https://www.cbc.ca/news/canada/saskatchewan/opinion-sask-abandoned-oil-wells-1.5104173
Opinion | Saskatchewan needs to get serious about abandoned oil and gas
wells
Saskatchewan has tens of thousands of inactive oil and gas wells
Sarath Peiris · for CBC News · Posted: Apr 21, 2019 6:00 AM CT
Confronted daily with news about hard times in the oilpatch, the impact
of the federal carbon tax and the political battles over adding pipeline
capacity to move western oil, it's easy to forget about a hugely
expensive legacy the energy industry is creating.
A report last year by provincial auditor Judy Ferguson noted that the
number of inactive oil and gas wells in Saskatchewan had ballooned by 90
per cent between 2005 and 2017. The Ministry of Energy and Resources
(MER) pegged the future cost of abandonment (capping) and reclamation at
$4 billion.
Even though the ministry points to several programs it says will ensure
the energy industry picks up the tab — annual levies on the industry
toward an Oil and Gas Orphan Fund and the government's Licensee
Liability Rating (LLR) program, which requires a security deposit from
higher-risk licensees — there's little reason for confidence.
Tens of thousands of wells
Saskatchewan currently has more than 30,000 inactive oil and gas wells
scattered around the province — MER provided a figure of 35,868 wells
that includes oil and gas, water source, storage cavern and potash
production — as well as 31,057 abandoned and 609 orphan sites requiring
work.
Of the orphan sites — wells whose owners are unknown, insolvent, or no
longer operating the province — 240 need to be capped and have the sites
remediated to a pre-drilling standard. The other 369 orphan wells have
been abandoned and the site remediated, but need more growing seasons to
ensure that the reclamation was successful.
Based on former premier Brad Wall's 2016 request to the federal
government for $156 million to clean up 1,000 wells, the capping and
restoration of these orphan wells could cost as much as $37 million.
According to the orphan fund's 2017-18 annual report, it had about $11
million as of March 31, 2018. The LLR program also held $104 million in
security deposits paid by operators whose asset value falls below their
cleanup liability.
In addressing the long-term cleanup cost projection of $4 billion, MER
estimates the current value of oil and gas wells and facilities in
Saskatchewan at $14.5 billion.
It may seem like a lot of money. But as the orphan fund annual report
notes, while the number of risky licensees in the LLR has held steady at
around 200 since 2007, the number of companies with a good rating has
steadily declined to about 140 from nearly 300.
Coupled with the industry trend toward larger companies off-loading
wells at pennies on the dollar to smaller operators with less financial
stability, the potential for trouble is huge. Picking up the tab would
fall to all industry players required to pay ever-rising mandatory
levies to the orphan fund, and to taxpayers who will serve as the
backstop if things go further south.
Although Alberta's energy regulator had pegged the potential future
liability for cleanup of oil and gas wells at less than $20 billion, the
Alberta Liabilities Disclosure Project, an association of landowners,
researchers and environmentalists, has found data that show the
abandonment and reclamation of 300,000 active and inactive well sites
could cost as much as $70 billion.
Regulatory framework is lax
While Saskatchewan's $4 billion estimate could be accurate because its
system is somewhat different from Alberta's, we shouldn't be complacent.
At the bottom of it all is the weak regulatory approach taken by western
provinces that place no restrictions at all on how long companies are
allowed to let oil and gas wells remain inactive.
While American states such as Texas and North Dakota have stringent
rules that require operators to either restart inactive wells within 12
months or cap and reclaim the sites, Saskatchewan, Alberta and British
Columbia have only progressed so far as talking about developing such
requirements.
Asked how many wells in Saskatchewan have been inactive for five years
or more, MER responded with a statement that said the "data isn't
currently available, as wells can be reactivated at any time." The
reality is only a minuscule number of licensees ever reactivate inactive
wells.
Although MER says it is considering imposing a time limit before
abandonment and remediation is required, it said "there's no evidence
that the length of time that a well is inactive is an indicator of
environmental or safety risk."
This despite concerns in the auditor's report that, "Inactive wells may
leak methane and may increase risk of contamination of surface and
groundwater," and that contaminated sites could threaten wildlife
habitat and interfere with agricultural activity. The auditor also
pointed to the potential of flooding or soil erosion from contaminated
sites could release chemicals into the environment.
Despite MER assurances, Saskatchewan faces a looming problem involving
the oil and gas industry that has been its bread and butter for decades.
Addressing it must begin requiring the industry to abandon and reclaim
inactive well sites within 12 months.
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