Insolvency and Environmental Law Collide: Supreme Court of Canada rules in favour of Alberta energy regulator in Redwater decision

The Supreme Court of Canada (“SCC”) has released its decision in Orphan Well Association v. Grant Thornton Limited (2019 SCC 5) regarding the bankruptcy of Redwater Energy Corporation, and the strategy of Redwater’s trustees in bankruptcy to try to sell off productive assets of the company to pay creditors, while disclaiming environmentally challenged assets and leaving them to the industry funded Orphan Well Association and potentially the Government of Alberta to address.

Not so fast, says the Supreme Court of Canada! There are end-of-life remedial obligations associated with the bankrupt’s non-productive wells that have to be addressed. This isn’t a battle of federal versus provincial legislation and paramountcy; it’s a prioritization of the use of the bankrupt’s assets for compliance with its regulatory obligations to clean up under the terms of its licenses.