Alberta flooded with applications for grants to clean up inactive oil and gas wells

Calgary’s Scott Darling, who owns two oil-well service companies – Performance Energy Services and Performance Production Services – is hoping to participate in Alberta’s Site Rehabilitation Program.
Todd Korol/The Globe and Mail

May 25 2020
Alberta flooded with applications for grants to clean up inactive oil and gas wells

“… Saskatchewan also requires companies to “pay to play,” Ms. Eyre said, in that they must be fully paid-up on all taxes, levies, royalties and lease payments. Phase 1 in Alberta prioritized similar wells, though Phase 2 will focus on sites where the province is on the hook for lease payments after companies failed to pay landowners. …”

Archive of the full article and related below

I am glad they are providing this economic relief that is also helping get some of the outstanding oil and gas well cleanup done. It does require companies get caught up if behind on taxes, royalties and lease payments.

There is likely some that are legitimately behind after struggling from Covid-19 and low oil prices. It has been harder for oilsands producers, especially the smaller ones to compete with lighter oil producers with much lower costs of extraction and transport. Some have been dependent on subsidies and tax breaks.

There is also some that have not saved from the many boom years or chose excess profit taking over cleanup and other responsibilities.

Related

Here is another article that looks at some companies or executives that have gotten away with dumping orphan wells and their cleanup liabilities on the public. More needs to be done to prevent this plus properly investigate and prosecute any crimes.

How to get away with dumping your orphan wells on the public
By Jeremy Appel
Analysis

National Observer
May 25th 2020

Alberta flooded with applications for grants to clean up inactive oil and gas wells

Emma GraneyEnergy reporter
May 24, 2020

Applications flooded the Alberta Energy Ministry for the first round of its $1-billion program to clean up inactive oil and gas wells, leading the province to close its online portal two weeks earlier than planned.

Around 3,000 companies will find out over the next couple of weeks if they were successful in obtaining funding. Close to 37,000 applications were received. By the time Alberta opened up the second phase of the program last week, 184 applications had been approved.

Alberta’s Site Rehabilitation Program is funded through a $1.7-billion federal grant to Canada’s three Western provinces as part of Ottawa’s economic response to the COVID-19 pandemic. The grant money is aimed at the struggling energy sector to help get people back to work, while also dealing with the environmental effects of inactive oil and gas wells.

Alberta’s Energy Minister says the response to the program has been overwhelming. “I think it just goes to show how much hope this gives people in the industry and how much they need the work contracts,” Sonya Savage told The Globe and Mail.

The process also had some hiccups surrounding communications, according to industry observers, so the ministry formed an advisory committee of sector associations to iron out kinks in the program.

“We’re going to be making improvements, but I’d rather get money out the door quickly and get people back to work. I don’t want to let the perfect get in the way of the good,” Ms. Savage said.

Under the first phase of the program, each successful applicant will receive up to $30,000 to clean up one of the 91,000 well sites that the Alberta Energy Regulator deems inactive. In the online application process, service companies were asked to identify inactive wells that they could work on. They then got the approval from site owners to proceed with reclamation and submitted their request online.

One of those hoping to participate in the program is Calgary’s Scott Darling, who owns two oil-well service companies – Performance Energy Services and Performance Production Services. He and his team submitted about 700 applications.

Mr. Darling alone spent 18 hours on May 1 completing form after form, aiming to secure a share of $100-million in government cash available in this phase of the cleanup.

It was the most stressful day of his life, he says. And after two hours sleep, he got up and did it all again.

Mr. Darling doesn’t yet know if he won what he calls “the new Alberta lottery,” but told The Globe that he’s hoping for the best. With oil hovering just over $20, he said, service companies such as his don’t have many other options for work.

“I need some of this to really keep the guys alive, otherwise I don’t know where they go from here,” he said.

“That’s what kept me up until three in the morning. I have to put everything I can into getting this for my guys.”

Mark Scholz, president and chief executive of the Canadian Association of Oilwell Drilling Contractors (CAODC), said stumbling blocks were inevitable given the scale and speed of the program.

It didn’t help that rumours about eligibility and what the government was looking for spread like wildfire through the sector, he said, combined with already high levels of stress and anxiety about tanking crude demand and price.

“For some of my members – depending on the regions they operate in and the customer base they have – this could be the only work that’s available for them for the foreseeable future,” Mr. Scholz said.

“There’s a very keen interest in the program. It’s a really big deal in terms of stimulus cash for struggling service contractors.”

On Friday, Saskatchewan released details of its $400-million site-reclamation program, also funded by the Ottawa grant.

The Accelerated Site Closure Program (ASCP) will roll out in several phases over two years, overseen by the Ministry of Energy and Resources and delivered in partnership with the Saskatchewan Research Council (SRC). Phase 1 will pay up to $100-million directly to Saskatchewan service companies for abandonment and reclamation work.

Under Saskatchewan’s program, companies nominate wells they want cleaned up, and are assigned a portion of funding based on their share of the province’s total inactive wells and facilities. The SRC will then procure services from eligible service companies to carry out the work and advance the funding to them directly.

“The idea is to make sure that smaller companies also receive a share of the funding, and that the program is as administratively streamlined and simple as possible,” Energy and Resources Minister Bronwyn Eyre said Friday.

Ms. Eyre said the program will prioritize Saskatchewan-based service companies and support around 2,100 jobs. She expects up to 8,000 inactive wells to be reclaimed over the life of the program.

Saskatchewan also requires companies to “pay to play,” Ms. Eyre said, in that they must be fully paid-up on all taxes, levies, royalties and lease payments. Phase 1 in Alberta prioritized similar wells, though Phase 2 will focus on sites where the province is on the hook for lease payments after companies failed to pay landowners.

British Columbia received $120-million from Ottawa and announced its strategy on May 13. It comprises a three-pronged approach: $100-million to reclaim wells that have been inactive for five consecutive years; $15-million to clean up orphaned oil and gas sites where the operator is insolvent; and $5-million “to address the legacy impacts of historical oil and gas activities that continue to have environmental impacts, such as on wildlife habitat or on the traditional use by Indigenous peoples.”

As Alberta Energy grinds through the 36,871 applications on its desk, some environmentalists and landowners have voiced concern that the province’s program allows oil and gas companies to shirk their cleanup responsibilities.

“It’s preferable to see the company that drilled the well clean up the site, but if that company doesn’t have two cents to rub together and is going bankrupt – and that site is just going to fall to the Orphan Well Association to clean up anyway – I just want to see people get back to work and the well cleaned up,” Ms. Savage said.

Ian Cameron, press secretary to federal Natural Resources Minister Seamus O’Regan, said in an e-mail that Ottawa is “thrilled” with the uptake of Alberta’s program.

“These federally funded programs will create thousands of jobs and provide lasting environmental benefits,” he said.

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Related topics

Alberta Energy

Oil and gas

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About Kevin Yaworski

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