Sask. to clean up 8,000 inactive wells

Province to use federal grant money in effort to support 2,100 energy-sector jobs

REGINA Saskatchewan will use up to $400 million in federal money to remediate as many as 8,000 inactive wells and facilities, supporting an estimated 2,100 energy sector jobs in the province.

Bronwyn Eyre, Saskatchewan’s minister of energy and resources, has long hinted that such a program was on its way. But Friday was the first time she revealed details about how it will help tide service companies through a catastrophic economic reality.

The Accelerated Site Closure Program will access the cash over two years pending a final agreement with the federal government, starting with a first phase of $100 million. Prime Minister Justin Trudeau announced the funding on April 17 as a way to keep people working while protecting the environment. Alberta, which received a larger share of the $1.7 billion pot, has already revealed its program.

On April 24, Energy Minister Sonya Savage announced the province’s site rehabilitation program, which will start May 1, saying it is expected to clean up thousands of sites and create work in an industry that has been suffering from low oil prices combined with the current COVID -19 pandemic.

“These jobs are needed now. We need to get Albertans back to work,” Savage said during the announcement.

The Saskatchewan program grants cover between 25 and 100 per cent of the cost of each cleanup depending on the company’s ability to pay. The money can go toward closure work on inactive wells and pipelines, including remediation and reclamation, the removal of abandoned in-place pipelines or Phase 1 and 2 environmental site assessments.

Saskatchewan oil and gas service companies have pointed to punishing economic conditions since oil prices dipped under the twin weight of a pandemic and an international price war. They depend on oil producers for work, but those companies are cutting production in the face of calamity.

Mark Scholz, president and CEO of the Canadian Association of Oilwell Drilling Contractors, said conditions remain “absolutely brutal” in the oilpatch. He said the money is needed, and fast.

“This pool of money and the work that’s going to be generated from it could be the only work that’s available to service companies for the duration of the year,” he said.

In Scholz’s view, the new program will have “a huge impact” on struggling companies.

“Its going to be incredibly advantageous to the industry and also for our workforce,” he said.

Eyre promised a program that is both “straightforward and streamlined.” It will come in phases, with the first step sending $100 million directly to service companies. Operators will nominate inactive wells, and the Saskatchewan Research Council will procure services from eligible service companies to abandon and remediate them.

Abandonment involves cleaning out the bore on an inactive well that is no longer producing, sealing the formation off with cement and then cutting and capping the well casing. Reclamation means restoring the surrounding area to something akin to its pre-production state.

The government estimated the program will support approximately 2,100 full-time equivalent jobs. It intends to “prioritize Saskatchewan-based service companies.” Eyre said Saskbuilds will use its procurement tools to “make sure that Sask-based companies take advantage of the program and get the work.”

But Saskatchewan NDP economy critic Trent Wotherspoon was not convinced that money will stay in Saskatchewan.

“We don’t have much faith in the Sask. Party when it comes to local procurement,” said Wotherspoon.

He said “past behaviour is a good predictor of future behaviour” and pointed to a 2016 report in the Regina Leader-post that found 40 cents of every dollar spent to clean up orphaned oil wells was going to Alberta.

Eyre said it would be fine for service companies to have “an Alberta-based head office” and still secure funds under the new program.

“If that company has bricks and mortar here in Saskatchewan, they have workers in that office who would be eligible,” she said.

She said the first phase of the program, worth $100 million, will begin “as soon as we can get this organized and out the door.” She hopes the next phase will follow in close succession.

“As soon as Phase 1 is rolled out we will definitely be formulating and gearing up for Phase 2,” said Eyre. “We want it to be before winter of course, which is a major factor here in the province.”