Saskatchewan paid out $125M for oil well cleanup before getting legislative approval

REGINA – Saskatchewan’s auditor says the Ministry of Energy and Resources violated government legislation by handing out grants for cleaning up inactive oil wells before getting approval.

Tara Clemett says the ministry paid $125 million to the Saskatchewan Research Council in instalments in 2020-21. The money was part of a total of $400 million the province has received from the federal government to help pay for such cleanups.

However, the ministry did so without obtaining the required approval from the lieutenant-governor in council, she said.

“They were not complying with the legislative requirements … and this is a significant amount of money,” Clemett told The Canadian Press. “They should have obtained (an) order-in-council, but they did not.”

Clemett said orders-in-council are necessary for transparency and accountability to the public, especially when dealing with large amounts of money.

“And also so cabinet and government is aware of significant purchases that ministries across government are being made.”

Energy Minister Bronwyn Eyre, who has served in the role for four years, said it was her understanding that an order-in-council wasn’t needed from an accounting point of view.

The federal government gave Saskatchewan the money to assist in cleaning up inactive oil and gas wells, because the industry was facing financial challenges brought on by low commodity prices and the COVID-19 pandemic.

The ministry developed a program to pay the province’s oil and gas producers to reclaim the equivalent of 8,000 non-active wells. If the work isn’t completed by next February, the province has to pay back any money it hasn’t used.

Eyre said the payback clause triggered the order-in-council requirement “and that’s really all there is to it.”

The auditor recommended in December that the ministry obtain the order-in-council, but that wasn’t done until last month.

Clemett said her office also audited the Saskatchewan Research Council, which issues contracts to oil and gas companies for the cleanup and pays them once the work is completed.

She said there was no evidence of anything nefarious and all the funding was allocated fairly among businesses.

“We were satisfied they were all properly approved and supported,” Clemett said.

Saskatchewan has handed out more than $305 million of the federal cash to clean up 4,300 wells — meaning they’ve been capped to prevent emissions from venting into the atmosphere.

Eyre said there are 40,000 inactive wells in the province.

The Energy Department was the only Saskatchewan ministry that didn’t comply with government legislation in handling COVID-19 relief money, Clemett said.

“Other ministries — education, finance — they were able to deliver the programs, and comply, and have appropriate administrative processes in place.”

The auditor’s office found other areas within the Energy Ministry that needed to be improved. They included requiring minutes be kept during meetings and obtaining sufficient documents to accurately record revenue.

Eyre said the Saskatchewan Party government accepts all the recommendations.

Emily Eaton, an associate geography and environmental studies professor at the University of Regina, said Saskatchewan’s inactive oil wells can’t be addressed within limited time frames and with federal funds.

“What’s worrisome is the problem of inactive and orphan wells is not a pandemic problem. It’s been a problem in our province for a long time, which was made worse by low oil pricing and the coming transition to green energy across the world,” Eaton said.

“It’s not just the order-in-council issue that’s inappropriate. It’s other provisions that have been made for the oil and gas industry under the guise of (the pandemic) emergency.”

This report by The Canadian Press was first published March 12, 2022.

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