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

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

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 lori.garrison@yukon-news.com

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