In AER vs Redwater, CAPP (Canada’s large oil and gas lobby group, the Canadian Association of Petroleum Producers) sent correspondence to the Court supporting AER. The Court included it in the docket for AER‘s appeal.
In Ernst vs AER, citizens and citizen groups sent correspondence to the Court supporting Ernst and water. The Supreme Court did not include any in the docket for Ernst’s appeal.
After the Supreme Court judges received the AER vs Redwater file, they took 1 month to decide whether to grant a hearing. In Ernst vs AER, on merely a preliminary motion and much less complicated case, they took 3 months. After the hearing, will the Court make AER wait a year and a day for the judges’ ruling like they did Ernst?
In August 2014, CAPP confessed in a full page ad in the Calgary Herald that frac’ing had contaminated drinking water in Alberta, and that in some of the more infamous cases [eg Ernst’s], people could set their water on fire. In 2015, while the Supreme Court was deciding whether to grant Ernst a hearing, why didn’t CAPP correspond to the Court and confess that frac’ing had contaminated Ernst’s water and that the AER needed to be held accountable for violating Ernst’s Charter rights trying to silence her?
If CAPP had written such a confession to the Court, would the court have left it off Ernst’s docket too?
Legal battle over abandoned oil wells bound for Supreme Court, The Redwater ruling gives creditors priority over environmental cleanup by CBC News, Nov 09, 2017, CBC News
Canada’s top court has agreed to review a ruling that could allow energy companies that have gone bankrupt to walk away from cleaning up abandoned oil wells.
The Alberta Energy Regulator, and the Orphan Well Association formally applied to the top court in July for leave to appeal what’s known as the Redwater decision.
The Supreme Court said Thursday it has granted the application for leave to appeal.
Regulators are concerned that if the Redwater ruling stands, worthless oil and gas wells will be abandoned across the province as struggling oil operators fold. [Struggling, or misusing bankruptcy to avoid paying to clean up after raking profit?]
“For the past two years, we have worked very hard at all levels of court to ensure the consequences of the Redwater decisions are fully understood,” AER president and CEO Jim Ellis said in a statement.
“The decision allows creditors to benefit at the expense of the environment and responsible companies by permitting receivers to avoid regulatory requirements that were put in place to protect the public and environment,” Ellis said.
“It allows owners of industrial facilities to walk away from their environmental responsibilities.”
The battle began when Calgary-based Redwater Energy Corp. went bankrupt last year, triggering a fight between the AER and the provincially-owned ATB over the remains.
Does the lender get paid back first? Or should proceeds from any asset sales go to clean up the mess — namely those 70 non-operational wells that would otherwise be abandoned — the company leaves behind?
In May 2016, [Justice Neil C Wittmann, same judges as the case management judge in Ernst vs AER/Encana and Alberta Environment] an Alberta Queen’s Bench judge ruled in favour of the bankruptcy trustee of Redwater. The court ruled the sale of assets from bankrupt energy companies should go first to creditors, not to cleaning up the mess from the company’s operations.
The Redwater Energy Corp. trustee and its lender, ATB Financial, wanted to sell off the company’s remaining producing wells to pay creditors. They argued a bankruptcy trustee is free to pick and choose from among the company’s assets and “disclaim” — legally abandon — unproductive oil and gas wells.
Those wells would be left to the Orphan Well Association, an industry-funded and government-backed group, to clean up.
But in a 2-1 decision released in April, the Alberta Court of Appeal backed the original judge, saying federal bankruptcy law takes precedence over provincial environmental rules.
‘That impact cannot be undone’
While Redwater was a relatively small player in Alberta’s energy industry, the court battle has far-reaching implications.
British Columbia and Saskatchewan both participated in the appeal in support of the AER because the case could act as a precedent in other provinces.
Since the Redwater decision came down, about 1,600 AER-licensed sites have been disclaimed by receivers, with estimated liabilities of more than $100 million.
“That impact cannot be undone,” said Ellis. “But we are looking forward to presenting our arguments and are optimistic we may convince the Supreme Court to reverse the lower courts’ decisions.” [Is this legal process and application to the Supreme Court a scam set up by CAPP, the BC and SK governments, and AER, to make it appear the AER did not intentionally set up this bankruptcy escape hatch for industry across Canada? Emphasis added]
Supreme Court to decide whether companies can walk away from abandoned wells in Alberta by Bob Weber, November 9, 2017, Calgary Herald
The Supreme Court of Canada says it will hear an appeal from Alberta’s energy regulator over a ruling that could allow energy companies to walk away from cleaning up abandoned oil wells. The decision could affect industrial sites across the country.
The question is whether a cleanup order from a provincial body is a legal obligation or a financial liability, says Nigel Bankes, dean of natural resources law at the University of Calgary.
“When a provincial regulator issues someone a cleanup order, under what circumstances is that just re-emphasizing an existing obligation or is it actually amounting to a provable claim in bankruptcy?” he said Thursday.
In May 2016, an Alberta Queen’s Bench judge ruled in favour of the bankruptcy trustee of Redwater Energy Corp., saying proceeds from the sale of assets from bankrupt energy companies should go first to creditors, not to cleaning up the mess from the company’s operations.
Redwater’s trustee and its lender wanted to sell off the company’s remaining producing wells to pay creditors, arguing a bankruptcy trustee is free to pick and choose from among the company’s assets and disclaim unproductive oil and gas wells.
Disclaimed wells would be abandoned and left to the Orphan Well Association, an industry-funded and government-backed group, to clean up.
In a split decision last April, Alberta’s Appeal Court backed the original judge, saying federal bankruptcy law takes precedence over provincial environmental rules.
Previous case law has simply asked if the liability was a debt incurred before the bankruptcy with a monetary value attached to it. If the answer was yes, the liability was considered a “provable claim” — an unsecured debt settled out of what’s left after secured creditors are paid off.
The Supreme Court agreeing to hear the case suggests it may be reconsidering that test, said Bankes.
“Should we be forcing provinces to deal with these issues in a bankruptcy context?” he asked.
“Or should we be simply saying these are the general rules for doing business in the province — you’ve known about them from day one. Your secured creditors knew about them from day one. You should just ante up now that the time has come to abandon this well.
“I think the court is going to be looking at that, and that is good news for taxpayers and .. for solvent players in the sector.”
The Alberta Energy Regulator also welcomed the court’s decision.
“We are looking forward to presenting our arguments and are optimistic we may convince the Supreme Court to reverse the lower courts’ decisions,” said regulator head Jim Ellis.
“All Canadians are impacted by the Redwater decision. It allows owners of industrial facilities to walk away from their environmental responsibilities.” [Set up by industry and its legally immune AER?]
The governments of Alberta, British Columbia and Saskatchewan all support the regulator, as does Alberta’s farmers advocate office and the Dene Tha’ First Nation. [But no support for Ernst from any of them for drinking water or Charter rights of frac harmed Canadians]
Since the original ruling was handed down, receivers have cut loose about 1,600 licensed oil and gas sites with estimated liabilities of more than $100 million.
As usual, the Supreme Court gave no reasons for agreeing to hear the appeal. [Emphasis added]
Supreme Court of Canada to decide on handling of abandoned oil wells by Sean Kilpatrick, November 9, 2017, The Globe and Mail [Same article as above.]
Bankrupt oil companies dump $100 million in clean up costs on Orphan Well Association in under two years, The Alberta government is concerned more companies will strip off bad assets, handing the bill to the OWA, and potentially, onto taxpayers by Geoffrey Morgan, November 9, 2017, Financial Post
CALGARY – The Alberta government has been keeping a tab of the clean-up costs bankrupt oil companies have handed over to the Orphan Well Association since a controversial court decision last year made it easier for companies to dump liabilities.
That tab has now passed $100 million.
The Financial Post has obtained a copy of the Alberta Energy Regulator’s list of assets that have been transferred to the OWA, which cleans up oil and gas sites whose owners have gone bankrupt, since a controversial May 2016 Court of Queen’s Bench decision that the Supreme Court of Canada has now said it would review.
The lower-court decision allowed the trustee for Redwater Energy to send the company’s uneconomic oil and gas wells to the OWA but keep control of better-performing wells, which could be sold to repay the company’s debt. The decision prioritized the rights of debt holders over environmental remediation in insolvency processes.
Alberta appealed the decision all the way to the Supreme Court out of concern it would lead to more companies stripping off bad assets and handing the bill to the OWA and, potentially, onto taxpayers. The Supreme Court announced Thursday it would hear the appeal.
The list obtained by the Post shows how many assets have been disclaimed since the lower court decision: 12 defunct oil and gas companies have disclaimed responsibility for 1,628 licensed oil and gas sites. The deemed liabilities for those sites exceed $100 million.
University of Calgary economist Blake Shaffer said that extra $100 million in clean up costs would add to OWA’s burden.
Alberta faces $8.6B bill to clean up old oil wells. Here’s how it can avoid it: C.D. Howe
Major oil companies caught in orphan wells crisis as tiny Lexin Resources goes insolvent
Shaffer recently co-authored a report for the C.D. Howe Institute that pegged reclamation costs for orphan wells in Alberta between $129 million and $257 million using data from 2015/2016. The $100-million tab contained in the AER’s post-Redwater list would be in addition to that estimate.
“This is 10 years of steady clean up, assuming no more wells go into the Orphan Well Association. So this is going to be a problem for quite some time and the problem with Redwater is who bears that cost?” Shaffer said.
Significantly, the list obtained by the Post does not include assets disclaimed in two other closely watched insolvency proceedings involving Calgary-based Lexin Resources, which owned more than 1,500 wells, and Southern Pacific Resources, whose receiver has applied to send an oilsands project to the OWA for the first time.
Both processes could further add to the mounting cost of cleaning up old oil and gas properties in the province.
The cost of cleaning up orphaned oil wells has become a political flashpoint in Alberta, where hundreds of thousands of oil and gas wells dot the landscape and thousands of them have been orphaned.
This year, the Alberta government provided $235 million to the energy industry to help pay for clean up costs of orphaned wells and the federal government agreed to cover $30 million in interest payments on the loan. [Wanna bet none of loan will be paid back?]
Examples from the list of 12 insolvent companies also show that the AER is concerned that some insolvent companies, like Sydco Energy, appear to be following the precedent set by Redwater.
Sydco went into receivership in February. Legal documents from the receivership proceedings show that in the following months, the AER refused to allow a second company called 2032951 Alberta Ltd. – with “virtually the same” principals as Sydco – to transfer some of Sydco’s wells to itself.
The documents also say AER has also refused to allow third company, Wormwood Resources Ltd., to assume Sydco’s well licenses unless it can show that it is not related to Sydco.
In a brief filed in Sydco’s receivership process, the AER said it has “consistently and publicly expressed its concerns that the decision of this Court in (the Redwater case) would result in licensees organizing their affairs and choosing insolvency proceedings as a manner in which to shed their end of life obligations. This is exactly what appears to have occurred in this situation.”
AER spokesperson Ryan Bartlett confirmed the details of the list obtained by the Post and added the regulator has kept a close watch over exactly what responsibilities have been shed since the Redwater case.
“By all means, we’re keeping track of it,” he said, adding the AER intervened in more court cases since the decision, implemented new rules for other oil and gas companies looking to buy or sell assets and is advising the government on a review of how clean up liabilities are managed.
“Any policy that comes out of this review, we will implement,” Bartlett said.
Shaffer said the Redwater case, by prioritizing the rights of debt holders in bankruptcy proceedings over the environment, forced the government to act. “Clearly, changes will have to happen,” he said. [But, typical in greed and fear sodden petrostates, the government has done nothing but give the billion dollar profit-taking industry money and deregulate]
The AER also took the “unprecedented step” of applying to become the court-appointed receiver in Lexin’s case, three Osler, Hoskin & Harcourt LLP lawyers Melanie Gaston, Janice Buckingham and Emily Paplawski wrote in a published commentary on Redwater earlier this year.
Calgary’s legal community watched the Redwater case carefully as it was considered precedent-setting and Osler lawyers said it could lead to a situation where disclaimed oil and gas wells “could increase dramatically.” [Emphasis added]
Regulators hit gas firms with big fines, Officials growing frustrated with abandonment of wells by Dennis Webb, November 3, 2017, The Daily Sentinel
Colorado oil and gas regulators who are growing increasingly frustrated over companies walking away from wells and leaving the state to deal with leaks and other problems this week handed out possibly their biggest fines ever for rules violations.
The Colorado Oil and Gas Conservation Commission imposed a total of nearly $4 million in fines against three operators, including one accused of failing to deal with issues involving a leaking well in the Douglas Pass area of far-western Garfield County.
The commission acted with the understanding that none of the three operators involved are likely to pay the fines. Commissioner Erin Overturf, who led the push for fines much higher than proposed by agency staff, said she made her proposal out of principle more than any expectation that the state would collect the fines.
“I’m very concerned about violations where there is a documented and actual environmental impact,” Overturf said.
The COGCC imposed fines that include:
■ $1,601,924 against Northstar Gas Company, Inc., stemming from the Garfield County well problem.
■ $1,608,456 against Tudex Petroleum, Inc., for violations involving wells in Adams County.
■ $652,003 against the estate of the late William Taylor for a problem well in La Plata County.
The Tudex and Northstar fines are the largest in recent years, and possibly ever, in Colorado, COGCC records suggest. The highest fine the Daily Sentinel has been able to find in those records is a $1.267 million fine against Benchmark Energy last year stemming from spills in Logan County. About $4.9 million in fines was imposed by the commission during all of last year.
COGCC staff weren’t able to say Friday whether this week’s fines are record ones.
In all three of this week’s cases, the oil and gas operators have failed to respond to issues raised by the state over their facilities, and sent no one to represent them before the commission acted, the agency says. The commission also terminated their authorization to operate in the state, and gave agency director Matt Lepore the authority to declare their wells as orphaned, meaning there’s no responsible party in charge of them and the responsibility for actions such as plugging the wells and revegetating pads falls to the state.
The commission also authorized foreclosure on financial assurance bonds associated with the wells, to help cover the costs of dealing with the orphan wells.
Commission staff have become increasingly concerned about what they say is inadequate funding from bonds and other sources to pay for a growing orphan well problem. They already know of hundreds of such wells that need plugging, and believe several thousand wells are at risk of likewise falling into the state’s hands to deal with.
Taylor operated just the one well in Colorado and there is a $10,000 bond on it. The average cost just to plug a well is $35,000, and site reclamation work can push the average cost of dealing with a well over $80,000, the COGCC says.
Tudex has nine wells in the state that Lepore now can declare as orphaned. It has $60,000 in bonding for them. Companies in Colorado can post of blanket bond of $60,000 covering up to 99 wells, or $100,000 for 100 or more.
Northstar has nine wells in the state and $30,000 in bonding.
Agency staff say a Northstar well on federal land in the Douglas Pass area was found last December to be spraying an oily mist onto the partially frozen surface of Trail Creek. Northstar failed to address the incident and violated other rules covering things such as reporting requirements, and testing of the condition of shut-in wells, the agency says.
Agency records show that Northstar official Ken McKinney did tell the state at the time the leak was discovered that due to low natural as prices and the fact that he had been severely ill, all of the company’s wells had been shut in since early 2016 and the company had been trying to sell them. He said the company had no funds and he was trying to prevent filing bankruptcy.
The Tudex situation involves problems including leaks at multiple wells, failures to meet reporting requirements, spill berms in disrepair, and other violations, officials say. Similar problems were found at the Taylor well in La Plata County, where a leak was both audible and visible using an infrared camera.
Agency staff had sought fines of about $389,000 in the Taylor case, $766,000 against Tudex and $366,000 against Northstar. The larger fines proposed by Overturf were based on daily penalty amounts being fully applied for the duration of time that the violations occurred.
Agency allow for a reduction in the overall fines in cases of long-duration violations, because of how high such penalties otherwise could be if the daily fine is fully applied. But Overturf noted that that provision is only guidance for the commission, and she said its application is inappropriate where actual environmental harm occurs.
She said the higher penalties she proposed send the message that the commission won’t look kindly on ongoing violations that cause actual harm, which may give it more leverage against companies that are violating rules.
Commission Chair John Benton was the only commissioner to vote against the higher fines. He said he agreed with Overturf in principle, but shared Lepore’s concern that imposing high fines on companies unlikely to pay them results in the agency having to report a lower rate of collection on the fines it imposes.
Much of the commissioners’ discussion in the three cases this week focused not on the fine amount but on the concern about defunct operators leaving the state with the problem of orphan wells.
Commissioner Howard Boigon said he’s sympathetic in the Taylor matter to the fact that Taylor has died, but the issue of companies walking away from their responsibilities is an ongoing one.
“It’s absurd that they can just leave and say ‘I’m done, do whatever you’re going to do,’” he said.
He said it gets back to the bonding issue, “although it’s too late for a lot of these deadbeats.”
Commissioners this week discussed numerous possible approaches, from increasing bonds — something Lepore thinks industry would oppose — to going after companies in court, or doing financial assessments of companies buying wells. Those wells typically are less economical over time and are sold to smaller companies with less financial wherewithal.
McKinney, with Northstar, couldn’t be reached for comment at a phone number listed with the COGCC. Casey Zachary, Northstar’s former operations manager, said he thinks the company’s Houston office has closed.
He thinks someone vandalized the Douglas Pass well, which he said was shut in and plugged.
“You had to pull that plug out and open the valve for it to leak,” he said.
He also believes regulators are helping bring the orphan well problem on themselves through excess regulations that make it hard for small, independent operators to survive and contributes to them going out of business.
Zachary pointed to what he said are costly rules to test facilities for methane leaks and test the soundness of wells that have been shut in for a year.
“You can’t pay for some of the stuff that they want you to do with a well that’s barely making enough gas to keep it open,” he said. [Emphasis added]
[Refer also to:
2017 08 03: Birds more important than workers & fracked families: What game is AER playing at this time? Trying to impress the SCC that AER is not a worker & wildlife killing, pollution enabler? Because ruling in AER’s Leave to Appeal Redwater awaits? Syncrude charged in deaths of 31 great blue herons at tarsands mine; *If* convicted, faces maximum penalty of $500,000
2017 06 22: More Propaganda CAPP style? AER, Charter Violating, No Duty of Care, Legally Immune, Abuser of Power, Pollution & Law Violator Enabler, “warns” industry it “could” go after directors, executives to clean up the current $300 Billion in oilfield liabilities. Really? With Ex-Encana Exec/Ex-Cenovus Exec/Ex-CAPP Exec Gerard Protti as AER Chair?
2017 04 28: Complaint against the lying AER & Alberta govt by Stewart Shields. Comment by Diana Daunheimer: “Grant Thorton LLP triple dipping, with the help of the AER?” AER vs Redwater: AER seeks leave to appeal to the Supreme Court of Canada
2017 04 24: AER’s $300 Billion Ponzi Scheme Closer to Fruition? Alberta Court of Appeal favours creditors over the environment, upholds Redwater decision. Did AER set this up to create horrific legal precedent to let companies hang their toxic pollution and massive damages on the public via the impotent Orphan Well Program?
2016 06 20: All part of the decades-long plan to hang big oil’s housekeepping on ordinary families while companies run for the hills? Oil bust [Or greed & corruption?] leaves states with massive well cleanup
2016 05 27: “Where does the buck stop?” AER to appeal ruling on oil, gas cleanup obligations. Chief Justice Wittmann found Alberta’s oil and gas licencing regime to be unconstitutional relating to money, but not in Ernst’s “valid” constitutional claim against AER relating to drinking water contamination by oil and gas