Energy Regulator to Appeal Decision to Supreme Court of Canada

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The Alberta Energy Regulator will appeal to the Supreme Court of Canada a recent Alberta Court of Appeal decision that allows receivers and trustees to disclaim, or walk away from, unprofitable oil and gas assets and their associated abandonment and reclamation liabilities despite Alberta legislation intended to ensure that energy developers—not Albertans—pay for final closure of energy sites.

In the 2-1 Alberta Court of Appeal decision, the majority dismissed the AER’s appeal of a Court of Queen’s Bench decision allowing the receiver/trustee to disclaim, or walk away from, unproductive energy assets and their associated liabilities.

“We are disappointed in the decision of the majority,” said AER president and CEO Jim Ellis. “It fails to recognize that the AER is not acting as a creditor when it takes steps to ensure that the public is protected from the environmental costs associated with suspension, abandonment, and reclamation when companies enter into insolvency proceedings.”

While the AER is appealing the decision because its effects are significant for Albertans, this decision will have significant ramifications across Canada, as demonstrated by the participation of other parties as interveners.

The decision may lead to more wells, facilities, and pipelines being sent to the Orphan Well Association, as receivers and trustees pick and choose which sites will maximize returns to creditors. The OWA is a nonprofit organization that abandons and reclaims orphan infrastructure and associated sites and is funded by industry.

“The OWA is an extremely important backstop that ensures energy companies—not Albertans—pay for final closure of energy facilities when a licensee has no other assets to cover the costs,” Ellis added. “It was intended to address true orphans, not to be used as a place for liabilities that companies no longer want to deal with.”

 

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