Federal oil well remediation cash aimed at service sector jobs

Landowners wondering if oil and gas wells on their properties might be remediated sooner thanks to an infusion of about $1.72 billion in federal funds will have to wait.

“We’re working on how we prioritize that in terms of the abandoned wells and the orphaned wells we have,” said Bronwyn Eyre, Saskatchewan Minister of Energy and Resources.

“We’re really going to try to make sure this is rolled out in such a way that we help the service sector in Saskatchewan as quickly as possible.”

Canada’s oil industry has been hit hard by the COVID-19 pandemic. Global lockdowns have kept millions of vehicles off the roads, airlines have grounded most of their fleets, and international oil producers have engaged in production wars. It’s all driven crude oil prices below zero.

In response, the federal government came up with special funding to remediate oil wells in the three western provinces and put at least some idled oil patch workers back in the field. One billion dollars is going to Alberta, $400 million to Saskatchewan, and $120 million to British Columbia. Alberta’s Orphan Well Association (OWA) is to receive $200 million as a repayable loan.

The Alberta government has already launched its Site Rehabilitation Program and began accepting applications on May 1. There is no obvious direction as to which wells will be addressed first, although orphan wells have been identified as a priority. These are wells whose original owners have gone bankrupt or otherwise disappeared, leaving no one responsible for remediation.

According to the Alberta government’s website, as of November 2019 there were 3,406 orphan wells needing abandonment and reclamation and another 2,772 sites needing reclamation only.

Concerns about energy companies reneging on their cleanup obligations on private lands as well as taxes to local governments, have spurred the creation of the Alberta landowners group Action Surface Rights and the Alberta Liabilities Disclosure Project. The latter estimates Alberta’s liability has grown over the decades to be between $58 to $260 billion.

The landscape in Saskatchewan is much different, Eyre said, with about 160 orphan wells to look after. She said that while the provincial government appreciates the infusion of funds to remediate end-of-life wells, it was troubled by the image of the picture implied by the federal announcement.

“It was perhaps a bit of an unfortunate impression that was left by the prime minister during that announcement, this idea that somehow leaking wells dot the landscape,” Eyre said. “That just isn’t the case here in Saskatchewan.”

Eyre explained the province has made oil well remediation a priority for the past several years, including an ask to the federal government for more than $150 million for the purpose in 2016. This includes both orphan wells and abandoned wells. The latter are wells that companies are shutting down, triggering regulations governing sealing of the well holes and remediation of sites back to pre-development condition.

“We had a good record going into this,” Eyre said. “Last year Saskatchewan oil and gas producers completed a record number of abandonments here in the province. We completed just over 2,000 — 2,031 — and that was up 40 percent since 2018. And that was up 240 percent since 2016.”

She added that streamlined regulations have also given companies incentive to clear these liabilities from their balance sheets to improve their financial positions.

Oil wells remain a potential liability until they’ve been fully sealed not only because of the expense of cleanup. They also pass through layers such as rock, sand, and clay and sometimes, another vital resource: potable water.

Grant Ferguson is an associate professor in the University of Saskatchewan’s College of Engineering where he specializes in groundwater and hydrogeology. He said normally, water-bearing and oil-bearing formations are separated by so much rock there is no danger of them mixing. Water wells are rarely more than 100 metres deep, while drillers in Western Canada can go down 2,500 metres or more to reach oil.

“The risk is that the well might be connecting the oil and gas reservoirs or saline aquifers with the overlying shallow groundwaters,” Ferguson said. “Many older wells have poor cement jobs between the casing and rock that would allow for upward migration of fluids, and the casings themselves may also degrade over time.”

Ferguson said deciding which wells to clean up first depends on many factors, such as if the well goes through a potable water aquifer or whether there’s danger of gas leakage (either methane or poisonous hydrogen sulphide). Also, regulations have evolved since the beginning of the industry decades ago. This means that abandoned wells — those that were remediated by companies according to regulations of the day — may warrant a second look.

“Those might be ones to look into,” he said, explaining that wells that cut through potable water aquifers should take priority.

“Basically, the older, the deeper the wells, the scarier they might be because of their potential to connect different things.”

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