Hat well abandonment effort already approved for $1 million

By COLLIN GALLANT on July 16, 2020.

cgallant@medicinehatnews.com@CollinGallant

The City of Medicine Hat’s effort to abandon natural gas wells has already been approved for a total of $1 million from a federal-provincial clean-up fund, and that only represents applications for very preliminary work, according to city officials.

That information can forward Wednesday as Alberta government held a press conference to highlight its efforts to oil patch service sector activity, as well as signal criteria for next phases of the billion-dollar program, that on face value could favour the Gas City as well.

“We’re starting to see approvals come in through our consultants,” said Kevin Redden, the city’s general manager of the natural gas and petroleum resources department. “And so far we’re seeing low-dollar amounts but high number of wells, so we’re very pleased.”

The Alberta program to distribute $1 billion for well abandonment requires contractors to apply on behalf of well owners, and two $100-million initial phases closed in June.

On Wednesday, Energy Minister Sonya Savage said that, to date, $69 million had been allocated, and that two more phases launched in July would re-evaluate applications on file and also consider large-scale programs, like Medicine Hat’s.

Redden said the city’s total allocation to this point from Alberta is $500,000, and mostly related to preliminary environmental assessments that are required to bring land quality back to pre-disturbance condition. That is one of a series of work stages before certification is made, such as capping and cutting the well underground, removing surface infrastructure, then grading sites, removing any contamination, then revegetating the area.

According to Redden, each work stage can have a separate application, and he’s hopeful more applications will be approved.

“We’ll be actively applying for subsequent (phases),” he said. “We have a big program and we’ll keep applying.”

The city has also received a $500,000 allocation from the separate Saskatchewan program, which distributes funds to well licensees and can assign contractors to perform the work.

It was rolled out in May after the federal government announced $1.8 billion for the prairie provinces to help tackle a glut of non-active wells and looming liability for the sector.

Due to timelines in Saskatchewan, said Redden, the city’s application revolved around approved work at that time, but it has since expanded. He hoped new submissions to Saskatchewan could mean higher grants as well.

Medicine Hat plans to abandon about 1,000 wells as part of an “accelerated abandonment program” to slash operating loses and get long-term cleanup liability off the books.

On Wednesday the province said a third $100-million round would allocate up to $139,000 per licensed producer, though still be paid to service companies which then discount their invoices.

“We continue to make enhancements to the program,” said Savage, speaking at a press conference highlighting Indigenous participation in the program. “With $900 million left to distribute, we will ensure the program’s positive impacts reach across the province.”

She said so far applications were approved to to clean up 55 sites on the Enoch Cree Nation and 257 sites across the province with work scheduled by Indigenous-owned services company Western Petroleum Management.

The program pays a sliding portion of total cost to service companies that then flow through a discount to producers.

The province expects 5,300 oilpatch service jobs to be created by the fund which was created in late April.