POLITICS

Cost of ending Sable gas project mean deductions from royalties for Nova Scotia

06/25/2015 12:42 EDT | Updated 06/25/2016 05:59 EDT
HALIFAX - As one of the world's largest oil and gas firms begins planning to decommission the Sable Offshore Energy Project, Nova Scotia's energy minister said the province has been footing part of the bill through reduced royalties.

"Over the last number of years the province has been setting aside some of the royalty revenue on the basis that if there is decommissioning those costs can be charged back against the province," Energy Minister Michel Samson said Thursday.

A spokeswoman for the department clarified in an email that the province cannot provide the decommissioning costs or indicate how much it has reduced royalties.

Sarah Levy MacLeod said the costs of decommissioning are paid by the Sable interest holders, but there is a deduction that reduces the royalties paid prior to the decommissioning.

"(It is) similar to a tax deduction, earning partial tax relief not a full recovery of the cost. ... It's been accounted for in accordance with standard accounting practice, showing up as an accrued liability in the public accounts," she wrote in an email.

An ExxonMobil Canada spokesman said the firm is developing a timetable over the next year to decommission the wells off Sable Island.

Merle MacIsaac says the firm plans to seek expressions of interest over the next year for the project.

The plugging and abandoning of the wells could begin as early as 2017, he added.

Other decommissioning work involves removing production facilities, which requires the use of heavy-lift vessels and an onshore site. The company is considering sites both in Point Tupper, N.S., and outside the province for the onshore work, said MacIsaac.

The project development plan originally envisioned the Sable project, which started in 1999, would last for 25 years.

However, MacIsaac said that natural gas reservoirs have been in a period of gradual decline since the last production well was drilled in 2010.

The company has already said it has sought interest from other companies in developing satellite fields in the Sable project.

"We've made a number of efforts in recent years to market those and have been open to providing access to our infrastructure on a commercial basis," said MacIsaac.

"To date we haven't been successful but we do remain open to discussions on that topic."

He said in the meantime the company has put in place the plan for decommissioning and has to move ahead with it.

Samson said the province remains hopeful a new operator can be found to keep some of the fields going.