Alberta's 'Gas City' to shut down 2,000 wells, laying off up to 100 people

The southern Alberta community of Medicine Hat — known as "The Gas City" — is permanently shuttering 2,000 of its active natural gas wells due to extremely low prices, resulting in layoffs for about 100 people.

The decision to close 75 per cent of the city's wells was announced last Wednesday and formalized Monday evening. Medicine Hat Mayor Ted Clugston said the difficult choice was a long time in the making.

"This didn't happen overnight," Clugston said on the Calgary Eyeopener.

"We've been actually talking about a strategy going forward for 10 years now since I've been on city council, when the prices basically went into the tank in 2008-2009."

Clugston said that the continual plunge in natural gas prices has caused the city to lose money at the rate of $30-35 million a year.

"There have been points in time that we're actually paying people to take our gas," said Clugston.

About 500 of the city's oldest wells, called "100-year wells," in the city's north side will remain active, as they cost the least to keep running. 

"We will still have to keep some employees on to maintain those, but everything in Saskatchewan and to the east of us is going to be shut in eventually," said Clugston.

The closures will result in about 100 workers losing their jobs.

"We've really never, ever laid anybody off … it's a tough thing to do," said Clugston.

"It's not something we want to do. We'll try to accommodate as many as we can, but I think most of them realize that this day was coming."

Identity crisis

Job and industry losses are a hard legacy to grapple with as a city and as mayor, said Clugston.

"I didn't want to be the mayor in 120 years that took Medicine Hat somewhat out of the gas business. I mean, that's not a legacy that anybody would want to leave in this municipality," said Clugston.

Clugston said the people of Medicine Hat are generally supportive of the decisions he and the city council made.

The silver lining on cheap natural gas is that anybody who burns it to … value add is doing well.- Ted Clugston, mayor of Medicine Hat

"But my citizens … they're not happy about it but they recognize that tough business decisions have to be made."

He said that despite these losses, Medicine Hat's identity will still be tied to the oil and gas industry.

"We take great pride in our history of natural gas production as a municipality and everything that it's given to us all," said Clugston.

"All of our recreation facilities are paid for, and our property taxes are subsidized by the natural gas profits, and all of our industry here burns natural gas to make fertilizer or fuel or methanol — now we're even using it to make bitcoin."

Silver lining

After the wells close, Clugston said they plan on leaving them that way, "unless a miracle happens," as re-drilling would be costly.

"The goal is to cap them and take the equipment off and to reclaim the land to its original, whatever it was, if it was grass for cattle or whatever," said Clugston.

The closing of so many natural gas wells in a city nicknamed for its oil and gas history signals a shift in industry for the population of 60,000 people.

However, Clugston said natural gas still powers the city's future.

"The silver lining on cheap natural gas is that anybody who burns it to … value add is doing well," said Clugston. 

He cited Medicine Hat's methanol plant, the Goodyear tire plant, bitcoin mining ⁠— which uses electricity generated from natural gas ⁠— and the future Aurora Cannabis greenhouse.

"That's all based on low-cost natural gas," said Clugston.

"We're still very proud of that and we will keep The Gas City we are."

With files from the Calgary Eyeopener.