May 26, 2016
In a post on Legal Feeds, the blog of Canadian Lawyer and Law Times, journalist Jennifer Brown reviews the implications of the recent Alberta Court of Queen’s Bench decision in Redwater Energy. The case considered whether the provincial regulatory regime governing the abandonment, reclamation and remediation of non-producing oil wells conflicted operationally with the federal Bankruptcy and Insolvency Act. Ultimately, the court held in favour of Grant Thornton, Redwater Energy Corp.’s bankruptcy trustee, ruling that it had the right to disclaim the junior oil and gas company’s non-producing wells and sell its producing wells. Essentially, the judgment favoured the interests of lenders and their secured loans over the province’s environmental laws. According to Melanie Gaston, a litigation partner in Osler’s Calgary office, the implications of this decision are far-reaching.
“Typically a receiver takes the less profitable wells or those that require decommissioning and sells them as packages. Now, with this decision, it’s clear that doesn’t need to happen. They can go in and pick the good, producing wells and leave the non-profitable ones,” Melanie explains.
Consequently, there may be an increase in the number of “orphan wells” and a corresponding increase in pressure on the oil and gas industry to cover the costs associated with remediating those wells. As Melanie points out, “the regulator is in a tough position because it will now be burdened with, potentially, exponentially more wells to manage with the Orphan Well Fund.”
Read Jennifer Brown’s full blog post Environment, future of companies take back seat to creditors in oil well case at Legal Feeds, May 24, 2016, as well as the following news sources: