Oilfield services group pitching rejigged well cleanup proposal to Ottawa

By The Canadian Press
August 30, 2016 - 3:57pm

CALGARY — The head of an oilfield services lobby group says if Ottawa won't give the industry money to clean up dormant oilwells, a loan would work just as well.

Mark Salkeld, CEO of the Petroleum Services Association of Canada, says he discussed his rejigged pitch with federal Natural Resources Minister Jim Carr this week.

"Our whole rationale remains the same," Salkeld said in an interview Tuesday. "There's work out there to be done and, if we can get after it, we can retain people and put people to work."

The association asked the federal government earlier this year for $500 million in infrastructure funds to deal with Alberta's 75,000 inactive wells. It argued it would be a good way to boost employment as low oil and gas prices continue to inflict significant economic pain.

The group has 175 members representing 35,000 workers who provide a variety of services to oil and gas producers.

A March briefing memo prepared for Carr obtained by The Canadian Press through an access-to-information request notes how difficult the downturn has been on the oilfield services sector and suggests investment in well decommissioning could help.

It mentions that companies spent 50 per cent less in 2015 compared to 2014 and that the country's two biggest drilling companies had together announced thousands of layoffs.

"The oilfield services sector has experienced significant job losses and has the necessary skillset and technology to carry out well decommissioning work across the country," the note says.

"This work would stimulate the oilfield services sector and various other sectors indirectly. Further, because of the nature of well decommissioning expenditures on labour and fuel, there will be some financial recovery by provincial and federal governments through payroll remittances and fuel taxes on industry activity that would not otherwise take place."

It acknowledges "well decommissioning is the direct responsibility of industry and is regulated by the provinces (unless on federal land.)"

The idea never made it into this year's federal budget. Salkeld said a big sticking point was that it is industry's job to plug and clean up wells that are no longer producing.

Speaking to reporters in Calgary on Tuesday, Carr said Ottawa is open to the idea, but it's up to provincial governments to make a formal request for infrastructure funds.

"If the premiers of Alberta and Saskatchewan believe that these projects are very high priorities, then I'm sure that the government of Canada would be happy to sit down with them and talk about infrastructure possibilities," he said.

Salkeld said the amended proposal is getting some traction and the federal and Alberta governments are pressing for more details about how many jobs it would create. He said he's writing to western premiers to get their support.

Saskatchewan Premier Brad Wall also made a $156-million well-cleanup pitch ahead of the March budget.

Salkeld said he sees how getting a federal "bailout" for something that is industry's responsibility would be a tough sell. But there are ways Ottawa can help get idle equipment working on well decommissioning, he suggested.  

"If you have issues with giving industry money ... then loan us the money. Let's get people to work."

The group is focusing on the cleanup of "legacy" wells that date back decades and "orphan wells" where there is no entity legally responsible for or financially able to handle the task. Many of the inactive wells in the province have been shut off by their owners for economic reasons.

— Follow @LaurenKrugel on Twitter

Lauren Krugel, The Canadian Press

©2016 The Canadian Press

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