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Failure of the energy companies can not escape from the old wells, the rules of the Supreme Court



Canada’s High Court states that the province’s right to enforce environmental clean-up rules takes precedence over creditors when a polluter has gone bankrupt.

In its decision 5-2, published on Thursday, the Supreme Court of Canada declared that Alberta's provincial rulings, which oblige oil and gas companies to clean up wells, are in the public interest and do not conflict with banks ’rights to collect bankruptcy debts.

This decision cancels two decisions of the lower court, according to which ATB Financial Corp. interested in recovering money on a damaged loan in the event of a bankrupt energy producer Redwater Energy Corp. before the Alberta Energy Regulator's ability to perform forced cleanings, as indicated in the province. regulations.

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Calgary-based Redwater filed for bankruptcy in 2015, and the recipient appointed to liquidate its assets tried to sell only the most profitable oil wells and withdraw the remaining ones, leaving responsibility for cleaning up the wider industry.

AER objected, fearing that more and more energy companies will seek to get rid of their least profitable operations through corporate restructurings and enormous pressure on the industry and the province, which is struggling to finance the restoration of tens of thousands of obsolete oil and gas wells. The Supreme Court agreed.

“Bankruptcy is not a license to ignore the rules, and during bankruptcy, insolvency professionals must comply with and must comply with applicable provincial laws,” says the decision.

The case known as the Orphan Well Association, et al. v. Grant Thornton Limited et al. Have caused the intervention of the country's largest oil companies, environmentalists, landowner groups, and attorneys general throughout Canada.

The number of non-operating oil and gas wells in Alberta alone has increased dramatically in recent years after a series of corporate bankruptcies. Prime Minister Rachel Knotley’s government has provided loans in the amount of $ 235 million to speed up the cleanup of obsolete wells.

AER warned of further load on the system in case of its appeal. However, there are concerns that the decision of Thursday may make it difficult for large banking companies to obtain loans.

Financial analysts of RBC Dominion Securities in their research report note that the court’s decision should increase the overall control of banks over environmental liabilities.

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But environmentalists and farmers have welcomed this decision as a victory for landowners, taxpayers, and the environment.

“The court reinstated the long-standing legal principle of polluters' wages,” said Keith Wilson, a lawyer from Edmonton, who represents landowners in disputes with energy companies.

"He rejected the decisions of the lower court that allowed oil companies to make a profit and waive their environmental obligations."


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