The Saskatchewan government is backing a recent Supreme Court ruling which prohibits oil companies from abandoning their environmental responsibilities in the event of bankruptcy or insolvency.
After an Alberta based energy company attempted to walk away from inactive wells following insolvency, recent court proceedings established that environmental regulations are to be the responsibility of the oil company in question. Doug MacKnight, Assistant Deputy Minister for Petroleum and Natural Gas with the Ministry of Energy and Resources, stated that given the alternative course of action in regards to orphaned wells, this is a good decision.
In Saskatchewan, when a well is abandoned, the clean up and environmental responsibilities are in the hands of the Orphan Fund Procurement Program through the provincial government and funded by a levy within the oil and gas industry. MacKnight said in the current fiscal year, the number of orphaned wells rang in at approximately 249, which is slightly higher than previous years but still manageable through the program.
The cost to properly decommission an orphan well can range from $50,000 all the way to $1 million, with last year’s provincial budget partitioning $4 million for the Orphan Fund Procurement Program.
MacKnight explained the decision by the Supreme Court may have saved the consumer-paid levy from rising. If oil companies were able to walk-away from inactive wells and the Orphan Fund Procurement Program saw an increase, that would be reflected back in the levy which would ultimately come out of theSa pocket of the consumer.
The ruling now gives companies clear and concise rules and regulations moving forward and MacKnight added that it was a decision that had the support of many in the industry, including oil companies.