Case information

Constitutional law - Division of powers - Federal paramountcy - Bankruptcy and insolvency - Provable claims - Natural resources - Oil and gas - Provincial energy regulator issuing orders requiring abandonment and remediation of bankrupt’s assets that trustee previously disclaimed - Whether the majority of the Alberta Court of Appeal erred in its application of Newfoundland and Labrador v. AbitibiBowater Inc., 2012 SCC 67, [2012] 3 S.C.R. 443 - Whether the majority erred in its application of the constitutional doctrine of paramountcy by finding that the Alberta oil and gas regulatory regime operationally conflicts with s. 14.06 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”), and is inoperative to the extent of the conflict - Whether the majority erred in its application of the constitutional doctrine of paramountcy by finding that the Alberta oil and gas regulatory regime conflicts with or frustrates the federal purpose of managing the winding up of insolvent corporations and settling the priority of claims against them - Whether the majority erred in its broad interpretation of s. 14.06 of the BIA - Whether the majority erred in its interpretation and application of PanAmericana v. Northern Badger, 1991 ABCA 181, namely in its finding that the decision did not survive the 1997 amendments to the BIA - Whether the majority erred in finding that the Alberta legislation enforcing end of life obligations and the transfer of oil and gas assets subject to insolvency proceedings create an unauthorized priority in bankruptcy - Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 14.06, 136 - Oil and Gas Conservation Act, R.S.A. 2000, c. O-6, ss. 1(1)(cc), 27, 29, 30, 106 - Pipeline Act, R.S.A. 2000, c. P-15, ss. 1(1)(n), 23, 25, 26, 51.

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Redwater Energy Corporation is a bankrupt company that held licences in oil and gas properties. Those properties included orphan wells that are at the end of their lives and are non-producing. The cost of remediation for disclaimed wells can exceed their value. The company’s receiver and subsequently its trustee in bankruptcy sought to disclaim the bankrupt’s interest in those wells but to sell the valuable assets.

The Alberta Energy Regulator has specific end-of-life rules on how a spent well must be rendered environmentally safe. Disclaimed wells become the responsibility of the Regulator and the Orphan Well Association. In this case, the Regulator opposed the trustee’s disclaimer on the basis that the trustee had to comply with the end-of-life obligations prior to any distribution to the creditors. The Regulator issued abandonment and remediation orders in respect of the wells that had been disclaimed. The trustee did not comply with the orders.

The Regulator and the Association applied to the Court of Queen’s Bench of Alberta, seeking compliance with the remediation orders. The trustee brought a cross-application for approval of the sale of some assets, and a ruling on the constitutionality of the Regulator’s position.