Jun 152018

The total number of inactive wells in Saskatchewan has increased by almost 90% between 2005 and 2017 to about 30,000.

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Tax-payers across Canada – – maybe we should start tightening our belts ?

  • The SK Provincial Auditor is talking potential $4 billion cleanup costs for abandoned wells
  • Alberta has many times more wells than Saskatchewan, wonder how much they’re adding to the tab?


2018-11-01 Alberta regulator privately estimates oilpatch’s financial liabilities are hundreds of billions more than what it told the public, National Observer


2018-05-26  Five minute Video shows Canadian banks, how much each one has in loans & commitments for tar sands & pipeline expansion      And

2016-01-29  How TD banked the 2nd-largest Ponzi scheme in U.S. history.  And they’re the largest banker for the tar sands and pipeline expansions.    (The posting includes information regarding the lawsuit brought against the TD Bank for its failures.)

2017-10 Book, Oil’s Deep State, How the petroleum industry undermines democracy and stops action on global warming – in Alberta, and in Ottawa, by Kevin Taft

2018-04-19 Kevin Taft on what turned Rachel Notley from crusading critic to big oil crusader, National Observer

2018-09-13 An evening with Kevin Taft, author, “Oil’s Deep State”.

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The Petro-State
From 15 years ago,   a  Related Posting (Sask),   same story: 
  • Sweet contributions to political parties,  then
  • Sweet deals for the industry, and
  • Sweet deals for selected government officials when they retire or change jobs.

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People from Saskatchewan and Alberta,  currently the major oil and gas provinces,  have a reputation for being tough people.   As far as I can see, they are not tough.  They are getting fleeced by Government officials they adore, AND by the industry millionaires and billionaires.   After the money has been siphoned off, to people who are paid millions of dollars a year, and to “shareholders”,  Citizens across the country  are on the hook to pay billions upon billions of dollars for cleanups (and bailouts, if I’m right).

Four items (below) tie things together:

  1.   Excerpt, 2018 Auditor General Saskatchewan Report:   future cleanup costs of oil & gas (o&g) wells could exceed $4 billion
  2.   Brad Wall, 2017,  starts work for Osler Law Firm (oil & gas, Kinder Morgan one of its clients) – 3 months after stepping down from Premier’s role.   (Wall is not a lawyer.)
  3.   The 2016 request from Brad Wall to the Federal Government, for $156 million to help with cleanup costs of estimated 1,000 abandoned wells  (2 years later the Provincial Auditor:  30,000 abandoned wells and potentially $4 billion).   (Not to mention the cost of cleanup related to the uranium industry in northern Saskatchewan.  In 2017 the costs for one mine were 10 times higher than the original $25M estimate.   No one pretends that these newspaper reports represent a comprehensive list of the cleanups to be done in northern Sask.   http://thestarphoenix.com/business/mining/abandoned-mine-cleanup-project-poses-a-deep-moral-problem.)      (also http://www.cbc.ca/news/canada/saskatoon/uranium-gunnar-mine-cleanup-cost-saskatchewan-1.4114674))

But back to oil and gas:

4.   GOVT WEB PAGE.   DRILLING INCENTIVES.  Looks to me like the ROYALTY RATE is 2.5%

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2018-06-07   The Petro-State. Provincial Auditor Saskatchewan: abandoned oil & gas wells, $4 billion (Alberta will be many times more). Revolving door: former premier Brad Wall now at Osler Law Firm (help for Kinder Morgan). Before that, Dwayne Lingenfelter to Nexen.

2016-11-01   Saskatchewan Party received millions in donations from Alberta companies (Oil and Gas in particular). CBC    (Read the details.  You would have thought that Brad Wall was the Premier of Alberta.)

2008-12-22  Great Sand Hills (O&G): A short letter to Premier Wall, conflicts-of-interest.  National, serious issues.


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    2018 REPORT,  VOLUME 1,   CHAPTER 17,  PAGE 220
The Ministry of Energy and Resources is responsible for regulating the oil and gas industry under The Oil and Gas Conservation Act.   The responsibilities of the Ministry include regulating the future cleanup of oil and gas wells.
The Ministry estimates that industry’s overall future environmental cleanup costs of existing oil and gas well and facilities located in Saskatchewan could exceed $4 billion.
This chapter describes our second follow-up of the Ministry’s actions on the recommendations we first made in 2012.
2.3.5   PAGE  226
. . .    As of February 2018, the Ministry was in the midst of assessing the implications on its liability management programs of increases in the number of inactive wells in Saskatchewan as well as recent changes in the oil and gas industry.  It was determining whether its liability management programs are doing enough to mitigate the risk of licensees (including those with inactive wells) not paying for cleanup of the wells they own, thereby passing the costs of cleanup onto the rest of the industry and potentially to taxpayers.
Since our 2015 follow-up, the oil and gas industry has faced two key challenges that have resulted in the number of inactive wells increasing, and potentially may impact who pays for their cleanup.
First, the level of activity in Saskatchewan’s oil and gas sector declined significantly in 2015 resulting from significant declines in the global prices of oil and gas. While the sectorhas partially recovered, the number of inactive wells in Saskatchewan has increased.
As shown in  Figure 3,  the total number of inactive wells in Saskatchewan has increased by almost 90% between 2005 and 2017 to about 30,000.
Figure 3 —  (SORRY – – I  can’t copy it – -)
Number of Inactive Wells by How Long They Have Been Inactive
Source: Ministry of Energy and Resources records.
Second, as noted in Section 3.2, the Alberta Redwater court decisions could have significant implications on who pays for the cleanup of abandoned wells. This decision allows receivers in Alberta to renounce uneconomic wells of insolvent companies, resulting in an increased number of orphaned wells and facilities. It pushes the liability for cleanup on the rest of the industry through orphan abandonment programs.
The Government of Saskatchewan disagrees with this decision and have intervened in the court proceedings.  At February 2018, this matter was before the Supreme Court of Canada.
In response, the Ministry has been monitoring the financial viability of the industry, and the implications on inactive wells. In late 2017, the Ministry analyzed inactive wells and facilities in Saskatchewan. Its analysis shows that licensees having a high percentage of inactive wells are more likely to fail (e.g., declare bankruptcy).  It found, on average, 60% of those licensees’ wells were inactive at least two years prior to failure. Its analysis indicates the risk of more licensees failing increases the risk of the number of orphaned wells increasing.  The Ministry is aware that as more licensees fail, the Oil and Gas Orphan Fund levy required from the remaining licensees may need to proportionally increase.
Further to this, its analysis identified that as the percentage of inactive wells a licensee holds increases, the ability of the Ministry to collect security deposits under its Licensee Liability Rating Program decreases.  There is an increased risk that these licensees may not sufficiently maintain the sites or have the financial means to clean them up.

. . .  As shown in Figure 3, at May 2017, about 16,000 wells were inactive for more than five years, compared to almost 10,000 in 2005—an increase of 60%.

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News Report about the Auditor General’S Report

https://saskatchewanherald.com/2018/06/10/109/  ]

JUNE 10, 2018 ·  HERALD  STAFF

Cleanup of inactive oil and gas wells could cost Saskatchewan taxpayers four billion – an amount not costed into any budget by the governing Sask Party.

Last week, government Auditor Judy Ferguson brought down a report estimating cleanup cost of inactive wells at $4 billion. Saskatchewan law puts the responsibility for cleanup on the well operator company.

If an operator goes out of business, the province’s Orphan Well Fund is intended to cover the cleanup.  Industry operators pay into the fund every year – but the fund currently sits at $11.6 million – less than one percent of the total liability estimated by the Provincial auditor.

With the downturn in the oil industry, the number of orphan wells in Saskatchewan has grown by ninety percent.  Bankruptcies in the oil and gas industry have significantly increased, and with a global shift to green energy, those risks continue to increase.  Given the information in the auditor’s report, Saskatchewan taxpayers could be on the hook for a hefty price tag as oil companies leave the field.

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2.   EXCERPTS, Global News, May 1st, b,   and then the Regina Leader-Post article.
Former Saskatchewan premier Brad Wall is going back to work, three months after stepping down from office.   (INSERT:  3 months – – end of January to May 1, 2017)

“We are excited to be able to offer our clients his strategic insights, particularly in the energy and agri-food businesses where Brad has exceptional understanding of the inextricable links among the political, business and trade spheres.”

Osler is a Toronto-based firm, and Wall will be working out of their Calgary office.

“Our clients need passionate advocates who are dedicated to effecting a national energy policy that supports their long-term, capital intensive projects,” Osler’s energy/regulatory industry leader said.

“Brad is best known for taking an open door approach to identifying new opportunities and creating trusted relationships that have promoted his province on a global stage.  And now our clients and our people will get the benefit of that strategic insight and approach.”

Brad Wall joining Calgary-based law firm with ties to Kinder Morgan

Former Saskatchewan Premier Brad Wall has a new job. 

Premier Brad Wall gives a speech during the Sask Party Leadership Convention in Saskatoon, SK on Saturday, January 27, 2018. Kayle Neis / Saskatoon StarPhoenix

The Saskatchewan government says it is not aware of any relationship between the province and the Kinder Morgan-linked law firm for which former premier Brad Wall is serving as an adviser, but it is something the province is examining.

In a press release Tuesday, Calgary-based Osler, Hoskin & Harcourt LLP announced Wall will be a special adviser to the firm and its clients.

The same company acted for Kinder Morgan Canada during its application to the National Energy Board expansion of the Trans Mountain pipeline.

Saskatchewan, stretching back to Wall’s tenure and continuing today, is a strong proponent of that project; last week the provincial government introduced legislation as part of an ongoing trade war with B.C., which is opposing the Trans Mountain expansion.

Minister of Export and Trade Development for Saskatchewan Jeremy Harrison said he was “very happy for Premier Wall” and that he “knew (Wall) would do very well post-politics.”

He dismissed any concerns of conflict of interest over Wall working for the company, telling reporters doing so was a “long bow to draw,” in part because the province is directly “working with Kinder Morgan” on the file.

Harrison said he spoke with a senior executive at the Texas-based company a few days ago.

It remains unclear what, if any, relationship the law firm and Saskatchewan’s government might have.

“We have no relationship with the law firm as far as a contractural relationship or anything like that,” said Harrison, before adding it is something the province is “looking into.”

Attorney General Don Morgan also said he has no knowledge of any contractural relationship between the province and Osler, Hoskin & Harcourt LLP; but said he would have concerns if there was one.

“It would depend on the nature of it,” he said. “If it was something directly involving something the former premier is doing, then I think I would be concerned.”

Wall could not be reached for comment, but he posted on social media he was “looking forward” to working with the law firm and their clients.

He said he will be based in Calgary but will be staying at his home in Swift Current.

As has been a somewhat common occurrence over the years, he then engaged in a back-and-forth with Alberta Premier Rachel Notley.

She publicly congratulated him before writing, “Don’t worry, we won’t check your licence plate when you’re parked at the office,” a lighthearted jab at a fierce exchange between the two over Wall’s government claiming Alberta was banning Saskatchewan licence plates from Alberta work sites.

In one of his last acts as premier, Wall announced Saskatchewan would stop allowing Alberta licence plates work on Saskatchewan highways projects. The government never followed through on the threat and there was never any evidence of a ban on Saskatchewan plates in Alberta.

On Tuesday, Wall replied by telling Notley to “drop by the office sometime” for a “great” Saskatchewan craft beer, a jab referencing a trade spat over beer sales between the two provinces.

Osler, Hoskin & Harcourt LLP is not registered in Saskatchewan’s lobbyist registry.


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2016-02-09   Wall asks feds for $156 million to clean up abandoned oil wells

Premier Brad Wall is pitching an idea to the federal government to get Saskatchewan energy workers back on the job.

A few weeks ago, Wall said he spoke with Prime Minister Justin Trudeau about getting $156 million in federal funding to pay for the cleanup of abandoned oil and gas wells around the province.

“We just think this a good source of transition help,” said Wall, adding Trudeau and Regina MP Ralph Goodale were open-minded about the idea.

Wall’s number crunchers say the investment would create about 1,200 jobs in the energy sector and help clean up about 1,000 abandoned wells. Because of previous experience in the industry, many of those jobs would go to energy-sector employees struggling because of oil’s low price.

“It’s not perfect. No program is going to be perfect. Thirty-dollar oil isn’t perfect,” he said.

The premier said he appreciates Trudeau’s commitment to the Prairies in extending employment insurance and offering money for infrastructure during the hard economic times.

Those are, in Wall’s mind, only part of the solution.

“This particular initiative we think would have a more direct impact on those affected,” he said, adding many energy workers are being kept on the job at reduced hours rather than being laid off, or are private contractors not eligible for employment insurance.

Chairman of Weyburn based Valleyview Petroleums Ltd., Dan Cugnet (L) and his brother, Matt Cugnet (R) president, along with Saskatchewan Premier Brad Wall (C) speak to the media during a scrum at the Saskatchewan legislative building rotunda in Regina on February 08, 2016.
Chairman of Weyburn based Valleyview Petroleums Ltd., Dan Cugnet (L) and his brother, Matt Cugnet (R) president, along with Saskatchewan Premier Brad Wall (C) speak to the media during a scrum at the Saskatchewan legislative building rotunda in Regina on February 08, 2016.

Brothers Dan and Matt Cugnet from Weyburn-based Valleyview Petroleum first brought the idea of getting money to clean up abandoned wells to the premier’s office.

“We think it’s a great step for getting people back to work and continue the environmental initiatives that the industry wants to keep going with,” said Dan.

In 2012, then-auditor Bonnie Lysyk criticized the way Wall’s government was cleaning up orphan wells, or wells where there is no legally responsible or financially able company to do a proper abandonment.

She estimated there were potentially 700 orphan wells in the province.  At the time, then-energy minister Tim McMillan disputed that number. On Monday, Wall said there were about 100 orphan wells in the province.  According to the province, there are over 20,500 suspended wells in the province; many of which are waiting to be decommissioned and reclaimed.

Industry does pay a fee — essentially a tax — to the province to clean up orphan wells.

Wall said that if the price of oil remains low, there is a chance more wells will become orphaned as companies go out of business. Money from the federal government to potentially support those companies, he argues, could help prevent that.

The federal government doesn’t have a legal responsibly to clean up orphan wells, but Wall charged they do have a responsibility to help Saskatchewan’s busting economy.

“In terms of helping the energy sector, that’s their obligation,” he said.



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Drilling Incentives

Newly drilled oil wells in Saskatchewan qualify for “volume based” drilling incentives ranging from 0 to 16,000 cubic metres. Qualifying incentive volumes are subject to a maximum royalty rate of 2.5% for Crown production and a maximum production tax rate of 0% for freehold production. Refer to Information Circulars PR-IC03 (vertical wells) and PR-IC05 (horizontal wells) for further information.

Newly drilled exploratory gas wells in Saskatchewan qualify for a 25,000,000 cubic metre “volume based” drilling incentive. The qualifying incentive volume is subject to a maximum royalty rate of 2.5% for Crown production and a maximum production tax rate of 0% for freehold production. Refer to Information Circular PR-IC04 for further information.

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