Province says oil industry needs more money

Minister welcomes remediation cash, but warns sector faces liquidity crisis

REGINA Saskatchewan’s government is still working on a program to clean up inactive oil wells using $400 million in federal funding, but the province’s energy and resources minister is lobbying Ottawa for more money to prop up a troubled industry.

Bronwyn Eyre sent a letter to federal National Resources Minister Seamus O’regan dated May 4 asking for “substantial help” for producers in the form of liquidity support. She warned that current federal measures are tilting too much toward decommissioning wells at the end of life, rather than keeping producing wells going.

On April 17, Prime Minister Justin Trudeau announced $1.7 billion in federal funding to support the cleanup of inactive and orphaned oil wells in Saskatchewan, Alberta and British Columbia, as well as an additional $700 million in support for methane emissions reductions.

Alberta has already announced how it will spend its share of the pot. Premier Jason Kenney unveiled a $1-billion program late last month to remediate oil wells in partnership with industry. He estimated it would create 5,300 jobs.

Eyre said her officials are still developing Saskatchewan’s plan.

“We’re working right now, as we speak, to design what we hope will be a strong common-sense plan that will promote Saskatchewan workers first,” she said.

“It’s very important to move quickly on this, obviously,” she added. “But one also wants to make sure that, as I said, you do it right, so that it doesn’t overwhelm the system and it’s fairly distributed across regions.”

NDP economy critic Trent Wotherspoon said now is “no time for a government to drag its feet.”

“We have a beat-up energy sector, we have far too many workers out of work and service companies that are really hurting right now. These dollars need to be put to work, putting Saskatchewan workers and businesses back to work.”

In her letter to O’regan, Eyre said the federal funding will help remediate 8,000 wells in Saskatchewan. But she warned that focusing too much on inactive wells doesn’t help companies “desperately” trying to avoid shutting in their production in the face of rock-bottom prices.

“Some low-producing wells can maintain production for many years,” she wrote. “If they get shut in now, before the end of their natural life cycle, due to low prices and a potentially disproportionate focus on abandonment, they will never see production again.”

She told the Leader-post that the federal program leaves a “gaping hole in terms of other support for that current and existing production, which is where we’re seeing the massive cash-flow shortfall.”

Ottawa has also expanded credit to medium-sized oil companies, but Eyre argued that those programs are limited to the point that “very few companies” in Saskatchewan can benefit.

Natural Resources Canada confirmed O’regan received the letter. It pointed to its previous supports and a spokesman confirmed that it remains “in constant two-way communication with Saskatchewan and other provinces, as well as workers and businesses, as we keep working on solutions.”

Saskatchewan has about 41,000 inactive wells that have not yet been properly decommissioned but are not producing. Just 159 of them are considered orphaned wells, meaning a solvent owner capable of remediating them cannot be located.

Between April 1, 2019, and Feb. 29, 2020, a total of 2,030 wells were decommissioned in the province, meaning they were sealed and rendered safe.

Eyre said that’s very different from Alberta, which has about 3,000 orphaned wells.