $40 or $45.

Members will recall Teck Resources' Frontier mine project. This project depended on a price per barrel of $80 or $90 to be profitable. Since all experts agreed that the price of Canadian oil would never get back to $80 or $90, the Frontier mine project was abandoned.

This shows that the Canadian oil industry is under pressure, because it is not profitable at the current price per barrel, which sits between $50 and $60. Why would we continue to invest in this lame duck? It would be completely irresponsible, especially from an environmental perspective.

In conclusion, orphan wells are obviously a real problem, but it is not up to taxpayers to foot the bill. It is certainly not up to Quebec taxpayers to do so, because they have paid the price in past years. I think we can justify spending public money to deal with the orphan well problem, but only if certain conditions are met, as I said earlier.

The Bloc Québécois will stand by western Canadian taxpayers, workers and families as long as efforts start to be made to free the Canadian economy from its dependence on fossil fuel. I do not think a bill like this one will put us on that path.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Madam Speaker, I am happy to rise today to speak to Bill C-221, a private member's bill tabled by my colleague for Lakeland.

Bill C-221 would provide a tax credit to qualifying corporations for expenses incurred for the closure of an oil or gas well. The bill would also require the Minister of Finance to assess whether the implementation of a flow-through share program would increase private sector funds available to close oil or gas wells.

I will cut to the chase and say that I do not think that the bill before us is the way forward. The NDP believes in the polluter pays principle, and that is theoretically the way the well drilling system is set up right now. Companies are obliged to clean up their wells when they become inactive. Providing incentives for companies to not break the law is a waste of taxpayers' money. Despite what the member said, it is a textbook case of an inefficient subsidy. It flies in the face of government promises that date back to the Harper era to end subsidies to the fossil fuel sector. However, I would also admit that the bill does have the good intention of dealing with the significant problem of inactive wells across Canada, especially in western Canada.

Right now, there are 91,000 inactive oil and gas wells in Alberta, 36,000 in Saskatchewan and 12,000 in British Columbia, and these are the wells that Bill C-221 is seeking to address. These wells are not cleaned up. When the companies that own them become insolvent, they become orphan wells and the taxpayer is on the hook to pay for the cleanup. That scenario has played out again and again.

There are more than 2,500 orphan wells in Alberta right now, 356 in B.C. and 159 in Saskatchewan. It can cost $100,000 or more to clean up a well. Members can do the math: It is a big bill for taxpayers to deal with orphan wells, and the bill could get bigger. The Alberta Energy Regulator has predicted that the number of inactive wells in Alberta could easily rise, could easily double, to 180,000 over the next 10 years, and so it is a serious problem. I would agree with the member on that.

We cannot leave these wells and do nothing. There are impacts on the environment, as they will leak methane into the air and contaminants into the ground. There is an impact for landowners and farmers who receive lease payments while these wells are active and even when they are inactive. Until they are cleaned up, those lease payments are made, but, increasingly, oil companies have simply informed landowners that they will not be making lease payments, with no discussions, no negotiations. Many Canadians wish they had that kind of power over their landowners. Landowners have had to take companies to court to make them live up to their obligations.

The Alberta provincial government has told oil companies that they do not have to pay municipal taxes during these tough times, but there is no compensation given to local governments that are already struggling through COVID. Municipalities have not only lost a valuable tax base, but many have been left with contaminated sites that they cannot afford to clean up; and the member for Lakeland mentioned one of these, and so development opportunities are squandered.

What has caused this problem, and how can we fix it?

Clearly, the problem is that companies do not have the ability to pay for cleanup. We all know that times are very difficult in the oil patch. One could argue that companies did not see this downturn coming and were caught unaware by these tough times. The trouble is, the number of inactive wells and orphan wells was steadily rising even when times were good, when oil was $80 a barrel. Companies were not saving for the future then. They were not cleaning up their wells then.

Will this proposed legislation help fix the problem? Would it incentivize companies to live up to their obligations so that taxpayers are not on the hook?

When companies drill a well, they know that they are going to have to clean it up once it has stopped producing. When it is producing, they should be putting aside those funds for that obligation. The problem is, many of those companies are not doing this. They are not planning for that rainy day, and they have not been doing this for years.

The regulators are partly at fault for not properly ensuring that companies do this. Regulators should be putting limits on how long a well can remain inactive before it must be cleaned up. Only the B.C. regulator has rules about that right now.

Regulators could create a steadily rising inactive well fee, such as we see in California, that could go into a fund to help orphan well cleanup. Regulators could demand that companies pay a security up front, and the member for Jonquière mentioned this, so that when a well is drilled, the remediation costs would be automatically covered. That bond would be a small amount compared to the price of buying drilling rights and actually drilling the well. However, these regulatory solutions are largely in provincial hands, as the member for Lakeland mentioned.

I am not a tax accountant, but it seems logical that if a company did not put away enough money to cover legal obligations and now is not making enough profit to cover those costs, a tax break will not fix things. Tax writeoffs only work when enough money is being made to have to pay some tax. If tax credits are being provided to cover these costs, then it is the taxpayer who is funding these activities.

The idea of creating a flow-through share structure to encourage people to invest to clean up oil wells does not seem like a good idea either. Flow-through shares are used extensively in the mining industry to encourage investment in mine exploration and mine development. That is obviously a risky investment, so it makes sense, if we are to develop our resources, that we should provide incentives to investors to help companies at that critical stage.

However, cleaning up oil and gas wells is not a risky business. Companies' investors know years ahead of time that they will have to do it, and they have a pretty good idea of how much it is going to cost. Providing incentives to corporations or investors is completely inappropriate at this stage.

This is a straight subsidy to the fossil fuel industry. We would be paying them to do something that they are legally obliged to do. It is like giving drivers a tax break for staying on the right-hand side of the road or coming to a stop at a stop sign. The Parliamentary Budget Officer estimates that this tax credit would cost $264 million.

Canada's natural resources are shared resources owned by the people of Canada. Former premier of Alberta Peter Lougheed once said that, when it comes to resources, we have to act like owners. That means getting the best price for our resources. It also means making sure that the corporations that pay for access to those resources abide by our laws in how they treat the environment when extracting them.

Governments across this country have not done a very good job of upholding that pact with the people of Canada. Regulators for the oil and gas industry, whether it is the Canada Energy Regulator, the Alberta Energy Regulator, the B.C. Oil and Gas Commission or any other of a number of such bodies, have too often acted like cheerleaders for the industry instead of regulators acting as stewards on behalf of the Canadian public.

Companies are obliged by law to clean up after themselves. When they drill a well, they know how much that cleanup will cost. They should act responsibly and put away sufficient money in a trust fund while a well is productive, so that when the well reaches the end of its productive life, the money is there to clean up their mess.

That is what we find in another Conservative private member's bill from the member for Calgary Centre, Bill C-214. I would be happy to support that bill when it comes up for debate. However, this bill before us today is not an incentive for companies to do the right thing, to put aside money to pay for future obligations. It is an incentive for companies to put off that obligation until the last minute, forcing taxpayers to help them pay for clean up or, if it is too late, to pay all the costs for that clean up.

Unfortunately, I will not be supporting this bill.

[Warren Steinley, Conservative, Regina—Lewvan, SK]

Madam Speaker, it is with great pleasure that I join this debate on the second reading of Bill C-221. I am very honoured to support my friend and colleague, the member for Lakeland. As this is my first speech over Zoom through the virtual Parliament, it will take a little while to get used it, but I am looking forward to adding my voice to those who think this bill should be supported by all parties.

I will go through a couple of discussions on why this is a bill that should unify members of Parliament to come together to support this option of doing the right thing environmentally and making sure we have an idea of how we are going to clean up orphaned and abandoned wells.

I have listened intently to my colleague's speech, as well as those of the members from the Bloc, the NDP and the Liberal party, on what should have been done and the now growing issue of abandoned wells. Obviously we can look to the past and say some things were not done right, but as the government is famous for saying, we need to take a team Canada approach. What we need to do now is look at options for getting these orphaned and abandoned wells cleaned up.

One thing that has come to light that shows why a bill like this should be pursued is the recent Redwater decision of the Supreme Court. None of my colleagues from the opposition parties have mentioned this, so I will mention it. As a result of the Redwater Supreme Court ruling in 2019, federal bankruptcy laws do not supersede provincial environment obligations. This results in many companies no longer being able to find the financing to drill wells to increase their cash flow because, in the case of bankruptcy, investors and creditors would only get paid after all well closures and reclamation costs were incurred.

What we have to do now is figure out how oil and gas companies are going to get access to liquidity in order to continue operating, so these wells can be cleaned up in the long run, as it comes to the environmental part of Bill C-221, an act to amend the Income Tax Act or the environmental restorative incentive act.

For a quick overview, Bill C-221 aims to provide support for the energy industry by implementing a 13% non-refundable tax credit for oil and gas well decommissioning costs. It also instructs government to evaluate the feasibility of flow-through shares.

The bill has received support from many key energy industry and government stakeholders that are focused on orphan well cleanup instead of new extraction projects. Opposition from environmental groups has been minimal. This bill is an attempt at a win-win for energy and the environment. It is being presented as a Conservative solution to an environmental crisis, as well as a way to help energy companies survive and create new jobs.

The member from the Bloc talked about unemployment rates. Right now unemployment rates in Saskatchewan and Alberta continue to climb because of new proposals and policies brought forward by the government. I listened to the member for Lakeland talk about two of the main issues behind the oil and gas sector not doing well. She forgot the third and fourth issues, but she said the two issues were oversupply and pricing during COVID-19.

However, a third and, I would say, more prominent issue that explains why the energy sector is not doing well is the government putting in place policies that have been damaging. We can talk about Bill C-69 and Bill C-48, as well as the continued overburdening with regulations, which energy sectors have continued to meet.

My Bloc colleague brought up the fact that the government bought a $7-billion pipeline. I would respond to the member by saying the government would not have had to buy a $7-billion pipeline if the regulations had been in place and it had not kept moving the goalposts.

A private company would have built that pipeline at zero cost to taxpayers across our country. If those regulations had not been changed, we would have had a private proponent building the pipeline and allowing our energy sector more options on how to transport goods to market.

Another thing about the environmental restoration incentive act is that it is for small and medium-sized producers. As we have talked about already, through no fault of their own, some of the policies that have been put in place have really hamstrung their ability to make ends meet and continue to work and employ people across our country.

The reality is that oil and gas wells that companies intend to decommission are now being suspended, so I think all members in the House can come together and say that we need to ensure we are able to clean up oil and gas wells. I do not think that is a debate among members of Parliament. I know they have been talked about many times.

I think our NDP, Bloc and Green party colleagues should take long look at this bill to make sure that the environmental measures are going to be met and that we will have the ability to clean up these wells once they are decommissioned and abandoned.

I will read a couple of quotes from either late shows or things that have been said in the House of Commons. The NDP member for South Okanagan—West Kootenay rose in the House on February 21, 2019, and stated:

There are over 122,000 inactive wells across western Canada, and most of those wells have absolutely no prospect of ever operating again. That is almost a quarter of the wells out there. Most will require cleanup and reclamation in the near future. Many are on private land, on farms, where they impact the work and lives of farmers who are no longer receiving rental payments for those wells.

That is absolutely true. I agree with his statement. So far there have not been many proposals from the NDP on how we are going to make sure these wells get reclaimed, and I would ask the member for South Okanagan—West Kootenay to take a look at this bill once again, because it does bring forward a reasonable approach to ensuring some of these wells get cleaned up and the land goes back to its original state of being.

The former member for Edmonton—Strathcona rose in the House on February 20, 2019, and said, “[the] government did commit $30 million in budget 2017, when the cost, according to some people, is $260 billion, in support of Alberta's efforts to advance the reclamation of orphan wells.” The former member Linda Duncan is in favour of work to reclaim these wells, and I would like to have an idea of where she would be on this. I think she would be in support of this private member's bill.

The member for Saanich—Gulf Islands on June 17, 2019, during the climate emergency debate, stated:

We must, in that process, include a transition for the skills of workers.

One great example that I will give are the orphan oil wells. There are thousands of them throughout Alberta and northern B.C., which have tremendous potential for geothermal energy production.

Therefore, there are ways to work together on this. Many MPs from across political stripes know that we need to have a policy in place to ensure these orphan wells are cleaned up, and I am looking forward to working with them on Bill C-221, so we do have the ability to ensure that the Government of Canada is coming together for the environmental purpose of making sure these orphan wells are cleaned up.

The other side of this is that it also has the ability to create jobs and employment in the hard hit sectors across Alberta right now. I want to say that this bill would allow friends and families across western Canada to go back to work and help provide for their families once again. I need to know that the federal government is going to be there and is in support of the energy sector.

The Liberal MP who was on her feet today spoke about the support her government has shown to energy and oil workers in the energy sector, and I would like to see that support continue. It has been a minuscule amount of support at this point in time, but with this bill we could put in place the opportunity for companies across Saskatchewan, Alberta, Manitoba and B.C. to continue to stay afloat. We are looking for the ability of these companies to have options to keep their people employed and keep people working across our sector.

On one final note, I realize that a couple of my colleagues have said that the energy companies need to step up and they need to be responsible. I do want our colleagues to stop looking backward. That was in the past. We need to have these companies stay in business and work together to allow them to clean up the orphan and abandoned wells.

I am proud to support the hard work of the member for Lakeland. She is a tireless advocate for her constituents and I am happy to be able to be seconding this bill, Bill C-221.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

The time provided for the consideration of private members' business has now expired. The order is dropped to the bottom of the order of precedence on the Order Paper.