Increase in inactive oil and gas wells could cost Saskatchewan $4B in future cleanup:

[chuckChuck]

Increase in inactive oil and gas wells could cost Saskatchewan $4B in future cleanup: auditor
Province has over 24,000 inactive wells — 90 per cent more than in 2005
Bridget Yard · CBC News · Posted: Jun 08, 2018 6:00 AM CT | Last Updated: June 9

Since 2005, inactive oil and gas wells have increased by almost 90 per cent in Saskatchewan, and the provincial auditor says the government has some work to do.

Auditor Judy Ferguson issued a report today that estimated the overall future cleanup cost of the province's inactive wells at $4 billion.
"You've got an increased number of oil and gas wells because of the downturn in the economy in part, and then you've got this Redwater case happening. Are you really sure your programs are protecting the public enough to make sure that the industry continues to pay?" asked Ferguson after releasing the report.
She's referring to an Alberta court case, now before the Supreme Court of Canada, which will set a precedent on who is on the hook for orphaned wells after a company goes bankrupt.

The provincial energy regulator argues that proceeds from the selloff of Redwater's remaining goods should help to pay for cleanup of its inactive wells.

Currently in Saskatchewan, cleanup responsibility lies with the company. If they can't be found, or no longer exist, the cost can be covered through the province's Orphan Fund.

The fund sits at $11.6 million, and the industry contributes to it every year, each company contributing a sum based on its own total liabilities.
'They are liabilities'

While Ferguson estimates future cleanup costs of Saskatchewan's inactive wells at $4 billion, one researcher believes the price tag will be far more.

In her research, University of Regina geography and environmental studies professor Emily Eaton found there were over 24,000 inactive wells in Saskatchewan in 2017.


"They are liabilities. In fact, I would say every oil and gas well in Saskatchewan is a liability," she said

"Eventually, the oil industry will be wound down across the world and we're going t have to deal with decommissioning and remmediating the land association with all these wells."

There are over 110,000 wells in the province, she said, and she believes the ministry's approach to holding companies accountable is "inadequate."
Emily Eaton has been studying Saskatchewan's oil and gas industry since 2011. (Submitted) In addition to the Orphan Fund, the provincial government also attempts to mitigate risk with the Licensee Liability Rating program.

Every licensee with wells and facilities in the oil and gas sector has their licensee liability rating calculated each month by the ministry. If their rating exceeds a certain number, they do not have to pay a levee.

These security deposits are held, so funds are available to clean up inactive wells should the companies become insolvent or bankrupt. The Ministry of Energy and Resources has a fund of $134.7 million for this purpose.

According to Eaton, the measure isn't enough. She argues every oil and gas company should be leveed before beginning projects, since all wells will eventually have to be cleaned up.

[chuckChuck]

The cost of cleaning up suspended or orphaned oil wells in Saskatchewan came up during the winter months and nobody provided the number of inactive wells or a cost.

The Saskatchewan Auditor just released this report the other day.

Unless regulations are strengthened it looks like tax payers are on the hook for $4 billion in decommissioning costs and cleanup in Saskatchewan.

Unless this is paid for by the oil industry this will be an example of taxpayers subsidizing the oil industry.

[bucket]

Yup quite a bill for the party Wall threw.

[Guest]

Anyone that believes oil and gas will be wound down soon is living in a dream world. Loses all credibility at that point . But theyre right oil companys should be responsible for it forever as well as CEO’s etc

[chuckChuck]

Anyone that believes oil and gas will be wound down soon is living in a dream world. Loses all credibility at that point . But theyre right oil companys should be responsible for it forever as well as CEO’s etc

Oil and gas will be around for a long while but a lot depends on when cheaper new technology and new energy sources make it obsolete.

Harper said Canada should be off fossil energy sources by the year 2100. He signed a G7 agreement on that goal. That is an estimate. Who knows when it will actually occur.

[LEP]

$4B may be a tad high by atleast three time. At one time many swabbing companies were abandoning wells themselves. Pull off equipment, dig down 5 feet cutoff wellhead fill with cement, weld on cap. Backfill. All for a couple thousand. These were vertical wells.

Now horizontal wells have longer runs but I believe the procedure isn't much different. Have to fill with cement at xx pressure. Doubt all 24,000 wells are horizontal. Likely less than 1/3 would be.so the number is way overstated

Also I believe if you shutin a well for a period of time because of price the well is considered abandoned. So at $30 oil way more abandoned wells than at $60.

[chuckChuck]

$4B may be a tad high by atleast three time. At one time many swabbing companies were abandoning wells themselves. Pull off equipment, dig down 5 feet cutoff wellhead fill with cement, weld on cap. Backfill. All for a couple thousand. These were vertical wells.

Now horizontal wells have longer runs but I believe the procedure isn't much different. Have to fill with cement at xx pressure. Doubt all 24,000 wells are horizontal. Likely less than 1/3 would be.so the number is way overstated

Also I believe if you shutin a well for a period of time because of price the well is considered abandoned. So at $30 oil way more abandoned wells than at $60.

Alot depends on the site. If there is contamination from oil and saltwater and the soil and clay have to be removed to an approved waste disposal site then costs will be very high with long transportation distances.

Also what does it cost to remove roads, lease sites, and replace the top soil? Service rigs don't do any of that.

Plus there will be potential crop loss for many years on these sites which requires compensation.

Then what about flow lines. They need to be purged and capped or in some cases removed?

Surface casing needs to be cemented to stop the potential contamination of ground water sources.

Some of the old battery sites will be full of contaminants and many times more expensive. They will run into the many millions per site.

All wells will eventually need to be cleaned up whether the oil is $100 per barrel or $10 as they all stop producing at some point.

If my math is correct, $4 billion divided by 24000 wells is around $166,000 per well. Will that cover all the costs I listed at todays or tommorows inflated prices? 10 or 20 years from now?

Cleaning up these sites will put a lot of people to work for a long time.

[mustardman]

Wow ! Huge bucks for cleanup!
Good thing we got all that Royalty money.... Oh right we forgot to charge for that....

Yes good old sask and Alberti where the Lowest royalty is the law.....lower than Indonesia ,lower than Ivory Coast, hell well give it to you for nuthin and stick the taxpayers with the cleanup

[jensend]

Yup Wall said here's a three year royalty holiday (the most productive years of a well) and the province will clean up your mess. What a businessman.

[GDR]

Not really abandoned just shut in but you drive around our area and you hardly see any pumpjacks moving these days, must be waiting for better prices but think there is something about the mineral rights and royalties that if you dont use them you lose them?

[chuckChuck]

Yup it is kind of sad. I know it is not easy to compare Norway to Canada or Alberta. We have very different circumstances.

But I can't imagine Norway has a huge cleanup bill waiting for taxpayers. And if they do, they have managed to put away over a $trillion dollars in a sovereign wealth fund for 5.3 million people from their oil industry. They are real fiscal conservatives.

Norway came to look at Alberta's Heritage Fund as a model for theirs.

Did we blow it all? Did we forget that the oil mostly belongs to the taxpayers? Instead I think the profits were privatized and gone to the shareholders.

Yes we got lots of jobs, economic activity, and taxes and those have been beneficial. But did we a good job in managing a one time finite resource for the greater long term benefit of citizens and the sustainability of our economy? I don't think so when you look at what Norway has done.

Are we little like a one industry town that when the mine runs out or becomes uneconomic, the town dies?

[GDR]

Yup it is kind of sad. I know it is not easy to compare Norway to Canada or Alberta. We have very different circumstances.

But I can't imagine Norway has a huge cleanup bill waiting for taxpayers. And if they do, they have managed to put away over a $trillion dollars in a sovereign wealth fund for 5.3 million people from their oil industry. They are real fiscal conservatives.

Norway came to look at Alberta's Heritage Fund as a model for theirs.

Did we blow it all? Did we forget that the oil mostly belongs to the taxpayers? Instead I think the profits were privatized and gone to the shareholders.

Yes we got lots of jobs, economic activity, and taxes and those have been beneficial. But did we a good job in managing a one time finite resource for the greater long term benefit of citizens and the sustainability of our economy? I don't think so when you look at what Norway has done.

Are we little like a one industry town that when the mine runs out or becomes uneconomic, the town dies?

Mineral rights should have never been separated from property rights. Would have been better for everyone. We had an oil company come in 10yrs ago and want to drill in a very unfavourable location for me. I opposed it for my reasons, also had 4 other neighbors oppose it. Went to arbitration and long story the well got drilled, neighbors had their concerns mostly addressed but me as the landowner basically got stuck with it. The reasoning used throughout the arbitration was that the taxpayers had a right to the royalties and surface rights of the landowner are secondary. I asked the head landman if they would drill in his backyard in Calgary if the oil was there, but of course that is different!

[sumdumguy]

Not really abandoned just shut in but you drive around our area and you hardly see any pumpjacks moving these days, must be waiting for better prices but think there is something about the mineral rights and royalties that if you dont use them you lose them?

The same should go for rights that aren’t used. Companies tyed up land forever when they bought the rights for next to nothing and their caveat sits on the title forever, unexercised.

If the land owner grants access and allows a well on his property, maybe he should be responsble for the clean-up? Just wondering. Probably ruffled some feathers there.

[AlbertaFarmer5]

Perhaps if all of the useful idiots on the left hadn't postponed or blocked every pipeline proposal, Western Canadian oil and gas would sell on par with World prices, Royalties could justifiably be on par with the rest of the world, Energy companies would still be profitable and in business here, And we wouldn't be having a discussion about abandoned or orphaned wells and who has to pay for it. Perhaps we should send the bill to those who opposed the pipelines, They can try to extract the funds from their financiers Who have profited handsomely from our incompetence to deal with these treasonous obstructionists.

[sumdumguy]

The “left” or “backwards” don’t realize what a big role oil revenue plays in the Canadian economy not to mention everything we do every day. Takes away their cars, their tractors, the thermostat on their wall, there airline tickets - then listen to them whine.