Saskatchewan Green Party Leader Naomi Hunter put out a release last week, claiming that Saskatchewan’s oilpatch had essentially run rampant during the Saskatchewan Party’s watch, something Energy and Resources Minister Bronwyn Eyre refuted by email on Monday.
The Green Party release stated, “For a very long time, oil and gas production was limited in Saskatchewan, but when the Sask. Party was elected in 2007 that all changed. A government closely aligned with our petro-state neighbours to the west took their cues from them and threw the market wide open.
“A number of corporations were pampered with sweetheart deals. They were vastly undertaxed and free from contractual obligation to clean up the toxic aftermath of their operations. The Saskatchewan Green Party (SGP) has been pointing out the folly of these decisions from their inception.”
Pipeline News, Saskatchewan’s petroleum newspaper, reported many times from 2008-onward that the Saskatchewan Party’s energy policies, particularly with regards to its royalty regime, were largely unchanged from those established by the previous New Democratic Party government.
In the early years of the Saskatchewan Party administration, a frequent feature of speeches by Bill Boyd, long-time Energy and Resources minister, was the fact the Saskatchewan Party was not changing a thing with regards to royalties.
Regarding Saskatchewan’s oil and gas production being limited prior to 2007, the Government of Saskatchewan’s economic dashboard on Saskatchewan.ca shows this province’s oil production volumes were essentially flat for 10 years, around 2.1 million cubic metres per month, from 2001 until 2011 (roughly 433,000 barrels per day). It then rose to an average of around 2.3 million cubic metres per month (roughly 474,000 barrels per day) and remained close to that level until early 2020, when COVID-19 caused a crash in oil prices. Oil production is now again around 2.1 million cubic metres per month (433,000 barrels per day).
The Green Party release continued, “Now what we warned against is happening. There are abandoned oil and gas wells all over the province.”
“They have left the workers, and they have left us all with the cost of the cleanup, states Green Party leader Naomi Hunter. “I can't keep the fury out of my voice every time I point these things out.... The Sask. Party reeks of privilege. Were they never taught as children to clean up after themselves? What about our homes and property? It's not like one of their holiday homes you can just walk away from when times get tough.”
“The Saskatchewan Association of Rural Municipalities (SARM) estimates that municipalities have lost millions in unpaid taxes. When oil and gas companies walk away from wells that are not lucrative anymore, the RMs are left with unpaid taxes. The ratepayers are stuck with making up the difference. The province's Ministry of Government relations answered SARM's complaint by noting that issues of bankruptcy and solvency are under federal jurisdiction, and that provincial laws could not apply to bankruptcy of oil and gas companies. (In other words, oil and gas investor money is protected by bankruptcy, so Tough Turkey, ratepayers.) Abandoned wells are dangerous and polluting; they just cannot sit there, so it is up to the hard-pressed RMs to pay for cleanup.
“So far, SARM's need for the Saskatchewan government to set up a cleanup fund is going unanswered,” Hunter said, “but we can't and won't give up.”
Energy Minister Bronwyn Eyre, who has held the role since 2018, said, “Ms. Hunter’s comments contain a lot of unsubstantiated nonsense.
“Contrary to what the Green Party would have you believe, leaking wells do not dot the landscape here in Saskatchewan.
“Ms. Hunter should move beyond the tired clichés and acknowledge the facts.
“Saskatchewan’s record is very strong. In 2019, well before the federal abandonment program, the Ministry of Energy and Resources (ER) oversaw the clean-up over 2,000 wells, an increase of 40 per cent since 2018 and 240 per cent since 2016. Oil companies did this work despite the economic downturn.
“It was the Saskatchewan Party government, in 2009, that created the License Liability Rating and sector-funded Orphan Well Fund programs, which are designed to ensure that the oil and gas sector is responsible for funding well abandonment.”
That program, whose existence is now going on 12 years, looks at what an oil company’s assets are worth, and what the potential cleanup costs are for its wells and infrastructure. If the company’s value is worth less than its potential cleanup costs, then that company must pay a premium in the form of a security deposit.
The program’s website states: “The Licensee Liability Rating Program manages the financial risk to the Saskatchewan Oil and Gas Orphan Fund (SOGOF), in terms of a licensee's future costs to abandon and reclaim their wells and facilities, through the collection of security deposits.”
The website continues, “The security deposit requirements is applicable to oil and gas producers. Therefore, each Saskatchewan upstream oil and gas licensee that has abandonment and/or reclamation liability associated with their well and facility licences, under the LLR Program, may be subject to a security deposit requirement.”
Each licensee with upstream oil and gas wells and facilities, including service wells, in the province has their Licensee Liability Rating calculated monthly by the Ministry of Energy and Resources.
Eyre continued, “The Energy and Resources regulatory division is reliable and widely-respected. Since 2017, it has spent close to $3 million enhancing regulatory systems, including more staff and resources, inspection and audit powers, penalty provisions, and authority to address long-term liability for potential environmental damage. ER field workers run a 24/7 operation, and the ministry offers an anonymous, toll-free line for anyone with regulatory concerns.
“Let’s not forget that the oil and gas sector, through royalties and taxes, provided $685 million last year, which helps pay for schools and social services, highways and hospitals. The oil and gas sector also supports some 30,000 jobs in Saskatchewan and has generously funded community projects, from spray parks to sports arenas, as well as food banks, hospitals and school breakfast programs,” Eyre concluded.