www.lexpert.ca | LEXPERT • December 2016 | 27
British Columbia," says William Kaplan of Blake, Cassels &
Graydon LLP in Vancouver.
The difficulty, however, is that some countries — including
several European countries and none of the Scandinavian states
— are not parties to international agreements that bind them to
recognition proceedings. "In these instances, we're back to where
we were before we started developing protocols for cross-border
cases," Kaplan says.
HELP FOR ENERGY OUTFITS
In a key decision that may help the struggling oil and gas industry
access much needed credit facilities, an Alberta court has ruled
that bankruptcy trustees may disclaim non-producing oil wells
and sell the producing ones.
"The ruling will promote increased access to credit because it
makes it more likely that lenders will recoup their loans in the
event of an oil and gas company's insolvency," says Vanessa Allen,
a senior manager in Deloitte Restructuring's financial advisory
group in Calgary and a spokesperson for the Canadian Associa-
tion of Insolvency and Restructuring Professionals, which inter-
vened in the case.
Re Redwater Energy, released in May 2016 by Alberta Court
of Queen's Bench Chief Justice Neil Wittmann, involved an ap-
plication by the Alberta Energy Regulator (AER) and the Or-
phan Well Association requiring Grant Thornton, the trustee
in Redwater Energy Corp.'s bankruptcy, to carry out the aban-
donment, reclamation and remediation obligations related to the
company's non-producing wells, which included paying a security
deposit under certain circumstances.
Chief Justice Wittmann concluded that Alberta's Oil and Gas
Conservation Act and the province's Pipeline Act, which prohib-
its trustees and receivers from disclaiming non-producing wells,
conflicted with the federal Bankruptcy and Insolvency Act, which
allows such disclaimers. Under the constitutional doctrine of fed-
eral paramountcy, the federal legislation governed. The upshot
was that the province's energy regulator could not require non-
producing wells to be sold as a condition of issuing licenses for the
transfer of producing wells.
Kelly Bourassa of Blakes in Calgary, who represented the Al-
berta Treasury Branches at the hearing, welcomes the "level of
certainty" the Redwater case brings to the industry and its finan-
ciers. "What you had before was a can of worms where the AER
was telling receivers that it wouldn't approve license transfers un-
less all of the wells were sold," she said. "So receivers were either
being forced to take one-dollar offers just so they could get rid of
everything, or else were required to turn some of the proceeds of
the sales of producing wells over to the AER, which amounted to
giving the AER a priority claim it did not have."
The ruling has sparked an outcry from the public and environ-
mentalists grounded in fears that taxpayers will have to bear the
costs of environmental remediation necessitated by the failure of
a private company.
To the contrary, Grant Thornton's Calgary counsel, Jeffrey
Oliver of Cassels Brock and Tom Cumming of Gowling WLG
(Canada) LLP, argued that the use of public funds to assist the
Orphan Well Association was not in the offing. Indeed, the Or-
phan Well Association (OWA), whose job is to remediate and
reclaim wells for which there is no responsible party, is funded by
the industry pursuant to a formula devised by the AER. Evidence
at the hearing showed the original levy of $15 million on the in-
dustry in 2015 had been doubled by the end of the year.
The AER, then, could up the ante for the industry's contribu-
tion to the OWA yet again. "But that would impose yet another
burden on companies who are struggling in the current down-
turn," Allen says. The fact remains, however, that the OWA has a
10-year backlog of 1,000 non-producing wells requiring remedial
INSOLVENCY
