Financial Assurances for Site Remediation
The development and operation of an oil or gas field can take several decades. Over this time, exploration and extraction activities can significantly change local ecosystems. Vegetation cover will often be removed, local drainage patterns can change, species diversity may be reduced, and soils and waters may be contaminated.
Nowadays, at the end of an oil and gas project, the proponents are usually required by regulations to return operation sites to their natural state or to a state that meets established standards. However, years ago, before such regulations existed, many sites were abandoned once operations ceased and were not rehabilitated. In many cases, governments inherited the responsibility for cleaning up these sites and for the costs of doing so. Governments can also remain responsible for the ongoing maintenance, monitoring, and management of certain sites over long periods.
The costs of remediating and maintaining decommissioned oil and gas wells and associated facilities can be very important. In 2012, for example, it was estimated that overall future environmental liabilities (clean-up costs) for Saskatchewan’s 87,000 oil and gas wells and 5,300 facilities could total $3.6 billion. Should licensees fail to clean up their wells and facilities, the clean-up costs could fall on the province’s taxpayers.
In addition, liabilities may increase over time due to more stringent environmental standards. In such an instance, lands that had previously been remediated to existing standards may require additional remediation work if they do not meet new standards. The question of who is responsible for these new liabilities may be difficult to resolve. Ultimately, governments may have to assume partial or full responsibility for these costs.
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