N.W.T. minister says cleanup cost of Cameron Hills not known

Northwest Territories taxpayers will likely have to pay "tens of millions of dollars" to remediate an oil and gas field south of Kakisa, N.W.T., said a Yellowknife MLA.

Strategic Oil and Gas is legally responsible for cleaning up its Cameron Hills project, which consists of more than 40 wells, winter roads, a camp, a gathering system and a small pipeline.

But the company went into receivership late last month when a restructuring effort failed, and there are big concerns that the security deposit it was required to post will not be enough to cover the cost of remediation at the sprawling site.

"Our government is poised to assume tens of millions of dollars in environmental liabilities associated with the Cameron Hills sour gas field," said Frame Lake MLA Kevin O'Reilly in the legislature Tuesday.

Last year O'Reilly rang alarm bells about the project, noting the security deposit is far less than the $12.2 million dollar estimate that was assigned to the cleanup by a firm that was handling Strategic's attempt to restructure.

On Wednesday, the N.W.T.minister of lands said the government has cashed a $2.9 million security deposit held by the Mackenzie Land and Water Board. Lands Minister Shane Thompson said more security is held by the Office of the Regulator of Oil and Gas Operations, but said the amount is confidential.

Approved 10 years ago

Thompson said Strategic's Cameron Hills project got regulatory approval in 2010 and the government had no indication of the financial trouble the company was in store for.

"The government of the Northwest Territories had a reasonable expectation that it would continue its operations until it was wound down according to regulatory requirements," said Thompson in the legislature.

But the government did not assume responsibility for the site until three years later, when it signed the devolution agreement.

Leading up to the signing,N.W.T. government officials and their federal counterparts negotiated which of the many contaminated sites in the territory are the responsibility of the territory and which are the responsibility of the federal government. The devolution agreement includes a list detailing the outcome of that negotiation. Cameron Hills is among the sites the N.W.T. agreed to accept responsibility for.

At the time the devolution agreement was signed, production at Cameron Hills was dropping, the U.S. boom in cheaper shale oil and gas was driving down prices and Strategic's share price was in the midst of a two-year plunge from 28 dollars to just over two dollars per share.

Ten months after the devolution agreement came into effect, Strategic shut down all operations at Cameron Hills.

O'Reilly said taxpayers have heard the same story before.

"We've seen this happen again and again and again in the North, whether it's Giant Mine, Colomac, you name it," said O'Reilly.

"Name me one site that's actually properly reclaimed here."

Thompson said three government departments and the regulator of oil and gas are reviewing what went wrong in an effort to avoid the same outcome in the future.

He said the government does not know how much it will cost to remediate the site because Strategic never finalized a cleanup plan. But he said the security posted is enough to do work the company was ordered to do months ago to reduce the immediate environmental risk.