Business

Majority of $1.7B in government cash to clean up old oil and gas wells still hasn't been spent

Many are unhappy with the delays in cleaning up aging oil and gas wells, including oilfield service companies, the land reclamation industry, and others.

Alberta government program improving, but industry criticism persists

There are tens of thousands of orphan and inactive wells in Alberta. (Kyle Bakx/CBC)

When the federal government announced $1.7 billion toward cleaning up aging oil and gas wells in Western Canada, Garnet Amundson couldn't help feeling some excitement. But even then, in April, he knew the details and pace of the program would be critical.

Over the summer, fall and winter, complaints about the program have mounted.

The funding was promoted by federal and provincial politicians as a way to not only clean up the environment, but provide desperately needed activity for the oilfield services sector. 

Alberta received the majority of the money and the bulk of the complaints. The provincial government is in charge of dispersing the funds, but was admittedly overwhelmed when tens of thousands of applications came pouring in; a sign of the sector's desperation.

The government has directed more staff to administer the program and made other changes, but still the private sector is discouraged by the little noticeable impact there is on jobs, spending, and overall activity.

"I would say that a lot of us are both disappointed and frustrated," said Amundson, president of Calgary-based Essential Energy Services.

The oilfield service sector has struggled mightily this year as oil prices plunged to historic lows and energy producers slashed spending and drilling activity.

Amundson chopped his salary in half, rolled back wages for senior staff and suspended bonus programs, among other measures to make up for the sharp drop in demand for his services.

Essential Energy Services has applied to receive some of the well cleanup funding, but Amundson wouldn't share the figures, because "it's bleak," he said, and hasn't even reached the conservative estimates the company had made.

"Our main purpose should be getting well sites cleaned up and getting people back to work because we're completely desperate," said Amundson.  

"Right now, I think almost everyone is unhappy. [The oil and gas producers] aren't getting their well sites cleaned up, the farmers and landowners are upset, oilfield service companies aren't getting the cash flow to work, and the environmental groups are critical of all of us as we're not doing our job to clean up this mess."

An aerial view of a crew decommissioning an old natural gas well in Alberta. (Kyle Bakx/CBC)

The federal money was divided between B.C. ($120 million), Alberta ($1 billion) and Saskatchewan ($400 million). Alberta's Orphan Well Association, will receive a $200-million loan to support the cleanup of wells leftover when companies go bankrupt.

So far, the Alberta government has approved spending about a quarter of the funding, which is split between downhole abandonment activity ($179 million) and environmental reclamation work ($85 million).

Government officials are stressing how they are trying to disperse the money quickly, while also highlighting how the program was designed for some funding phases to stretch into 2021 and the work only required to be completed by the end of 2022.

"My department officials have been working around the clock. I can't say enough good things about how hard they are working," said Alberta energy minister Sonya Savage.

Savage said she's feeling pretty good about the program, including how officials have been willing to make improvements to the application process to address industry feedback.

Alberta Energy Minister Sonya Savage speaks to journalists in February, 2020. (Julie Debeljak/CBC)

More adjustments are likely still necessary, said Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors.

"We're hopeful that this will be a very important buffer for the service rig and other service companies in 2021 as the industry begins to grapple with a very gradual, modest, but volatile recovery," he said.

Alberta hasn't received the billion dollars from the federal government yet, according to the provincial government.

ABOUT THE AUTHOR

Kyle Bakx

Reporter

Kyle Bakx is a Calgary-based journalist with CBC's network business unit. He's covered stories across the country and internationally.

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