Oil Wells that End Well?

By The Numbers: Saskatchewan Oil & Gas Wells

87,000Approximate number of oil and gas wells in Saskatchewan as of July 31, 2012.

24,000Approximate number of wells that are currently inactive.

9,728Number of wells that have been inactive for at least 5 years.

700Number of orphaned wells (up to 700) that need to be cleaned up.

10Number of orphaned wells cleaned up over 2 years.

Amount collected by the Ministry of the Economy from oil and gas sales and land rights sales in the 2011-2012 year.

Estimated future cleanup costs for all existing oil and gas wells and facilities. While owners of wells are responsible for their cleanup, there is a risk that taxpayers will end up paying for some of these costs.

Source: Saskatchewan Provincial Auditor

With Saskatchewan having close to 10,000 inactive oil and gas wells, the provincial government needs to do a better job making sure they are properly cleaned up — and in a timely way, Saskatchewan Auditor Bonnie Lysyk says.

Lysyk raised environmental concerns about inactive wells in her latest report, released Tuesday.

What's an oil well cleanup?

Cleaning up an inactive well involves two steps: well abandonment and well site reclamation. The first part involves pouring cement into openings to prevent gas or fluids from leaking out.

The second part involves removing all the equipment, fixing contaminated soil and groundwater and returning the site as close a possible to its original condition.

Source: Saskatchewan Auditor

In it, she said the Ministry of the Economy needs to do a better job of managing risks associated with environmental cleanups in the booming oilpatch.

"The ministry currently estimates that the future environmental cleanup costs of existing oil and gas wells and their associated facilities could total $3.6 billion," the report says. "While owners of wells and facilities are responsible for their cleanup, there is a risk that taxpayers will end up paying for some of these cleanup costs."

Some special concerns have been raised about so-called orphan wells, where the licencees either have ceased to exist or no longer can be located.

There are likely between 260 and 700 of these wells, according to provincial government estimates, but over two years, only 10 of them were cleaned up.

Going with Saskatchewan's low estimate, 260, only 4 per cent of orphan wells have been cleaned up.

The Saskatchewan situation doesn't compare well to Alberta where 421 out of 769 orphan wells have already been cleaned up — 55 per cent of the total. 

The total cleanup of Saskatchewan orphan wells could cost $18 million to $49 million, but there's only $8 million in what's called the Oil and Gas Orphan Fund, the report says.

In addition to the orphan wells are the "inactive wells" that companies hold. The auditor's report says there are 9,728 in Saskatchewan that have been inactive for at least five years and out of those, 1,081 haven't been producing for at least a quarter-century.

The auditor said she wants the government to do a better job monitoring, assessing and reporting on the risks and associated costs of future cleanups.