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Canada Starts Doling Out Millions in Oil Well Cleanup Money

April 24, 2020, 10:51 PM

Oil services companies in the Canadian province of Alberta can begin receiving grants from a C$100 million ($71 million) fund starting May 1 to clean up abandoned wells and pipelines or to perform environmental reviews, the provincial government announced Friday.

The money is the first installment from a C$1 billion fund that Prime Minister Justin Trudeau announced April 17 to help Alberta clean up inactive and abandoned wells.

Many of Alberta’s oil and gas producers have been hit hard by the twin impacts of a global crude price war and the coronavirus pandemic and can’t pay for the reclamation and remediation of inactive and abandoned wells and pipelines, Energy Minister Sonya Savage said.

“If you ask them to contribute to the cost of it, it just won’t happen,” Savage said in an interview. “They don’t have the ability now or likely for a very long time.”

Saskatchewan is receiving C$400 million ($284 million) and British Columbia is getting C$120 million ($85 million) to do the same work.

Trudeau also announced an additional C$200 million to help remediate Alberta’s orphan oil and gas wells, left behind after companies go bankrupt. Alberta is home to 91,000 inactive wells, 73,000 abandoned wells, and around 4,700 orphaned wells, according to provincial and federal figures.

‘Taxpayer Risk’

The C$100 million Alberta announced Friday can cover the entire cost of a well clean up and cover contracts worth up to C$30,000 ($21,284), a news release said. Applications open May 1 and can be made until the end of the month.

A second C$100 million installment will take applications between May 15 and June 15. That package will focus on sites where the province has had to compensate private landowners, the release said.

The grants could cover 25% or 50% of a contract and the size of the government contribution will be determined by a well operator’s financial health, Savage said.

Friday’s announcement included no details on how Alberta plans to strengthen its well reclamation and remediation regulations—actions it must take to receive the federal money, said Nikki Way, a senior analyst with the Pembina Institute environmental think-tank.

“Alberta’s liability system is not adequate to preventing this from becoming a massive taxpayer risk,” Way said.

The province was preparing a suite of changes to prevent taxpayer liabilities before Covid-19 hit, Savage said. Alberta still plans to deliver those changes once the crisis subsides, Savage said, offering no timeline for the work.

The average costs for cleaning up an abandoned well is C$34,000 and for reclaiming a site is C$27,000, but no one knows the total value of the liabilities in the province because of the variety of cases, she said.

To contact the reporter on this story: James Munson in Toronto at correspondents@bloomberglaw.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Rebecca Baker at rbaker@bloombergenvironment.com

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