City Notebook: Tallying up the cost of well shutdowns
By COLLIN GALLANT on July 11, 2020.
cgallant@medicinehatnews.com@CollinGallant There’s no end to the messages to the News that the city’s gas well abandonment program has misrepresented the costs. That’s what you get in a town full of oilfield service workers, perhaps. The effort to dispose of 2,000 wells was initially said to cost $90 million. There’s $135 million in a reserve fund, though the city plans to borrow $90 million and let interest rates do their thing. The cumulative estimate of the closure liability on the city’s financial report is $260 million. It’s all sort of true, and without writing a textbook on how well abandonment works, there’s work to stop gas from going out of the well, then costs to clean up the well site, and ongoing costs, like taxes and surface lease payments. In a town surrounded by rural land owners and leasees, that much should be well known. Anyway, part of the issue was explained at council this week and the above ground remediation contracts for 750 wells were awarded for $2 million. “This is the cheapest part, the more expensive part is coming,” said energy committee chair, Coun. Phil Turnbull, referring to ongoing payments that will last for three to five years. Energy commission Brad Maynes reiterated his division’s estimates that, all-told, for a shallow gas well in Alberta or Saskatchewan, the average total cost should be $55,000 to $65,000. Multiply that by 2,000 and you get $130 million. The actual down hole work costs $15,000 to $30,000 on average, but the remainder is reclamation (grading, restoring vegetation, etc.) which, says Maynes, includes local tax payments and surface rentals until the site is certified, he said. Speaking of high finance Weeks ago this column noted that more answers might come soon about how wild swings in the stock market in March affected Alberta public savings funds. It was to be laid out at a late June meeting of the standing Alberta Legislature committee on the Alberta Heritage Savings Trust Fund, which was to include the annual report of AIMCo. The meeting was postponed the night before, thereby keeping the report under wraps, though the meeting is rescheduled for Monday. (Spoiler alert, the report landed in the laps of several national outlet reporters this week). Opposition MLAs called the whole thing a stall tactic to keep the report out of site while debate on a pensions bill took place. The City of Medicine Hat reported in its own financial report last week that investment losses in its AIMCo.-managed fund were about nine per cent at April 30, but have made gains since. How big? Power from a proposed solar panel farm in north Medicine Hat would be fed onto the provincial power grid, it’s revealed in this edition of the News. But how big is that? The City of Medicine Hat’s electrical generating stations have a combined output of 255 megawatts which is entirely fired by natural gas. But it likely won’t be the biggest by the time it’s built “realistically after 2022, according to the developer, DP Energy. The planned Traverse solar plant in Vulcan County would have a 400-megawatt capacity when it is complete. Several facilities in Ontario have a peak capacity of 100 megawatts. Currently the largest solar plant in operation in Alberta is the 25-megawatt “Hull” facility near Taber that was built by German utility giant Innogy last winter. The highly visible Brooks Solar Project was the largest of its size in the province at 15 megawatts when it was completed in 2017. The owner, Elemental Energy, has recently received approval to triple its size. In another measure, the tax bill from the facility, which would span almost 1,000 acres, would likely be big enough to shave a couple years of the 10-year “Financially Fit” budget rejig that is still seeking $15 million in cost savings or tax hikes by 2027. A look ahead The city and several local entrepreneurial entities have scheduled a Monday press conference to layout a new business grant program involving Google Canada. Stay tuned for details, but as anyone with Google can easily find out, the company’s Canadian wing pledged $1 million in April to help a number of municipalities develop programs to help small business owners boost their online sales with its own “Digital Mainstreet ShopHERE” application. Calgary and six mid-sized cities in Ontario have already signed on. Collin Gallant covers city politics and a variety of topics for the News. Reach him at 403-528-5664 or via email at cgallant@medicinehatnews.com. 31-30
