With about $749 million in liquid assets, the city is looking to better explain to residents how those dollars are spent or saved.--NEWS FILE PHOTO
@@CollinGallant
The City of Medicine Hat has nearly three quarters of a billion dollars in the bank, but a better breakdown of how that money is earmarked could be coming soon.
City council members will meet tonight in a new process to determine capital priorities in the 2025-2026 budget cycle, but last week, the audit committee heard that staffers will suggest creating two more reserve fund categories.
They would note how much money is set aside for two priority areas: cleaning up the city’s oil and gas wells, and money stashed away to modernize the power plant to lower its carbon footprint.
“This is a conversation for council to have,” said city corporate services director Dennis Egert.
Coun. Alison Van Dyke has said in the past that the city has a large bank account, but also large liabilities that should be better spelled out for citizens.
“The number is high,” said Van Dyke, a member of both the audit and energy committees. “It’s easy for people to look at the reserve funds and wonder, ‘Why do we have all this money? We aren’t using it? Why are we raising taxes?’
“If you’re not identifying clearly that we have an enormous asset retirement obligation coming forward … it’s easy to assume we have lots of money and not realize that it’s spoken for.”
The city has $749 million in liquid assets, committee heard, but the money is invested in different ways depending on short-, medium- and long-term needs to access the cash.
Recent financial statements state cleanup of city wells and other sites, like those with asbestos contamination, is considered to be worth $255 million, including estimates of $12 million for eventual landfill closure, and $6 million to dispose of asbestos in city buildings as they are demolished or remodelled in the future.
The latter two items are newly required in accounting standards used by municipalities, but not included in the figure is the eventual cost of decommissioning the river valley power plant.
In terms of the energy transition, two items already in approved energy division capital projects are related to Project “Clear Horizon.”
It would potentially develop a regional carbon capture hub storage hub and update the city’s own machinery to capture emissions.
City has budgeted $12 million toward engineering and study of the storage feasibility, but spent $1.5 million so far, according to most recent financial reports.
Separately, $4.9 million has been set aside to study and add carbon capture equipment at the power plant, but so far only $324,000 has been spent to date.
Funding for both includes about $7 million in grant funding from the province and Ottawa.
Council has also approved $7 million on a “Clean Energy Business Opportunity” from the division’s working capital, which is part of a larger umbrella category of “unrestricted funds” in the accounting statements.
Currently the city’s $749-million liquid financial assets are denoted:
– $207 million in “unrestricted reserves”;
– $211 million in “Capital Reserve” to be used on municipal and utility projects;
– $34 million in “Operating Reserve, for short-term operating expenses and one-time projects;
– $209 million in “Heritage Savings Reserve,” returns from which will be used to bolster annual revenue and off set taxes;
– $36 million, held in grants from other governments for specific projects, mainly construction.
That is only approved money however, and new reserve totals would only reflect cash in hand, not the eventual expected total cost.
A list of long-term liabilities in the city’s past financial statements has long pegged oil and gas abandonment cost above $230 million, but different figures appear on a capital project list.
Abandonment occurs in two parts, removing and capping the well itself and reclaiming the surface lease.
They state that budgeted general abandonment from 2019-2023 program – when 2,000 wells were permanently closed – was valued at $50 million. About $33 million has been spent, though recent notes state the final cost for the specific work could rise to an expected $64.4 million.
Related work for “surface lease abandonment” is expected to come in under budget however, by about $6 million. About $47 million has been spent on work now expected to cost about $131 million.
That means about $115 million is still required for approved work, but the gas production unit still has about 500 operating wells that the city will eventually have to close and cap.
