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Supreme Court of Canada overturns Redwater decision

Judgment restores balance between environmental obligations and creditor interests that existed before the case.

On Jan. 31, 2019, the Supreme Court of Canada granted the appeal in the case Orphan Well Association et al. v. Grant Thornton Limited et al., commonly referred to as the Redwater case.

The judgment supports existing Alberta Energy Regulator regulations which hold the estates of bankrupt oil and natural gas operations liable for end-of-life obligations. Bankruptcy does not
absolve companies from environmental orders relating to their property. The decision explicitly allows the AER to direct a trustee in bankruptcy to use the proceeds of assets in the estate to pay
for abandonment and reclamation, prior to payment of creditors.

As an intervenor in the appeal, the Canadian Association of Petroleum Producers (CAPP) argued the industry-funded Orphan Well Association (OWA) was established to decommission and close
Alberta-based orphan wells when no operator can be held responsible – it is not an insurance policy and should be considered a last resort.

CAPP notes that this judgment restores the balance between environmental obligations and creditor interests to that which existed for many years before this case. Protecting the environment, people and communities is paramount.