Yukon News

Taxpayers on hook for $1.8 million to shut down Kotaneelee well

Lori Garrison Wednesday June 7, 2017

Submitted Photo/Yukon News

041917-kotaneelee.jpg

An archive photo shows the Kotaneelee gas processing plant in southeast Yukon. The plant has become the responsibility of the Yukon Government after Houston-based EFLO Energy Inc. ran out of money.

Yukon taxpayers are on the hook for $1.8 million to fully abandon a gas well at the now-defunct Kotaneelee plant.

Minister of Energy Mines and Resources Ranj Pillai said in the legislative assembly June 5 that the estimated cost of abandonment for the well is $2.4 million. The original owner, EFLO Energy Inc., left a security deposit for $625,000 with the government of Yukon, not nearly enough to cover the full cost.

The Kotaneelee plant, located north of Watson Lake, first opened in 1977. It ceased production in 2012 and has been mothballed ever since. It was the site of a spill of wastewater and lubricants in August 2015. When the government ordered ELFO to clean up the spill, it was discovered to be insolvent.

Three wells at the plant were turned over to Houston-based energy company, Apache, who was a shareholder in the wells. The fourth and final well, however, was fully owned by EFLO, and therefore became the property of the Yukon government.

Pillai admits this is a “significant cost to taxpayers … and significant cost to government.”

Abandonment is the process of fully shutting down a well to meet environmental and remediation standards, with the intention that it never be used again.

“It’s a shame that the public will have to pay at least $1.8 million to clean up what was a private industrial operation,” said NPD Leader Liz Hanson in a press release.

Pillai told the house that the government needs to ensure its oil and gas industry puts the proper security in place.

“I think that going through the process in the Kotaneelee is going to give us a really a good run-through of the process — making sure, seeing what costing looks like and then taking a look at what’s happening in north Yukon,” Pillai said.

In an interview Hansen said she has concerns about how this event will affect future mining and gas abandonments, such as the Eagle Plains operation by Northern Cross. She said this kind of problem, where taxpayers are left holding the bag for clean ups by failed companies, is endemic in provinces where oil and gas extraction is well-established, such as Alberta.

“Companies have taken advantage of resources and leave the taxpayers with the bill … they walk away with the money and leave the mess,” she said.

“Hopefully the government realizes they have to do more due diligence.”

Contact Lori Garrison at .(JavaScript must be enabled to view this email address)

16 Comments

Swissarmylife wrote:
7:43am Wednesday June 21, 2017

@maxmack If the basic system was not flawed from the get go I would pretty much agree with you. Sadly though it is, in my eyes anyway.

There needs to be a balance yes but currently the balance is tipped to those who, even now, watch with mild interest as others deal with their legacy of greed, collusion and willful ignorance. It’s about money when it needs to be about need. 

The hypocrisy is not limited to the Yukon, even though I realize we are talking about a local issue currently the problem is systemic to the globe where humanity is concerned. It’s about money when it needs to be about being able to live within our means, globally.

So, any allowances we make towards a “balance” when dealing with corporate entities will immediately be pounced on as “opportunity” and every advantage or loophole will be capitalized on.

Money money.

Plato wrote:
5:53pm Sunday June 18, 2017

Shut down all mining and gas exploration in the Yukon.

ProScience Greenie wrote:
1:33pm Tuesday June 13, 2017

Totally agree -Companies must pay- but that is a different issue than these projects being gravy trains. Both aspects need dealing with. Graft is wrong no matter what it is about.

Companies must pay. wrote:
11:02pm Saturday June 10, 2017

@PSG The actual cost is kind of irrelevant here. Companies must be held accountable whether it’s $1 or $1M. Given the record of companies going bust and/or failing their responsibilities then full bonds must be collected. If a company cannot afford the clean-up bond they should never be allowed to start a project.

Groucho d'North wrote:
5:17pm Friday June 9, 2017

Regardless of party, Yukon politicians have consistently traded new jobs for environmental safety and abandonment funding programs.  It was a good idea at the time.

How many millions did wrote:
4:25pm Thursday June 8, 2017

the Yukon and First Nations Governments receive in royalties from this project over the years. Lots get all the facts correct before making negative statements in the media.

Max Mack wrote:
3:19pm Thursday June 8, 2017

The current anti-resource extraction movement in the Yukon will lead to more businesses pulling out, avoiding the Yukon, or trying to skimp on environmental “stewardship”. Demanding ever-greater security deposits, environmental fees and draconian regulations will simply worsen the problem. Balance is something that seems to be completely lost in the equation.

Meanwhile, folks living in houses have never put a dime aside for environmental cleanup. Nor, have the many businesses around town that sell us goods and services, while occupying formerly wild spaces. The city paves over the environment, never putting a cent away for restoration.

And the massive amounts of government (federal, territorial, first nations, municipal) spending surely has environmental consequences. Where is the cleanup fund?

I am in favour of responsible environmental stewardship and remediation. But, I see a whole lot of hypocrisy in the Yukon.

Knows a few things wrote:
12:47pm Thursday June 8, 2017

Id guess a plant of this age would require a bigger budget then estimated. Due to the number of unknowns such as Asbestos gaskets, insulation, caulking, PCB contamination, and NORMs as well as the remoteness and cost of trucking all materials to government approved waste facilities/recylers. All tanks need to be drained of fuel, glycol, J13 hydraulic oil as well as in ground and above ground sump tanks which need to be hauled to approved waste facilities. For future learnings it would be a good idea to begin an orphan well program with some of the royalties earned early in the oil and gas industry in the yukon in order to not make the same mistakes that Alberta/Sask have made.

? wrote:
8:59am Thursday June 8, 2017

@YkCommonSense….really pay out of Royalties, for a private business, give me a break….Government needs to take more for damages and charge the private companies more for cleanup, so sad that we as tax payers have to clean up there SH$t ....bad enough that their pillaging the earth lets get the little guys to clean it up and not pay jack sh$T…

@ BnR well said!

Truthposse2 wrote:
5:20am Thursday June 8, 2017

If the Yukon were more supportive of resource business there might not be a reclamation cost issue to deal with and might be a revenue stream instead.  EFLO had viable resource opportunities according to their business plan described previously.

Salar wrote:
7:40pm Wednesday June 7, 2017

This happens all over the Yukon in mining…..but thats ok because its only really a cost of 60% of the estimate to clean up…..da

BnR wrote:
6:32pm Wednesday June 7, 2017

YKCommonSense
So, your common sense approach is that the government should just anticipate that resource extraction companies will not pay for their cleanup and use the royalties, which are supposed to go towards benefitting citizens, use them for taking care of the companies responsibilities?
That about sum it up? 
So I guess we should start saving now for the Casino mine cleanup, ‘cause gosh, they aren’t going to clean up either?

andy wrote:
4:39pm Wednesday June 7, 2017

tax payers paying to clean up after private industry!? unheard of in the yukon

Jonathan Colby wrote:
3:02pm Wednesday June 7, 2017

Ah, I’m so glad we live in a world that exalts the profit motive as the primary motivation for economic activity.

CAPITALISM, GOOOOOOOOOOO!

YKCommonSense wrote:
2:07pm Wednesday June 7, 2017

A news article from the whitehorse star states “From 1993 to 2012, the Kotaneelee Gas Project generated $45.4 million in royalties.”

So the cleanup cost is roughly 4% of the royalties generated… if the government is making that much money in royalties, shouldn’t they be putting some aside for the inevitable cleanup and abandonment process that private industry loves to exploit?

ProScience Greenie wrote:
1:08pm Wednesday June 7, 2017

Real cost of cleanup is probably 60% of estimated cost. For sure it is time to ensure that companies put up bigger security deposits but it is also time to stop letting consultants and a few bloated government sub-departments milk these cleanups. The Faro mine cleanup is an example of what a gravy train this has become. Pillai is a smart guy, surely he can see the waste and bloat that is happening.

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