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Glenn Gibson

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On November 9, 2017, the Supreme Court of Canada granted the Alberta Energy Regulator and the Orphan Well Association’s request for leave to appeal from the decision in Grant Thornton Ltd. v. Alberta Energy Regulator, 2017 ABCA 124. By granting leave, Canada’s highest court will weigh in on the Alberta Court of Appeal’s determination that secured creditors in a bankruptcy should be paid before environmental claims arising from abandoned oil and gas wells.

As described in our previous blog post, on April 24, 2017, a majority of the Alberta Court of Appeal determined that certain sections of the  Oil and Gas Conservation Act and Pipeline Act were inoperative to the extent that they conflicted with the Bankruptcy and Insolvency Act (BIA). Under the appellate decision, a bankruptcy trustee or receiver is not required to satisfy the environmental remediation obligations in priority to other creditors. On the other hand, the dissenting judgment noted concerns that the effect of the majority decision would be to create an incentive for corporations to avoid the end-of-life obligations of wells by using insolvency laws and shift the environmental remediation costs onto the public and other oil and gas producers. 

Earlier this year, the Alberta Court of Appeal, in Grant Thornton Ltd. v. Alberta Energy Regulator, 2017 ABCA 124 decided that secured creditors in a bankruptcy should be paid before environmental claims arising from abandoned oil and gas wells. There was a strong dissent and Alberta’s energy regulator is seeking leave to appeal to the Supreme Court of Canada. Ultimately, if the decision stands, it will have a significant impact on who bears the environmental remediation costs of abandoned oil and gas wells.