Sask. could receive up to $400M from feds to clean up orphaned oil wells

Saskatchewan Premier Scott Moe says $1.7 billion from the federal government is a "positive step" to help get oil and gas workers back on the job in Canada's western provinces.

Details are sparse at this point, but the Ministry of Energy and Resources said Saskatchewan could receive a split of up to $400 million.

Prime Minister Justin Trudeau said the money will bring back work for former oil and gas employees and help land owners in B.C., Albert and Saskatchewan who have orphaned or inactive wells on their property.

"Our goal is to create immediate jobs in these provinces while helping companies avoid bankruptcy and supporting our environmental targets."

There are about 640 orphan well sites in Saskatchewan, according to the energy ministry. Of those, 481 sites are currently being reclaimed, while the other 159 are still waiting to be properly decommissioned.

Moe said he's appreciative of the federal government support, but hopes it doesn't stop here. He said he'd like to see a federal bailout program similar to the one that helped the auto industry in 2009.

"We have a serious liquidity issue in the oil and gas sector here in Saskatchewan. There are levers that the federal government can pull and we're asking them to pull them. And we expect that they will in the days ahead."

Proactive and reactive approaches

Lex Ewen, CEO of Edge Liability Risk Management, said he wants to know the specifics before declaring the funding a victory for the oil and gas sector. He said there are two options for how the money will be spent

A "reactive" approach, as Ewen called it, would be to funnel the money into each province's orphan well association [OWA], to help clean up existing orphan wells.

"If this money just goes to the orphan well association, that's great for the orphan wells association," he said. "They'll be able to open up their vendor list and have more contractors that are able to do that work for them. So, it will open up a lot of jobs in the oil field service sector, engineering sector and environmental sector."

The "proactive" approach, Ewen said, would see the money go directly to companies in the embattled oil and gas industry.

"Industry really needs support to ensure that the OWA does not see a major influx of orphan wells," he said. "It would be nice to see proactive measures to help operators to ensure we don't see more bankruptcies and we don't see more wells in the OWA."

Emily Eaton, a University of Regina geography and environmental studies professor, said orphan well clean-up is important — and could provide good jobs — but she said it sets a dangerous precedent if the Canadian taxpayer is expected to pay for something that is legally required of oil companies.

"It would be great to have workers cleaning up the mess of the oil and gas industry, but we need to find a way to ensure that the oil and gas industry itself is on the hook for those dollars."

Eaton said a proactive way for the federal government to spend the $1.7 billion would be transitioning away from the oil and gas industry altogether.

"We're really lying to ourselves if we think we can just continue to prop up this industry indefinitely until it recovers," she said, alluding to the fact that the price of oil and gas was declining even before the COVID-19 pandemic.

"I think we have to plan for a different future and we want to do that in a way that is just to the workers who've given over their lives to the industry."