A Canadian legal precedent could be set this week as the Supreme Court is set to rule on who is responsible to pay for environmental clean-ups left by companies that go bankrupt.
The case has caught the interest of environmentalists, oil companies and governments, as well as banks and creditors across the country. It focuses on Redwater Energy, a small Alberta oil and gas business that went bankrupt in 2015. Redwater had 80 oil and gas wells in the province, most of which were inactive. The main lender, ATB Financial, and the receiver wanted to sell the company's 20 productive wells and use the proceeds to pay off debtors.
However, the Alberta Energy Regulator intervened and said that any money must first be spent on cleaning up the abandoned and dormant wells. The receiver refused, and the case went to court. Two courts have sided with the receiver, and on Thursday of this week, the Supreme Court will release its decision in the case.
The insolvency industry wants to be free of historic liabilities so that they are better able to save troubled companies. However, the concern is that billions of dollars of environmental cleanup costs could be dumped on Canadian taxpayers.
Several provincial governments took part in the Supreme Court hearing last year because of the widespread impact the case could have. Politically there is concern about the case if the court decides in favour of the insolvency industry. ATB Financial has said the case is about providing certainty to banks so that if they lend money, they know where they rank in the list of creditors should the company fail. Other banks have argued that they should be protected because they are the ones taking financial risks.
On the other side, farmers and landowners in rural areas are angry at the glacial pace of cleaning up old oil well sites and the impacts on the land, water and their crops. Environmental groups too have called on insolvent companies to be held responsible for the cleanup of oil and gas sites.
Regardless of the Supreme Court’s decision, Alberta has massive environmental problems as there are currently more than 150,000 inactive or abandoned oil wells scattered across the province.
