The Supreme Court of Canada is hearing a controversial case this week concerning who is responsible for cleaning up toxic industrial sites when a company goes bankrupt.
At stake is potentially billions of dollars in environmental clean-up costs. And entities ranging from governments to Canada’s big banks to oil and gas companies and farmers are all looking to ensure that they don’t end up on the hook for cleaning up toxic sites – many of them in remote rural and northern areas of the country.
The case before the Supreme Court of Canada focuses on a small Alberta oil company called Redwater Energy, which entered creditor protection in 2015. Only a few of the company's assets had value, so the banks involved wanted to sell Redwater’s abandoned wells to recover some of its debt and abandon the rest of the company’s oil and gas sites.
The question for the Government of Alberta and area farmers that had Redwater oil and gas wells on their land became whether Redwater's assets should help pay its debts or be used to pay for the clean-up cost of its worthless and contaminated work sites?
The Supreme Court case addresses a fundamental public policy dilemma about what happens when a resource company fails. Every mine operation in Canada has environmental regulations attached to its licence about reclaiming the site when the mine closes. But if the company goes belly up, does the bank take over those end-of-life responsibilities? If not, is the site abandoned or do taxpayers pick up the hefty tab when the provincial government pays to clean it up? And how much cost should farmers and other landowners bare for clean-up and reclamation costs?
"We need to be able to ensure the people of Alberta, collectively, are protected," Alberta Premier Rachel Notley told reporters earlier this week.
The Alberta Energy Regulator (AER) says there are approximately 1,800 abandoned oil and gas sites in that province alone and pegs the cost to remediate them at $8.6 billion.
"The Redwater decision impacts Alberta's constitutional right to manage its own resources," said AER spokeswoman Cara Tobin, adding that ``By rejecting the polluter pays principle that underlies virtually all of Alberta's oil and gas legislation, it's shifted liability from the polluter to innocent third parties and the public.``
The provincial governments of Ontario, which currently has about 2,400 oil and natural gas producing wells, along with British Columbia and Saskatchewan have also joined the Supreme Court Case, which will be heard in Ottawa this week. The Canadian Association of Petroleum Producers is also an intervener in the legal case.