Oil well cleanup far too slow in Saskatchewan

Weak regulations adding to stall, Sarath Peiris says.

Against a backdrop of major automakers building factories in Ontario to produce electric vehicles, and the growing public eagerness to move away from fossil fuels, Saskatchewan is making slow progress in tackling a $4-billion, long-term cleanup bill that is the legacy of decades of oil and gas production.

While the Ministry of Energy and Resources says that its approach of collaborating with industry to safely decommission non-producing wells and restore the land to its former state is producing better results than the colossal cleanup mess facing Albertans, Saskatchewan's weak regulatory regime still leaves much to be desired.

Consider that a $400-million cash injection to Saskatchewan under the federal COVID-19 economic response plan to provide employment for more than 2,000 oilfield workers is estimated to see 8,000 inactive oil wells and facilities rendered safe, and site remediation and reclamation work started.

It's certainly a welcome contribution — paid by taxpayers and not industry — to addressing the challenge, but ministry figures show that Saskatchewan currently has 40,000 inactive wells, as well as 589 orphan wells. These wells all need to be cut and “capped” with concrete at least a metre underground before more expensive remediation and reclamation work can be done.

Under somewhat confusing industry parlance, inactive wells that have been capped by oil and gas companies to make them safe are identified as “abandoned,” while orphan wells are inactive wells whose owners are unknown, insolvent or no longer operating in Saskatchewan.

“We have a strong record of cleaning up oil wells in Saskatchewan and there are not `leaking wells' dotting the landscape as some have portrayed,” the ministry said in a statement in response to a query about the numbers.

“Wells were being cleaned up well before the federal funding was provided in the spring of 2020. In 2019-20, due in part to the success of our regulatory regime, the province saw a record number of oil and gas well abandonments with an approximately 240-per-cent increase in industry-funded cleanup of wells compared to 2016.”

Extrapolating from figures used by Energy and Resources Minister Bronwyn Eyre to highlight the record 2,030 well abandonments completed between April 2019 and March 2020, the industry-funded abandonment total was 1,450 wells in 2018-19, and 846 the year before, a pace that clearly was barely making a dent in the need for safe decommissioning.

The fact that the number of inactive wells has risen to 40,000 today compared to about 30,000 two years ago, shows a growing challenge. And while the number of orphan wells needing abandonment is now at 589 even though the industry-funded orphan wells fund decommissioned 84 wells last year, it remains a stubborn challenge.

What is troubling are findings in the orphan fund's annual report for 2019-20 that the number of industry players with a good liability rating has been steadily declining, along with the liability of companies in comparison to the value of their assets.

Over time, this could mean that the orphan levies charged to companies in the field will increase to cover potential defaults, adding to their cost of operating and weakening their financial stability.

Given these challenges, what remains puzzling is the provincial government's apparent reluctance to strengthen its regulatory regime by adopting measures in places such as North Dakota and Texas.

These oil-rich American states require companies with inactive oil and gas wells either to restart the wells within 12 months or to cap them off and reclaim the sites. Some states require operators to post a bond or obtain insurance to cover well abandonment and reclamation costs before they begin drilling.

While Saskatchewan's energy ministry has talked about imposing a time limit on inactive wells, progress has been painfully slow. Too often, the rationale is that wells can be reactivated at any time, and that there's no evidence that the length of time a well remains inactive is a factor in environmental or safety risk.

Yet, as the provincial auditor noted two years ago, inactive wells may leak methane, increasing the risk of contaminating surface and groundwater sources. Her report said contaminated sites could threaten wildlife habitat, interfere with farming operations, or release chemicals into the environment through flooding or soil erosion.

Saskatchewan may be doing better than Alberta, but that doesn't mean we are doing enough, fast enough.