The Mine Financial Security Program (MFSP) is one of many liability management programs that ensure Alberta’s energy resources are developed responsibly. The program helps manage coal and oilsands liabilities by collecting financial security from mine owners and protects the public from paying for project closure costs.
As of June 30, 2020, $1.48 billion was being held in security under the MFSP. Oilsands mines account for just under $1 billion of this total.
The formula to determine payment into the Mine Financial Security program includes an operator’s revenue, operating cost and sales volume. Under the program, coal companies pay their security up front, while oilsands mines use their reserves as collateral for financial security.
Extremely low oil prices in 2020 reinforced problems with the program’s formula. As a result, the Government of Alberta is making a change in the interim to the calculation while the program review is underway to ensure security amounts align with the intent of the program.
This interim step will not impact environmental outcomes in any way.
Work on the program review will include engaging Indigenous Peoples and other stakeholders. Details on the program review and engagement plans will be available in the coming weeks
“The math doesn’t work if you have extremely low or negative oil prices, like we did in 2020. Instead, what we need is a long-term solution for the Mine Financial Security Program to better protect our environment and Alberta taxpayers.”
A year ago, the price of West Texas Intermediate reached a historical minimum of -US$37 per barrel and it is currently more than US$60 per barrel. The program is currently vulnerable to drastic swings in prices like the one the oil sector experienced in 2020.
While the price of oil has already begun to recover, the extremely low oil prices in 2020 significantly skewed the calculation of what oilsands companies would have been required to pay for reclamation security in 2021. As a result, the Government of Alberta is making a change in the interim to the calculation while the review is underway to ensure security amounts align with the intent of the program while ensuring positive environmental outcomes.
The program review will include feedback from the province’s auditor general and will focus on the security calculation. The goal is to ensure sufficient funds are collected from oilsands mine operators to pay for future reclamation costs. No change has been nor will be made in requirements for environmental oversight and protection.