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Plodding progress
Oilfield service companies tap into only small share of C$1.7B fed cleanup funds
Gary Park for Petroleum News
Canada’s oilfield service sector has been sluggish in taking advantage of the C$1.7 billion of federal money assigned to clean up abandoned wells, with one exception - Indigenous communities that are eager to secure a slice of the money.
That partly reflects a bureaucratic tangle bogging down the program, which was announced in April and hailed by the Canadian government as a chance to rehire some of the thousands of workers laid off this year amid the COVID-10 downturn.
It is also seen by some as a sign of reluctance among cleanup companies and their employees to spend time at remote work camps, exposing themselves to the virus at a time when outbreaks have been declared at six oil sands sites.
Complaints from the beginning From the outset, complaints have mounted about the program, which is primarily being administered by the Alberta and Saskatchewan governments, which say they have been overwhelmed with applications from the oilfield services sector.
Alberta has assigned more employees to run the program and has made changes to the approval process but has yet to generate enthusiasm in the industry.
Garnet Amundson, president of Essential Energy Services, said he like many of his peers is disappointed and frustrated at a time when he has laid off half his staff, rolled back wages for senior employees and suspended bonus programs.
He said Essential Energy has received some well cleanup money but said that allocation is well short of the conservative estimates he had targeted.
Amundson said “almost everyone is unhappy,” covering oil and gas producers who can’t get their well sites cleaned up, farmers and landowners who have been pressing for years to get action on the polluting wells and environmental groups that are critical of our failure to clean up the well site mess.”
Alberta yet to receive money So far Alberta has spent about one quarter of its allocated C$1 billion - with C$179 million going to downhole abandonment activity and C$85 million to environmental reclamation - although it has yet to receive the money.
Energy Minister Sonya Savage said her officials are “working around the clock” to improve the application procedures.
Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors, said more adjustments are needed if the program is to serve as a “buffer” for the service sector in 2021 as companies “grapple with a very gradual, modest, but volatile recovery.”
Not everyone is unhappy. The Indian Resource Council, after lobbying and holdings meetings with Alberta government leaders, said it has secured commitments of C$100 million to clean up orphaned wells on aboriginal land.
Stephen Buffalo, president of the IRC, said that after balking at the IRC’s request for a portion of the funds the Alberta government has now shown it is prepared to work with the more than 100 communities that have oil and gas reserves on their land.
“It sure took some time, but we just kept giving them a reason not to say ‘no.’ To me, it just made a lot of sense,” he said.
Effort could be overwhelmed While the money has started to trickle out, the challenge faced by Alberta threatens to overwhelm the cleanup effort.
Canada’s Orphan Well Association, mostly funded by the industry, could inherit 12,000 additional well sites, mostly stemming from bankruptcies, although the Alberta Energy Regulator said that not all the estimated wells involved in insolvency hearings will be abandoned.
Alberta, Saskatchewan and British Columbia have an estimated 125,000 inactive wells, though only a fraction are deemed to have been abandoned.
The Alberta regulator said some companies will successfully restructure and others will see their assets scooped up by competitors such as Ember Resources which acquired about 1,100 wells from Trident Exploration when it folded in 2019.
Nina Lothian, fossil fuels director at Pembina Institute, a green energy think tank, told the Globe and Mail that the prospect of another 12,000 wells being added to the thousands already abandoned “will make it even harder to manage the inventory without relying on the public purse.”
COVID impact Getting crews to most of the well sites is a challenge that is compounded by the danger facing workers operating and living in confined spaces.
Alberta’s northern health zone has reported that hundreds of positive COVID-19 cases are tied to oil sands operations, with 13% of employees found to be infected by the virus in early December.
The list of affected companies covers most of the major players - Imperial Oil, Suncor Energy, Syncrude Canada and Canadian Natural Resources - whose cases have totaled 258, but a spokesman for Syncrude said there is a “strong likelihood” that the virus was contracted in the wider region rather than the workplace, stemming from the frequency with which workers fly in and fly out of camps.
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