February 01, 2019
Senior associate Jeremy Opolsky spoke with Canadian Lawyer on the Supreme Court’s January 31 decision in Orphan Well Association v. Grant Thornton Ltd., saying “it’s a win for the regulator but a loss for secured creditors.”
The 5-2 decision overturned the Alberta appellate court decision in allowing the appeal of the Orphan Well Association and the Alberta Energy Regulator against Grant Thornton Limited, the receiver and trustee in bankruptcy for a bankrupt oil and gas producer.
Jeremy told the publication the “decision effectively puts creditors at the back of the line.”
“In many cases, including this one, they recover nothing at all, including their investment. The [Alberta] Court of Appeal called it replacing ‘polluter pays’ with ‘third party pays’,” he said.
Moreover, in dissenting reasons, Justice Suzanne Côté, along with Justice Michael Moldaver, found the federal and provincial legislation could not co-exist, and consequently the appeal should be dismissed. They also found the public duties to be outside of “provable claims” because they are actually owed to the fellow citizens, rather than to a creditor.
“What the dissent raises is that if you don’t let a company like Redwater transfer profitable as well as unprofitable wells, it leaves the risk that profitable wells won’t be able to be transferred to anybody,” Jeremy said.
“This [case] rose out of the efforts of the receiver to transfer only the profitable wells and disclaim the unprofitable ones.
“In the big picture, this means wells will have fewer options for financing, and financing may be more expensive.
“Somebody has to pay for remediating these wells, and the regulator said it shouldn’t only be the public who bears this onus.”
We have previously written on case when the Court of Appeal of Alberta released its decision in April 2017. You can read our summary of the case until that point in "Redwater appeal dismissed in favour of creditors."
For more insight from our litigation and dispute resolution team, see the relevant practice page.