Yedlin: Court ruling could have far-reaching implications for abandoned wells in Alberta – Calgary Herald

Janice Buckingham, Lorne Carson, Frank Turner

Jun 2, 2016

The Redwater Energy ruling by the Alberta Court of Queen’s Bench has garnered a lot of press, including an article by Deborah Yedlin in the Calgary Herald. In this decision, Chief Justice Neil Wittmann held that the federal Bankruptcy and Insolvency Act takes precedence over the provincial Oil and Gas Conservation Act, with the result that the proceeds from the sale of the bankrupt Redwater Energy Corp.’s productive wells will go to the company’s creditors – and will not be used to cover the cost of remediating its abandoned wells. In her article, Yedlin discusses the far-reaching implications of this decision with three Osler lawyers: Frank Turner and Lorne Carson, both partners in the firm’s Corporate Practice Group, and Janice Buckingham, partner and chair of the firm’s Oil & Gas Practice.

According to Frank, “[t]his decision makes life more difficult for directors because they could find themselves in a situation where the secured creditor has put in a receiver, sold the best assets for the benefit of the secured creditors and all that’s left are a bunch of assets that are reclamation and remediation obligations.”

Another possible outcome, says Lorne, is that “[l]iquidation may be seen as more favourable than restructuring because when a company restructures, the ongoing entity continues with the abandonment obligations” – obligations that are left behind when a company chooses to liquidate.

In addition, Janice explains that the decision may have an impact on the willingness of companies to enter into joint venture agreements since a corporation may be on the hook for abandoned wells if their partner becomes insolvent.

To learn more about the potential consequences of the Redwater decision, read Deborah Yedlin’s full article Yedlin: Court ruling could have far-reaching implications for abandoned well in Alberta in the June 2, 2016 edition of the Calgary Herald.

For more information about the Redwater decision, read Osler’s update “Implications for the Redwater decision – Where does the buck stop?”.