Photo courtesy of Colton McKee - City energy commissioner Brad Maynes briefs council on the plan to shutter 2,000 gas wells during Monday's council meeting.

By Alex McCuaig

Well Abandonment

Council laments loss of gas wells while mayor remains silent

Sep 17, 2019 | 7:18 AM

Medicine Hat, AB – The city expects to be able to take a substantial bite out its estimated $300 million in environmental liabilities connected to oil and gas development, council heard on Monday night. But while many of the councillors alternated between lamenting the move to abandon 2,000 gas wells and accepting it as inevitable, Mayor Ted Clugston demurred from comment both during and after the council meeting.

The city announced last week its intention to abandon the vast majority of its gas wells. Monday night council was presented with the grim realities of the glut of natural gas in the market place and that it couldn’t make a business case for the commodity which has dipped to as low as 38-cents a gigajoule but which costs the city $3 to extract.

“It’s a sad day for our 100-year asset but it is also the right thing to do,” said Coun. Julie Friesen of the three-year, $90 million dollar project.

Brad Maynes, city energy and utilities commissioner, outlined the reality of the city’s situation, highlighting the estimated $35 million in losses the city is facing on its gas assets this year and no viable path forward to profitability in the future.

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Asked by Coun. Jamie McIntosh as to what will happen if the city’s $150 million reserve set aside to deal with abandonment of the city’s oil and gas wells.

Maynes said he is hoping the advent of technological innovations and the wider move to have old wells cleaned up could drive down costs and also held out hope some fields may be sold.

“If you look at what is happening at companies that don’t have money set aside to do reclamation, they are going broke and the wells get turned over to the Orphan Well Association,” said Coun. Jim Turner. “Which will eventually fall on the shoulders of the taxpayer.”

The city is expecting to begin abandonment of 1,000 wells next spring followed by 700 the following year with the remainder coming in the last year.

However, council heard certification of reclamation of the sites can take up to five years and while that process is underway, the city is still liable for around $11 million in operating costs primarily made up of surface lease payments and municipal taxes.