It’s been a long time coming but finally a win for landowners, taxpayers, the environment and the petroleum industry’s reputation.
The losers were banks, receivers and irresponsible oil and gas operators.
The Supreme Court in a 5 – 2 decision overruled a lower court decision that allowed the receiver for bankrupt Redwater Energy to pay out the creditor, ATB, before meeting their environmental obligations.
The receiver, Grant Thornton Limited and ATB brought the original lawsuit so they could sell off the profitable assets, recoup their fees and outstanding loans, and then stick the Alberta Energy Regulator (taxpayers), the Alberta Orphan Well Association (industry) and landowners with cleanup and reclamation of Redwater Energy’s abandoned wells.
There are concerns with Canada’s bankruptcy laws, but this case gives us a small glimmer of hope.
Too often companies, in all sectors, are able to walk away from their incompetence, errors or greed through bankruptcy.
Then with a simple name change, incorporate a new company and start all over again.
Landowners have spent decades fighting to have abandoned wells and sites restored to their original condition as promised by legislation and by land agents.
The more wells dumped into the Orphan Well Association, the longer it will take for landowners to see their properties restored.
The Canadian Association of Petroleum Producers agrees with the Supreme Court’s judgement.
Bad behaviour hurts the industry’s overall reputation and because the Orphan Well Association is industry-funded, all petroleum producers bear the financial burden.
Taxpayers are at risk as well.
The pending liabilities for abandoned wells and pipelines are staggering. Recent updates show there are 3,127 abandoned wells,1,553 sites requiring reclamation and 3,176 orphan pipeline segments.
Further, 90,000 well sites in Alberta are sitting idle. They, too, will become abandoned if not re-worked or lease payments to landowners stop.
There is a valid reason for limited liability and bankruptcy laws in Canada otherwise we would not be a good place to invest. But this Court decision recognizes it isn’t always appropriate for financial institutions to be the number one creditor.
It can be argued absolute limited liability afforded to corporations tempts bad behaviour.
We need look no further than Sears Canada where our bankruptcy laws gave no protection to retirees and employees who had for decades made contributions into a pension plan only to end up with nothing.
The Supreme Court’s decision to put provincial environmental obligations ahead of banks was a good day for landowners and all Albertans.
A lack of balance in our bankruptcy laws simply incentivizes corporations to behave badly and pass their malfeasance unto taxpayers or the powerless at the bottom of the creditor chain.