Saskatchewan set to increase deposit fees for oil well cleanup

CALGARY Companies buying energy assets in Saskatchewan are facing higher deposit costs for environmental remediation after a precedent-setting court case in Alberta that dealt with abandoned oil and gas wells.

In a letter sent last month to operators of wells, pipelines and other energy assets in Saskatchewan, the provincial Ministry of Economy (ECON) warns that all applications to transfer government licences for wells as part of sales transactions will be treated as “non-routine” from now on.

“All licence transfer applications will be reviewed in detail and ECON will consider all relevant factors in calculating transfer deposit requirements,” it says. “In addition to increased deposit requirements, ECON may incorporate additional conditions with licence transfer approvals which may impact the decision to proceed with certain transactions.

“In particular, licence transfers involving a high percentage of potentially uneconomic infrastructure will be very closely reviewed and deposit requirements set accordingly.”

Regulators in Western Canada are watching closely after a ruling from the Alberta Court of Queen’s Bench in May granted the receiver for bankrupt producer Redwater Energy the right to sell the private company’s best assets and disclaim or abandon inactive assets for which estimated environmental cleanup costs were higher than resale value. An appeal of the decision is to be heard in October.