By COLLIN GALLANT on September 11, 2021.
The City of Medicine Hat could cut its entire abandonment costs at the controversial Manyberries oilfield in half thanks to a newly awarded $18 million from a federal government fund to pay for well cleanup in environmentally sensitive areas.
The work – closure and reclamation of up to 118 wells – appeared on a public tendering website last week.
Officials revealed to the News on Friday that the cash from the provincially administered federal fund, along with up to $4 million in city spending, will reduce the city’s liabilities in that field by “about 60 per cent.”
“We’re very, very pleased,” said Kevin Redden, the city’s director of environmental and intergovernmental relations, of the recent $18 million allocation from the Alberta Site Rehabilitation program.
As well, he said, a city lawsuit filed against Ottawa to seek compensation for increased environmental regulations on sage grouse range has been suspended, with parties working toward “an amicable resolution.”
If so, that would end litigation that has carried on since early 2014, when the city and several other oil companies in the area challenged the federal government’s consultation process and jurisdiction.
A separate claim from the group asked for $124 million in total compensation for economic losses after the Conservative government of the time imposed noise, operation and development restrictions to go along with the Species At Risk Act following a lawsuit by environmental groups.
That derailed a drilling program at the field that administrators said would boost production and pay off the field’s $48-million purchase price in four years.
During a special council meeting to approve the deal, several council members expressed reservations about a foray into oil to diversify the natural gas division, but still voted 8-1 in favour
Coun. Phil Turnbull voted against, and the now-chair of the city’s Utility and Infrastructure committee said Friday it is time to lower the city’s liability exposure.
“We can shake our heads all we want – I voted against it, thought it was terrible – but it’s done,” said Turnbull. “We’ll never be able to do what we want there (drilling to boost production), we’ve spent money in court – enough money in my opinion – and $18 million can go a long way.”
Redden said for the time being the city will retain producing wells in the field which are producing a profit or are not covered by the specific grant qualifications.
“We’re focusing on the marginal wells that are connected with (specific) habitat related to the grant,” he said, stating the city will retain about the same number of wells at the field.
“At current prices we’re doing OK there; we’re turning a profit.”
Bids from oil patch servicing and environmental reclamation firms are now being accepted.
The new money arrives in the latest $100-million tranche of the $1 billion awarded to Alberta by Ottawa last year as a lifeline to producers and oil services agencies during a steep decline in oil and gas prices caused by the pandemic.
The city has been allocated those funds, but the program requires contractors to apply for grants that factor into final payment, so the scope of work and costs will not be final until bids are evaluated.
Work will begin this fall, with in whole work schedule to be complete by next spring. Reclamation and monitoring can take years before certified as complete.
The city has also received about $3.5 million in earlier phases of the site reclamation program in Alberta, and about $2.5 million from a similar program in Saskatchewan.