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Saskatchewan’s Accelerated Site Closure Program Announces New Details

Written by Brad Gilmour, Keely Cameron, Stephanie Ridge, and Kassandra Devolin, Bennett Jones

On June 26, 2020, the Saskatchewan Ministry of Energy and Resources (the Ministry) released new details regarding its Accelerated Site Closure Program (ASCP). The ASCP will administer $400 million in funds from the federal government’s COVID-19 Economic Response Plan for Canada’s Energy Sector. The ASCP will distribute funds to Saskatchewan-based service companies completing abandonment and reclamation work in the province.

The June 26, 2020 update was included within the Ministry’s ASCP Questions and Answers document, which is updated regularly and provides key instructions on the operation of the ASCP.

Phase 1 Funding Allocation Complete

As of May 29, 2020, the $100 million available in Phase 1 had been completely allocated. Licensees were notified of their allocated funding amount via email on June 1, 2020.

Licensee Nomination Process Opens

With funding allocation amounts in hand, licensees can now proceed to nominating wells and facilities through the Integrated Resource Information System (IRIS). On June 26, 2020, the Ministry provided further guidance regarding the nomination process, including a supplemental guide and online training module. The Ministry recommends these resources are reviewed prior to completing applications on IRIS.

Notably, the ASCP does not require licensees to nominate their projects on a first come, first serve basis. The funding allocated to licensees in Phase 1 will remain with the licensees until the amount is used or the program ends in December 2022.

The Ministry has also provided templates which can be uploaded into IRIS during this process, including a preferred vendor and site nomination template. The site nomination template is intended to be used on a project basis, allowing licensees to nominate specific stages of work within a project. Licensees can also substitute, remove or add wells during the nomination process. With regards to preferred vendors, licensees are able to select service companies on a project basis.

Eligible Service Company Pre-Qualification is Ongoing

Eligible service companies may pre-qualify to bid on area-based work packages once procurement contracts tendered to nominated sites have been released. The Ministry will issue a Business Associate (BA) code to all prequalified service companies. Licensees will be able select their preferred vendors within the system on the condition they have a BA code. Service company codes will be updated throughout the process, and a current listing is available on the ASCP website.

There are three additional updates of note with regard to eligible service companies.

  1. Contractors have not yet been selected for the ASCP. Contractors can apply through SaskTenders and their eligibility will be determined based on the program’s criteria. The Ministry also clarified that companies and vendors listed on the Saskatchewan Industrial & Mining Suppliers Association Inc. website are not prequalified for the ASCP by virtue of being included on that list. Similarly, the vendor pre-qualification process for the orphan fund program is applicable only to the orphan fund program. Contractors will need to apply for the ASCP separately.
  2. Pre-qualification period opened on June 15, 2020. Service companies may now apply for ASCP eligibility by completing a Request for Service Qualifications (RFSQ) on SaskTenders.
  3. Generally, only bidders require pre-qualification. The Ministry has confirmed that businesses supporting ASCP activities, such as subcontractors or small, individually staffed companies that do not intend to bid on area-based work packages offered for bid, are not required to apply for pre-qualification or complete the RFSQ. However, companies must still be Saskatchewan based and otherwise eligible to receive ASCP funds.

Notwithstanding, the Ministry has identified that companies delivering services (as opposed to supporting their delivery) in the following major service areas are expected to prequalify for the RFSQ:

  • well decommissioning activities, including service rig operations, wellsite supervision, coil tubing, wireline, fluid hauling and disposal, cut and cap, pressure testing, cementation and service maintenance, downhole tools; and
  • remediation and reclamation activities, such as initial environmental assessment (i.e., Phase 1), detailed site assessment, environmental contracting (i.e., heavy equipment, transport and waste disposal).

Licensee Responsibilities Elaborated

The Ministry has also provided further information regarding the role of licensees in the ASCP. Notably, licensees are encouraged, to the greatest extent possible, to nominate routine wells. This is defined as projects which are routine from a regulatory perspective, with the overall intent being to decrease the time spent processing applications. Where non-routine projects are nominated, licensees are advised to submit infrastructure projects where there are no known or foreseeable issues which could increase costs or project duration. A general expectation of the ASCP is that nominated projects may be completed in a timely manner and in accordance with expected costs.

As part of the ASCP, licensees will also be expected to follow applicable regulations and directives with regard to abandonment and reclamation. Licensees will be responsible for updating IRIS with all relevant reporting requirements.

Moving Forward

At this time, the Ministry has not announced its plans for next phases, including criteria for distribution or the funds available. The Questions and Answers indicates additional details will depend on the execution and initial results of Phase 1 of the ASCP.


About the Authors

Brad Gilmour is head of the firm’s regulatory department and co-head of the environmental department. His practice focuses primarily on environmental, energy, regulatory and aboriginal law.

Keely Cameron is an experienced legal counsel with a solid business background. She has a proven track record for finding innovative solutions and generating value. Keely helps clients on both commercial litigation, insolvency and regulatory matters.

Stephanie Ridge has a general regulatory law practice with an emphasis on environmental, Aboriginal, and regulatory law. She has experience with matters and proceedings before the National Energy Board, Alberta Energy Regulator, and Alberta Utilities Commission.

Kassandra Devolin is a Summer Student a Bennett Jones.

 

Supreme Court of Canada to hear Alberta’s “orphaned” oil wells case

By – Michael Nowina and Glenn Gibson, Baker McKenzie

On November 9, 2017, the Supreme Court of Canada granted the Alberta Energy Regulator and the Orphan Well Association’s request for leave to appeal from the decision in Grant Thornton Ltd. v. Alberta Energy Regulator, 2017 ABCA 124.  By granting leave, Canada’s highest court will weigh in on the Alberta Court of Appeal’s determination that secured creditors in a bankruptcy should be paid before environmental claims arising from abandoned oil and gas wells.

Map of all Orphan Wells in Alberta

As described in our previous blog post, on April 24, 2017, a majority of the Alberta Court of Appeal determined that certain sections of the Oil and Gas Conservation Act and Pipeline Act were inoperative to the extent that they conflicted with the Bankruptcy and Insolvency Act (BIA). Under the appellate decision, a bankruptcy trustee or receiver is not required to satisfy the environmental remediation obligations in priority to other creditors.  On the other hand, the dissenting judgment noted concerns that the effect of the majority decision would be to create an incentive for corporations to avoid the end-of-life obligations of wells by using insolvency laws and shift the environmental remediation costs onto the public and other oil and gas producers.

 Leave to the Supreme Court

Leave to the Supreme Court will only be granted where the court is of the opinion that the question raised by the case is of public importance or one that ought to be decided by the Supreme Court. In their leave application, the Orphan Well Association and the Alberta Energy Regulator identified the following issues to be clarified by the Supreme Court:

(a) Given the exclusive jurisdiction of provinces to regulate their natural resources, whether regulatory obligations created by provincial legislation conflict with or frustrate the scheme of priorities set out in the BIA?

(b) Whether select provisions of the BIA enable a receiver or trustee to pick and choose which provincial laws it will comply with?

(c) Are end-of-life obligations associated with oil and gas development also duties owed to the public?

The Minister of Justice and Solicitor General of Alberta intervened in the leave application. In supporting the leave application, the Province of Alberta’s position on leave was that the majority decision of the Court of Appeal interfered “with critical provincial regulatory functions in a manner that is inconsistent with the constitutional division of legislative powers and the balance of confederation.”

The Supreme Court granted a motion to expedite the appeal, and it will likely hear the appeal in the first half of 2018. The Supreme Court’s decision is an opportunity for the court to clarify the interaction of federal insolvency laws with the province’s jurisdiction to regulate natural resources as well as whether the public and other oil and gas producers ought to bear the burden of environmental remediation. The decision will have significant implications for the oil and gas industry, lenders, and regulators across the country. We will continue to provide updates on the status of the hearing as it becomes available.

This article was originally published on the Baker McKenzie website.

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About the Authors

Michael Nowina is a member of the Firm’s Dispute Resolution and Global Financial Restructuring & Recovery practice groups. Mr. Nowina has a diverse civil litigation practice, with a focus on fraud recovery, insurance defence and insolvency law. Mr. Nowina has appeared before all levels of courts in Ontario and regularly appears on matters on the Commercial List in Toronto.

Glenn Gibson is a member of Baker McKenzie’s Litigation & Government Enforcement Practice Group in Toronto. She joined the Firm in 2015 as a summer student and completed her articles of clerkship in 2017.  Glenn acts for various clients on contractual disputes, jurisdictional disputes, commercial class actions, matters involving fraud and commercial arbitration. She is a contributor to www.canadianfraudlaw.com, www.globalarbitrationnews.com, and the Baker McKenzie International Arbitration and Litigation Newsletter.