Oilfield services companies in Alberta will be able to apply through an online portal starting May 1 for $1 billion in grants under the oilfield rehabilitation program announced by the federal government last week.

Premier Jason Kenney and Energy Minister Sonya Savage announced the details of the Site Rehabilitation Program on Friday morning, saying it would be mainly funded by the federal government's COVID-19 Economic Response Plan.

The province estimates it will create 5,300 direct jobs.

It comes a week after the federal announcement on April 17, when Prime Minister Justin Trudeau's Liberals said they would spend $1.7 billion to help clean up orphaned and abandoned oil and gas wells in Alberta, Saskatchewan and B.C.

As of March 2020, Alberta has approximately 95,000 inactive wells and 69,000 abandoned wells, according to the Alberta Energy Regulator. Orphan oil and gas wells are those abandoned by developers who can't be located, have gone bankrupt or don't have the financial means to pay for proper decommissioning.

The federal government estimates cleanup costs for individual wells can range from $100,000 to several million dollars, depending on the size and complexity of the well.

Program details

Kenney said Alberta's new program would allow the cleanup of thousands of those sites while immediately getting money into the hands of businesses hit the hardest by the economic downturn.

The first part of the program is to launch on May 1 and will provide participating companies with funds in $100-million increments.

Its initial focus will be on grants to service companies that have been significantly impacted by the economic downturn.

Alberta's premier called out a reporter for asking when Alberta will transition away from fossil fuels, given the hit the oil and gas industry is currently taking, and whether his government would talk to American politicians interested in pursuing more renewable energy. 2:38

The program will provide grants of between 25 and 100 per cent of total project costs — depending on the ability of the oil and gas company responsible for the site to help pay for cleanup.

The funds will be paid directly to the oilfield service company completing the work, the province said.

"We are creating almost 5,300 jobs for Alberta's energy workers, while completing important work decommissioning and reclaiming abandoned pump jacks, pipelines and wells," Energy Minister Sonya Savage said in a news release.

"This will ensure that sites are properly addressed, benefiting landowners and Albertans across the province."

'Bailing out' oil and gas companies

Dispersing the money as a grant instead of a loan violates Canada's and Alberta's polluter pay principles, said Regan Boychuk, co-founder of the Alberta Liabilities Disclosure Project, a group critical of how the province deals with oilpatch remediation liabilities.

"By releasing $1 billion in Canadians' tax dollars as grants not loans to industry, the Alberta government is bailing out oil and gas companies that have profited from our public resources, but now refuse to adequately fund their own cleanup," he said.

Job creation and environmental benefits would be much more significant if the money was leveraged through loans, Boychuk added.

Some farmers have voiced similar concerns about the aging, inactive wells, saying they pose food safety and environmental concerns, some of which affect their ability to access funding from banks.

The province says a second $100-million increment, to be released from May 15 to June 15, would focus on sites where some operators have failed landowners and where government is paying compensation to landowners as required under the Surface Rights Act.

Eligible work will include:

Closure work on inactive wells and pipelines, including remediation and reclamation.

Removal of abandoned in-place pipelines.

Phase 1 and 2 environmental site assessments.

Information on eligibility and how to apply is available at alberta.ca/siterehab.