Appeal court upholds Redwater Energy decision

CALGARY — The Alberta Court of Appeal is upholding a lower court decision that gave secured creditors priority over environmental clean-up in the case of bankrupt Redwater Energy Corp.

The lawsuit has been closely watched as a precedent-setting case as bankruptcies afflict the oil and gas industry after more than two years of low commodity prices.

The court case centres on Redwater’s trustees who wanted to sell off its remaining producing wells and leave the others for the industry-supported Orphan Well Association to remediate.

The Alberta Energy Regulator, however, argued funds from the sale of the productive wells must be used to cover cleanup expenses for the unproductive wells.

The Alberta Court of Queen’s Bench ruled in May of 2016 that provincial regulations are in conflict with the Bankruptcy and Insolvency Act and ruled in favour of creditors.

The regulator appealed the decision because it said it could encourage more companies to enter receivership and bankruptcy to avoid obligations to clean up around oil and gas wells.

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