Jeremy Opolsky says SCC decision extends beyond oil and gas

Senior associate Jeremy Opolsky told The Lawyer’s Daily the effects of the January 31 SCC decision in Orphan Well Association v. Grant Thornton Ltd. “extends beyond the oil sector.”

In a 5-2 decision, the SCC ruled bankrupt oil firm’s assets must first be used to meet provincial cleanup obligations before paying secured creditors, in line with the federal Bankruptcy and Insolvency Act (BIA).

“From a legal perspective, the decision greatly narrows when a regulator will be a creditor for the purposes of the bankruptcy,” he told the publication.

“It expands the scope of the 2012 Abitibi decision and puts regulators in an increasingly privileged position in insolvency proceedings.”

He also suggested the majority “read down the BIA’s provisions,” avoiding “finer parsing of the constitutional issues.”

“But in reading down the BIA, the majority decision expands the liability of bankruptcy estates, and puts secured creditors at the back of the line behind environmental regulators,” he said.

Jeremy went on to explain how the shifting liability for environmental cleanups from the polluter to the secured creditors means “disclaiming unproductive or unprofitable wells in order to sell the viable wells may no longer be an option.”

Finally, he warned although “this decision was in the oil and gas space, its effect extends beyond the oil sector and into the mining an all resource-focused sectors, and should concern all secured creditors and their counsel.”

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."

Jeremy, along with the rest of our team, has provided more litigation and dispute resolution expertise on the relevant practice page.