The City of Red Deer has reached a cost-sharing agreement with a group of landowners who will benefit from developing property where oil and gas production has occurred.
Red Deer city council directed administration on Monday to enter into agreements with six landowners whose properties are more immediately developable, are interested in developing their property and are willing to participate in the cost-sharing agreement.
The landowners would share the $520,000 bill to compensate oil and gas company Conserve Oil Corp., which recently acquired NAL Resources, which the city had been formerly negotiating with.
NAL Resources is seeking the money because it would abandon several sour gas wells and pipelines in the city’s northeast, and as a result would see production and royalty losses.
The city entered into a conditional agreement with the company to shut down four wells and associated pipelines in the city’s northeast by Dec. 31, 2011. The complete abandonment of the facilities would occur by the end of 2012.
Since 2006, the city has been working with the company to ensure that oil and gas wells don’t prevent urban growth from happening in the area.
Planning director Paul Meyette said the price of $520,000 is a good one because it was negotiated when oil prices were lower than they are now.
Originally, the estimated cost was $2.4 million, plus interest.
“This is really important for the land developers and the owners so they can do normal development,” Meyette said.
“We are compensating because of lost revenue.”
The landowners have agreed to and signed a landowner agreement.
Councillor Dianne Wyntjes called the cost-sharing agreement a successful outcome based on how long the negotiations have been going on.
City solicitor Don Simpson said the city won’t be on the hook for reclamation costs.
Administration reported that reclamation occurs prior to development.