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Alberta Energy Regulator

In-house regulator takes case to SCC
Alberta Energy Regulator

By Jennifer Brown

Category: Litigation 
Department size: Large, Public Sector
Company: Alberta Energy Regulator

In her job as legal counsel at the Alberta Energy Regulator, Keely Cameron advises clients and has helped draft legislation, reviewed contracts and represented the regulator before all three levels of court including the Supreme Court of Canada. In particular, the AER appeared before the Supreme Court of Canada in February of this year to dispute a ruling by Alberta courts.

It was a major initiative for an in-house litigation team facing mounting costs and increased workload during a high-volume time in the province’s distressed energy market.

The downturn in the oil and gas economy in Alberta created serious and complex issues for the AER and various stakeholders, including industry players, financiers, landowners, governments  and the tax-paying public. This has put incredible strain on the AER and its resources, necessitating that it innovatively manages its growing insolvency litigation and related portfolio consistent with its limited legal budget and its obligation to protect the wide-ranging interests of Albertans.

“I am aware that Ms. Cameron has been at the forefront of this innovation and litigation management effort for the AER,” said Christa Nicholson, partner at Jensen Shawa Solomon Duguid Hawkes LLP in Calgary.

In April of 2017, in a landmark appeal decision, the majority of the Alberta Court of Appeal had dismissed an appeal by the AER and Orphan Well Association of the decision of the Court of Queen’s Bench of Alberta in the Redwater Energy Corporation receivership and bankruptcy proceedings.

In a case closely watched by the insolvency industry and the oil and gas industry, the Alberta Court of Appeal held that Grant Thornton Limited, the receiver and trustee in the Redwater receivership and bankruptcy proceedings, was entitled to disclaim Redwater’s non-producing oil wells and sell its producing ones. Redwater was a junior oil and gas producer that went into insolvency in the spring of 2015. It owed its bank, ATB Financial, about $5 million.

Upon appointment, the receiver conducted an assessment of Redwater’s assets and advised the AER that of the 91 wells in which Redwater held licences, it would only be taking possession of 20 wells, facilities and associated pipelines, which the AER opposed. The cost of remediation for disclaimed wells can often exceed their value.

At issue was whether the provincial regulatory regime under the Oil and Gas Conservation Act and the Pipeline Act conflicted operationally with the federal Bankruptcy and Insolvency Act.

In particular, the Redwater case deals with the extent to which Alberta regulatory requirements regarding the obligations of licensees to abandon and reclaim their energy sites survived subsequent creditor claims. It began in May of 2016, when the Alberta Queen’s Bench ruled in favour of the bankruptcy trustee representing Redwater Energy Corp. Under the ruling, profits from the sale of assets would go first to creditors — not toward cleaning up operation sites.

In the lower court decisions, they found various portions of Alberta law were inoperative to the extent that they conflicted with the Bankruptcy and Insolvency Act, the effect of which was to shift end-of-life obligations from licensees and their assets on to other industry players — the Orphan Well Association and potentially the public.

It is expected the SCC will issue its decision in the case this fall.

“We moved the Redwater litigation in-house for two reasons after the initial application in order to reduce our costs,” says Cameron who has been practising in-house for about seven years. “Given the matter was so focused on our legislation and facts we knew so well, we thought we had better expertise to bring it in-house.”

The other aspect of the litigation process that helped Cameron and the AER was working collaboratively with other parties with similar interests in the matter. In support of the AER and Orphan Well Association appeal, other parties intervened including the governments of Alberta, Saskatchewan, British Columbia and Ontario, as well as environmental groups Ecojustice and Greenpeace, the Canadian Association of Petroleum Producers and a landowner group called Action Surface Rights Association. The Canadian Bankers Association and Canadian Association of Insolvency Restructuring Professionals were involved in support of the position of the respondents, Alberta Treasury Branch and ATB.

Patricia M. Johnston, executive vice president, law and general counsel at AER, also nominated Cameron for the award.

“As evidenced by the numerous government and non-government interveners in the appeal, the Redwater decisions have implications beyond the oil and gas industry and beyond the province of Alberta,” said Johnston in her nomination. “In fact, the case impacts all industries that may leave an environmental footprint in all provinces of Canada. If not overturned, it will only be a matter of time before other industries in other provinces use federal bankruptcy legislation as a means of shedding abandonment and reclamation obligations.”

In his nomination of Cameron and her legal team for the award, Bennett Jones LLP partner and co-head of litigation Ken Lenz stated: “The Supreme Court of Canada’s decision in Redwater will have a significant impact on the Western Canadian economy and the law with respect to environmental liabilities nationwide. It is estimated that over $6 billion in liabilities could be shifted to industry or the public if the appeal is unsuccessful. This will have a significant impact on solvent companies and government priorities as it is a material amount in relation to the government’s budget. The decision already has a significant impact on landowners, who must sometimes wait years in order for the OWA to reclaim damage to their land caused by oil and gas exploration.”