This comment updates our recent commentary on the complicated intersection between insolvency law and environmental regulation.
There are now at least five recent events relevant to this intersection
- the pending decision of the Queensland Court of Appeal in Linc Energy, being the first, then:
- the Supreme Court of Canada hearing in Orphan Well Association v Grant Thornton Ltd (Redwater Energy), on 15 February 2018;
- the debate and excellent papers on this topic given at the Annual Review of Insolvency Law conference held in Vancouver on 9 February 2018;
- the Australian Senate Standing Environment Committee hearing on 14 February 2018 concerning the rehabilitation of mining and resources projects as it relates to Commonwealth responsibilities;
- the West Australian government’s push through COAG for the insolvency law of disclaimer to be amended to accommodate its concerns in relation to mining remediation.
Conference papers and presentations – Redwater Redux
The Vancouver conference provided two excellent papers, which broadly, presented the conflicting issues in Redwater.
Professor Fenner Stewart’s article, while examining the issue more from a Canadian constitutional law perspective, not that dissimilar to ours in Linc Energy in Australia, writes that
“Redwater has punched a hole in the AER’s strategy [the Alberta Energy Regulator] to help ensure upstream operators provide for proper abandonment of oil and gas wells.”
Ms Sarah Hawco’s paper presented the opposite viewpoint, her opening comment saying that
“no other case has held Alberta’s insolvency community captive in recent years more than the Redwater case”,
referring to the strong and divergent views it has released, citing one writer who sees
“the very term ‘insolvency law’ as an oxymoron and lawless …”.
On the panel Ms Christa Nicholson spoke strongly in favour of the insolvency viewpoint.
Views were also made in political terms, that the problem lay with a capitalistic, conservative government which accommodated what was a booming industry by not seeking bonds or forms of security of sufficient value to deal with later environmental problems that would inevitably arise, being a policy decision that it now regrets.
There have been various media reports since the hearing. The essence of these could have come from the Queensland government, the banks and the insolvency profession in Australia following Queensland’s chain of responsibility laws.
They reflect the two diverse views.
The AER is reported as saying that it is
“important that regulators be able to enforce rules to protect the public and the environment, even through the insolvency processes. And it’s important that creditors have to follow those same rules and someone’s not left holding the bag at the end of the day.”
Similar sentiments and submissions came from representatives of other provinces – Saskatchewan, British Columbia and Ontario, one (perhaps simplistically) informing the Supreme Court that
“receivers want to walk away without making surface rights whole again.”
Insolvency professionals and banks
On the other side, it is reported that
“insolvency professionals and banks have long argued they should not be held personally liable for an energy company’s activity, warning that reversing the lower court rulings could lead to more orphan wells and potentially decrease the amount of financing available to the oil and gas industry”.
If that happened, they might not take on insolvent oil and gas industry companies, which could increase the number of properties with environmental damage left to the public purse, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) is reported to have said.
That adopts a similar line taken here, in response to Queensland’s laws.
The Supreme Court of Canada
A video of the hearing on 15 February 2018 is here.
The media reports that the Supreme Court’s decision is expected in their spring or summer, that is, mid 2018.
More, as issues arise.
I am grateful to Professor Stewart, Ms Hawco, Ms Nicholson, John Grieve QC and Professor Richard Butler, for explaining to me aspects of this case. Any errors are my own.
 Published by Thomson Reuters, details available.
 How to deal with a fickle friend? Alberta’s Troubles with the Doctrine of Federal Paramountcy, Fenner L Stewart
 Redwater. Why are we still talking about this issue? Sarah Hawco.
 Jensen Shawa Solomon Duguid Hawkes LLP, Calgary
 See Fight over bankrupt oil company lands at Supreme Court – Who gets paid first? Creditors, or the cleanup efforts on orphaned wells? Tony Seskus, CBC News 15 Feb 2018