On May 18, 2016, the Court of Queen’s Bench of Alberta released its much anticipated decision in Re Redwater Energy Corporation, 2016 ABQB 278, which addressed the Oil and Gas Conservation Act (OGCA), the Pipeline Act and the Bankruptcy and Insolvency Act (BIA). The long running conflict involving the Alberta Energy Regulator (AER), receivers and trustees in bankruptcy, including the settlement agreement reached in National Bank of Canada v. Spyglass Resources Corp., was previously discussed here.
The decision in Redwater by the Court resolves the conflict, for the time being, by indicating that:
- a trustee is entitled to disclaim the debtor’s interest in a portion of the debtor’s AER licensed properties, including licensed properties and facilities that have negative value due to the fact of abandonment and reclamation obligations;
- a trustee is entitled to assume possession or control over a portion of a debtor’s AER licensed properties and facilities, including the fact that a trustee does not have to assume possession and control over AER licensed properties and facilities with the associated abandonment and reclamation obligations;
- a trustee is entitled, as a consequence of the foregoing, to sell a portion of a debtor’s AER licensed properties and facilities and the AER cannot refuse to transfer licenses to the purchaser in such circumstance only by virtue of the fact that the estate of the debtor will be left with AER licensed properties and facilities that will be disclaimed and not abandoned or reclaimed by the trustee; and
- abandonment orders issued by the AER are “claims” within the meaning of federal insolvency law and subject to compromise therein.