Redwater Reaches High Water Mark

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by Francis N. J. Taman and Ksena J. Court

It appears that the Supreme Court of Canada intends to wade into the orphan wells issue in Alberta.  The Court granted leave to appeal the Alberta Court of Appeal’s decision[1]to uphold the Court of Queen’s Bench decision[2] not to grant an order requiring Grant Thornton Limited, as trustee in bankruptcy of Redwater Energy Corporation, to comply with a number of environmental remediation orders against wells that the trustee had disclaimed an interest in.  Since the disclaimed wells would have become the responsibility of the Alberta government and the Orphan Wells Association, the Alberta regulator opposed the disclaimer.  The regulator issued abandonment and remediation orders with respect to the disclaimed wells, which the trustee didn’t comply with.

 

Orphan wells are a significant issue in Alberta on a number of fronts.  If a trustee is forced to remediate wells it cannot sell because their value is less than their remediation costs, it will be difficult to see how some energy companies could be realized upon.  This creates an issue for lenders and may make lending to such companies more problematic. It will be interesting to see what the Supreme Court has to say on the issue.

 

[1] 2017 ABCA 124

[2] 2016 ABQB 278

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