Wednesday, July 26, 2017

#PolluterPay?That'sNotTheAlbertaWay----------Environmental liabilities passed around like hot potatoes The overwhelming obstacle to industry accountability is the fact that these environmental liabilities have cascaded down from the companies that profited from the wells, and can afford to reclaim the well sites, to smaller and smaller companies that lack ability to meet the reclamation obligations. A joint government/industry committee reported in 1992 that new companies with “inadequate financial resources to meet future well-abandonment liabilities” were taking responsibility for wells from established companies. In some cases, “well-licence transferors have disposed of valuable assets, leaving only liabilities within a corporate shell and thereby generating future orphan wells.” And regulators weren’t duped; they didn’t just look the other way while these environmental liabilities were passed around like hot potatoes; they actively sabotaged their own regulatory programs to further facilitate this downloading of risk.




We all have a lot of opinions about what taxpayer dollars should pay for. Cleaning up after industry probably doesn't make anyone's list.


The conventional oil and gas industry is leaving a massive mess in Alberta. Regan Boychuk traces how it happened and shows how industry - not taxpayers - should…
NATIONALOBSERVER.COM
Comments
Stacy Mackenzie You might actually try fixing your own problems instead of "passing the buck."

http://business.financialpost.com/.../a20d3a41-7666-45bf...

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Clayton Muirhead HE WAS ONE OF WORST PREMIERS

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Angie Ed Van Pelt No he wasn't, he wanted to get Alberta out of debt and he did, but it was all the other premiers screw that up because they never knew how to budget

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James Macdonald No he was the worst premier / human of his time

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Kris Jesse he stayed on budget by not funding our children's educations, not taking care of the elderly and not taking care of the sick.

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Clayton Muirhead You are right Kris funny how people forget

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Julie Ali Angie Ed Van Pelt Mr. Klein was the worst. Mostly because he was simply a front man only (mind you he was good at this). I don't know how everyone got the impression he was good for Alberta but in my opinion he didn't do much for the province. But he wasn't the only premier to mess up the province. Mr. Lougheed began the rot with the Tapcal Trust Fund business. No one has actually told us who contributed to this private fund for the Tories and why.

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Michael Handelman "In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit.[1] Economists often urge governments to adopt policies that "internalize" an externality, so that costs and benefits will affect mainly parties who choose to incur them.[2]

For example, manufacturing activities that cause air pollution impose health and clean-up costs on the whole society, whereas the neighbors of an individual who chooses to fire-proof his home may benefit from a reduced risk of a fire spreading to their own houses. If external costs exist, such as pollution, the producer may choose to produce more of the product than would be produced if the producer were required to pay all associated environmental costs. Because responsibility or consequence for self-directed action lies partly outside the self, an element of externalization is involved. If there are external benefits, such as in public safety, less of the good may be produced than would be the case if the producer were to receive payment for the external benefits to others. For the purpose of these statements, overall cost and benefit to society is defined as the sum of the imputed monetary value of benefits and costs to all parties involved.[3][4] Thus, unregulated markets in goods or services with significant externalities generate prices that do not reflect the full social cost or benefit of their transactions; such markets are therefore inefficient."

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Timothy Cooper I wonder if it would be possible to impose a "trust" on all new wells where X amount of proceeds need be payed into the trust whole
Under operation until the trust has enough money to pay for the decommissioning of the well.

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Richard Mjl That's what the orphan well assoc was supposed to do...

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Richard Mjl Industry funds the majority of the costs incurred by the OWA through an Orphan Fund Levy. The AER assesses and collects a levy amount based on the deemed abandonment and reclamation liabilities held by each company and then remits the collected funds to the OWA.
http://www.orphanwell.ca/pg_faq.html


In the upstream oil and gas industry, an orphan is a well, pipeline, facility or associated site which has been investigated and confirmed as not having any legally responsible and/or financially able party to deal with its abandonment and reclamation responsibilities.
ORPHANWELL.CA

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Julie Ali Richard Mjl Unfortunately we are having to help out industry aren't we? I mean Ms. Notley and crew gave the industry a "loan" of $235 million as well as the $30 million of federal stimulation money to ensure the loan would be tax free. Why are we even in this business of supplementing the orphan well program with this sort of assistance when we're in debt? It's foolhardy. The industry is subsidized and still we are expected to subsidize even further. The industry is sitting on billions in assets and has profits while we don't. Why then are we ensuring that the orphan well program that is ineffective becomes workable with our money?

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Brad Brassor Klien was such a looser.

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Sheryl Meissner Goid grief. He had Alberta strong no debt!!!!'

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Brad Brassor Sheryl Meissner what planet do you live on. He ruined albertas social programs and made big corporations rich. Does that sound like a strong alberta. Petrr Lauheed would roll in his grave

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Julie Ali Sheryl Meissner Mr. Klein did balance the budget and get us out of debt. But he also did waste a lot of money. Remember the blown up hospitals? They would come in handy now. And he did the work of balancing the budget by a ton of pain for the people who were laid off . We also have an infrastructure deficit that seems to have originated in the Klein error.

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Gordon Lichuk Yes blame a dead man ndp goof

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Eva Wisner He wasn't dead when he pulled that s---t.

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Kris Jesse why bring them up when no one else did? why start name calling when no one else did? put on your big boy panties and grow up and realize what a sorry state out health care system, our energy system and our education system is in

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Stan Tomlinson Thanks to Kline😡👎👎👎

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Eva Wisner Yup Klein is right up there with Devine and Wall.

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Liliana Hardej someone pocket bonus for this a taxpayer pays, normal thinks in Canada . Bonuses are legal corruption in Canada.

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Jeanne Lauck Cleaning up the the bloated management of Albertas' biggest employer should be a priority!!

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Jack Meyer Alberta Government should monetize the ATB and make it an Alberta company not a company to fund the CEO/COO/Presidents life style and use the returned money for Albertans.

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George Rest 2/3 of Albertas income is from royalties and industry. It would be nice to you Union babies get along without that

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Julie Ali There should be more money coming for the resources; we got ripped off. And where's the money in the Heritage Trust Fund? I'm betting it's in the hands of the Tory faithful such as the many CEOs of the regional health authorities who got hefty severance settlements at the end of the junk of creating boards of buddies.

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Julie Ali and AUPE - Alberta Union of Provincial Employees shared a link.


The conventional oil and gas industry is leaving a massive mess in Alberta. Regan…
NATIONALOBSERVER.COM
  • The Klein error legacy that has been amplified with the long tenure of incompetent PC folks in government. We've got a liability that keeps growing due to the fact that no one wants to hold big oil accountable for its pollution.
    The NDP folks are now providing a $235 million loan to big oil supplemented with the Federal monies of $30 million so that big oil won't have to pay interest.
    It's ridiculous.
    We have the sacred cow.
    It's the oil and gas industry.
    We need to kick government rump to slaughter this sacred cow and get the liabilities dealt with by the sacred cow. Not by us.

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  • We all have a lot of opinions about what taxpayer dollars should pay for. Cleaning up after industry probably doesn't make anyone's list.

The failure of the PCs to work in the public interest is clear in the environmental liability that the public is faced with in the pollution that is being currently left with by big oil which is minor compared to the future when big oil will walk away after making major profits and scooping as much as they can in terms of public subsidy.
What we have had in Alberta have been a group of half assed politicians who failed to make regulations to ensure that polluters like big oil pay up and that there be penalties that are substantial for their failures to remediate the messes they are leaving for our kids. We can't hide from the messes created by the incompetent PCs. There are folks who were working on the oilsands' tailings ponds in the beginning of resource development who are now retiring. What have we got for 44 years of research? Well apparently they are doing the hole in the ground solution, dumping the tailings there and covering up the mess with water. Way to go folks for major research work over decades!
As for the orphan well program -it's obviously not gathering enough funds to make it workable since we are handing over $235 million plus $30 million to make the program deal with some of the backlog. Meanwhile the handy dandy solution for oil companies is either to sell off the liabilities to another oil company to deal with or simply just abandon the entire so that the banks get what is left. The banks and other creditors cannot be held responsible for the liabilities of the pollution so guess who pays? We do.
And still we have the Wildrose folks accepting the Ebola Party of the PCs as their beloveds? It's pretty clear to me at least that there is no love greater than the love of power and damn the public interest.
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http://www.nationalobserver.com/2017/04/03/analysis/ralph-kleins-multibillion-dollar-liability-about-blow-albertas-face
Ralph Klein's multibillion dollar liability is about to blow up in Alberta's face
By Regan Boychuk in Analysis, Energy, Politics | April 3rd 2017
#2 of 3 articles from the Special Report:Legacy of liabilities

The late Ralph Klein was sworn in as premier of Alberta in December 1992. File photo taken in Calgary, Alberta, in 2005, by Chuck Szmurlo
Anxiety was running high among oil and gas industry executives after a stunning court ruling in 1991.
In the June 12, 1991 decision, a panel of Court of Appeal of Alberta judges unanimously ruled that "abandonment of oil and gas wells is part of the general law of Alberta enacted to protect the environment and for the health and safety of all citizens."
The responsibility to properly abandon a well was binding on all who became licensees of oil and gas wells, even in bankruptcy.
The ruling came to be known as the Northern Badger case.
The anxiety it triggered was profound, but it was replaced with a newfound confidence after an unexpected boom in oilpatch activity and Ralph Klein's swearing in as Alberta premier in December 1992.
Under Klein, the Orphan Well Association was established. Wells are called “orphans” when there is no solvent entity to carry out abandonment and reclamation responsibilities. This industry-funded organization saw the already enormous problem of old wells multiply.
With Klein calling the shots, the oilpatch effectively escaped accountability for billions of dollars in reclamation obligations in exchange for merely plugging some wells after companies disappeared. In fact, the Orphan Well Association has only reclaimed about 700 sites in more than 15 years.
And today, Klein's environmental liabilities are about to blow up in the face of Albertans.
Alberta’s inactive wells, 1993-2015

Environmental liabilities passed around like hot potatoes
The overwhelming obstacle to industry accountability is the fact that these environmental liabilities have cascaded down from the companies that profited from the wells, and can afford to reclaim the well sites, to smaller and smaller companies that lack ability to meet the reclamation obligations.
A joint government/industry committee reported in 1992 that new companies with “inadequate financial resources to meet future well-abandonment liabilities” were taking responsibility for wells from established companies. In some cases, “well-licence transferors have disposed of valuable assets, leaving only liabilities within a corporate shell and thereby generating future orphan wells.”
And regulators weren’t duped; they didn’t just look the other way while these environmental liabilities were passed around like hot potatoes; they actively sabotaged their own regulatory programs to further facilitate this downloading of risk.
The only program that even began to address abandonment and reclamation with any real enforcement was the Long Term Inactive Well Program (LTIWP) launched, after considerable delay, following the 1997 election. With enforcement provisions that scaled up to legal action, the LTIWP was a five-year plan to safely plug wells that had been inactive for more than a decade.
It had some success in its first year, but as enforcement escalated in the second year, regulators lost their nerve. A second progress report was never produced and a dramatic change was announced in the third year. The Base Well Count assigned to each producer was supposed to be unchangeable. Regulators then let it be manipulated so companies could shift wells to smaller and smaller companies.
The rule change completely undermined the program’s objectives and allowed industry to game the program and loot it of deposits companies paid for well abandonment costs that could otherwise be left to taxpayers. Outrageously, regulators actually demonstrated to companies how to do so.
Six months later, with another election approaching, the program was cancelled – locking in the refunded deposits enabled by the rule change and relieving industry of any real obligation to so much as plug wells sitting dormant for decades.
Fading wells transferred so many times, basic information has been ‘lost’
The LTIWP was replaced in 2000 with the Licensee Liability Rating (LLR) system to calculate the amount of security deposits a company must provide to regulators to cover some of the costs of abandonment and reclamation that bankrupt licencees have left to taxpayers.
It literally took me all of five minutes of reading the regulatory directive on the formula used to calculate the deposits, to recognize the LLR program as a multi-layered charade that has cloaked Alberta’s growing mountain of environmental liabilities for more than 15 years.
Deposits are calculated on the difference between a company’s ‘deemed liabilities’ and ‘deemed assets.’ However, ‘liabilities’ are grossly underestimated and exclude more than 430,000 kilometres of pipelines, while ‘assets’ are exaggerated by grouping almost two million barrels of daily bitumen production in with the fading production of aging conventional crude and gas producers.
But the single biggest factor distorting the LLR program is the fact that current profitability is not used to calculate ‘assets.’ Despite clear wording, regulators are not using a three-year rolling average like their directives suggest.
Instead, regulators are still using a measure of industry profitability from 2008-10 (when both oil and gas prices were dramatically higher) to calculate ‘deemed assets’ – inflating the ‘asset’ side of the ratio significantly to spare producers from having to pay deposits on even a small fraction of their liabilities.
What’s more, in 2000, the Klein government had freed oil executives from liability. As further demonstration of their gross negligence, Alberta regulators made this gob-smacking admission in 2004:
“During the last 15 years, property sales were very high and many of these inactive wells were transferred numerous times. With the sale of these wells, knowledge of wellbore conditions, and in some cases even knowledge of the well’s existence, was lost.”
Ralph Klein, Alberta, premierThe late Ralph Klein, former premier of Alberta, ushered in an era of major growth for the oil and gas industry in the 1990s. File photo by The Canadian Press
The law as a weapon against Albertans and the environment
In early 2015, Alberta was well into the current decline in oil prices and new Progressive Conservative leader Jim Prentice was campaigning to further intensify austerity and permanently remove resource revenue from the annual budget, instead placing an increasing share of the paltry sum still collected into the Heritage Savings Trust Fund.
A spotlight was about to shine once again on who should pay when a company wants to walk away.
Redwater Energy was a small company with more than 100 inactive wells and $5 million in debts to Alberta Treasury Branches (ATB Financial), a provincial Crown corporation.
ATB expressed confidence that its loans to Redwater Energy would be repaid in full – despite lower commodity prices and despite being fully aware of the company’s reclamation liabilities.
Suddenly, one week after the surprise election of the provincial New Democratic Party, however, ATB forced Redwater into receivership. And one week after ATB CEO Dave Mowat was appointed chair of the new government’s promised royalty review, the regulator was informed that Redwater’s inactive wells were going to be left for someone else to clean up.
ATB intended to sell the company’s active wells to pay itself back the millions it lent Redwater in 2013 and was relying on a clause inserted into federal bankruptcy law in 1997 to counter provincial regulators’ insistence that it was responsible for all of Redwater’s wells, not just the profitable ones.
Redwater Energy court ruling lets company off the hook for well cleanup
In the midst of the royalty review in October 2015, ATB applied for the appointment of a trustee to liquidate Redwater’s active wells while it defied the regulator’s abandonment and closure orders for the inactive wells.
The 2016 Redwater Energy case was a virtual replay of the 1991 Northern Badger case – except the outcomes were polar opposites. Where it was earlier recognized that environmental cleanup had a super-priority over lenders and that companies were jointly and severally liable for environmental obligations, in 2016, Alberta’s chief justice ruled that banks came first and Redwater could not be forced to clean up its mess.
The Redwater decision was the culmination of two decades of the industry downloading its risk, and of legislators effectively rendering polluters and their bankers immune from the environmental consequences of their profit.
The key difference between the 1991 and 2016 court cases was that the federal Bankruptcy and Insolvency Act (BIA) had been amended in 1997.
“The most important substantive change,” wrote environmental legal scholar Dianne Saxe, “is that trustees (including receivers) have the qualified right to abandon contaminated property. When that property has been abandoned, the trustee cannot be required to comply with any remedial order relating to that property.”
Saxe noted the 1997 BIA amendments failed to distinguish the need to prevent irreparable future harm in cases like Northern Badger from other environmental requirements lacking special reason to trump other monetary claims in a bankruptcy. Presciently, she lamented: “This is most unfortunate, and will lead to unnecessary hardship, injustice and waste.”
“In an ideal system,” Saxe added, “bankruptcy priorities would reflect a functional analysis: urgent claims to prevent future harm to significant public interests would take priority over mere monetary claims… This is not, however, the approach taken in the [1997] Bankruptcy and Insolvency Act provisions.”
“Flies in the face of any conception of the polluter-pays principle”
The impact of the amendments “provides an incentive to failing companies to dishonor environmental orders,” lawyer Alexander Clarkson wrote in the University of Toronto Faculty of Law Review.
Clarkson, along with Nicholas Chaput, are among the very few specialists to have studied the environmental super-priority in depth.
Resource extraction industries often rely heavily on debt financing, “Therefore, when commodity prices fall, the solvency of the company falls dramatically and the company is quickly unable to comply with [environmental] orders,” Clarkson wrote. The secured lenders could obtain a receivership order and remove whatever the remaining value that could have gone to environmental cleanup.
Which brings us back to Redwater Energy and the government-owned ATB. The 2016 decision by Alberta’s chief justice “flies in the face of any conception of the polluter-pays principle,” says Nigel Bankes, University of Calgary Chair of Natural Resource Law.
“Any effort to restore the pre-eminence of the polluter pays principle will require statutory amendments [and] changes in regulatory practice. The most obvious candidate for amendment is the BIA itself but this may well prove to be an immovable object given the desire to protect the interests of secured creditors.”
Alberta needs a super-priority to prevent producers from escaping liability through bankruptcy, but the changes can only come federally. Because the Redwater decision has national implications, all Canadians need that super-priority to hold all polluters accountable for cleaning up mines and pulp mills in bankruptcy. Without it, polluters will simply walk away with their pockets stuffed full of money, leaving taxpayers burdened with the cost of cleanup.
Editor's note: This article was updated at 8:52 p.m. PT due to an editing error to correct that the late Ralph Klein was sworn in as premier of Alberta in December 1992, more than a year after the ruling in the Northern Badger case.

Investigative journalism has never been more important. Will you help?


http://www.nationalobserver.com/2017/04/03/analysis/ralph-kleins-multibillion-dollar-liability-about-blow-albertas-face

Ralph Klein's multibillion dollar liability is about to blow up in Alberta's face

By Regan Boychuk in Analysis, Energy, Politics | April 3rd 2017
#2 of 3 articles from the Special Report:Legacy of liabilities
The late Ralph Klein was sworn in as premier of Alberta in December 1992. File photo taken in Calgary, Alberta, in 2005, by Chuck Szmurlo
Anxiety was running high among oil and gas industry executives after a stunning court ruling in 1991.
In the June 12, 1991 decision, a panel of Court of Appeal of Alberta judges unanimously ruled that "abandonment of oil and gas wells is part of the general law of Alberta enacted to protect the environment and for the health and safety of all citizens."
The responsibility to properly abandon a well was binding on all who became licensees of oil and gas wells, even in bankruptcy.
The ruling came to be known as the Northern Badger case.
The anxiety it triggered was profound, but it was replaced with a newfound confidence after an unexpected boom in oilpatch activity and Ralph Klein's swearing in as Alberta premier in December 1992.
Under Klein, the Orphan Well Association was established. Wells are called “orphans” when there is no solvent entity to carry out abandonment and reclamation responsibilities. This industry-funded organization saw the already enormous problem of old wells multiply.
With Klein calling the shots, the oilpatch effectively escaped accountability for billions of dollars in reclamation obligations in exchange for merely plugging some wells after companies disappeared. In fact, the Orphan Well Association has only reclaimed about 700 sites in more than 15 years.
And today, Klein's environmental liabilities are about to blow up in the face of Albertans.
Alberta’s inactive wells, 1993-2015

Environmental liabilities passed around like hot potatoes

The overwhelming obstacle to industry accountability is the fact that these environmental liabilities have cascaded down from the companies that profited from the wells, and can afford to reclaim the well sites, to smaller and smaller companies that lack ability to meet the reclamation obligations.
A joint government/industry committee reported in 1992 that new companies with “inadequate financial resources to meet future well-abandonment liabilities” were taking responsibility for wells from established companies. In some cases, “well-licence transferors have disposed of valuable assets, leaving only liabilities within a corporate shell and thereby generating future orphan wells.”
And regulators weren’t duped; they didn’t just look the other way while these environmental liabilities were passed around like hot potatoes; they actively sabotaged their own regulatory programs to further facilitate this downloading of risk.
The only program that even began to address abandonment and reclamation with any real enforcement was the Long Term Inactive Well Program (LTIWP) launched, after considerable delay, following the 1997 election. With enforcement provisions that scaled up to legal action, the LTIWP was a five-year plan to safely plug wells that had been inactive for more than a decade.
It had some success in its first year, but as enforcement escalated in the second year, regulators lost their nerve. A second progress report was never produced and a dramatic change was announced in the third year. The Base Well Count assigned to each producer was supposed to be unchangeable. Regulators then let it be manipulated so companies could shift wells to smaller and smaller companies.
The rule change completely undermined the program’s objectives and allowed industry to game the program and loot it of deposits companies paid for well abandonment costs that could otherwise be left to taxpayers. Outrageously, regulators actually demonstrated to companies how to do so.
Six months later, with another election approaching, the program was cancelled – locking in the refunded deposits enabled by the rule change and relieving industry of any real obligation to so much as plug wells sitting dormant for decades.

Fading wells transferred so many times, basic information has been ‘lost’

The LTIWP was replaced in 2000 with the Licensee Liability Rating (LLR) system to calculate the amount of security deposits a company must provide to regulators to cover some of the costs of abandonment and reclamation that bankrupt licencees have left to taxpayers.
It literally took me all of five minutes of reading the regulatory directive on the formula used to calculate the deposits, to recognize the LLR program as a multi-layered charade that has cloaked Alberta’s growing mountain of environmental liabilities for more than 15 years.
Deposits are calculated on the difference between a company’s ‘deemed liabilities’ and ‘deemed assets.’ However, ‘liabilities’ are grossly underestimated and exclude more than 430,000 kilometres of pipelines, while ‘assets’ are exaggerated by grouping almost two million barrels of daily bitumen production in with the fading production of aging conventional crude and gas producers.
But the single biggest factor distorting the LLR program is the fact that current profitability is not used to calculate ‘assets.’ Despite clear wording, regulators are not using a three-year rolling average like their directives suggest.
Instead, regulators are still using a measure of industry profitability from 2008-10 (when both oil and gas prices were dramatically higher) to calculate ‘deemed assets’ – inflating the ‘asset’ side of the ratio significantly to spare producers from having to pay deposits on even a small fraction of their liabilities.
What’s more, in 2000, the Klein government had freed oil executives from liability. As further demonstration of their gross negligence, Alberta regulators made this gob-smacking admission in 2004:
“During the last 15 years, property sales were very high and many of these inactive wells were transferred numerous times. With the sale of these wells, knowledge of wellbore conditions, and in some cases even knowledge of the well’s existence, was lost.”
Ralph Klein, Alberta, premierThe late Ralph Klein, former premier of Alberta, ushered in an era of major growth for the oil and gas industry in the 1990s. File photo by The Canadian Press

The law as a weapon against Albertans and the environment

In early 2015, Alberta was well into the current decline in oil prices and new Progressive Conservative leader Jim Prentice was campaigning to further intensify austerity and permanently remove resource revenue from the annual budget, instead placing an increasing share of the paltry sum still collected into the Heritage Savings Trust Fund.
A spotlight was about to shine once again on who should pay when a company wants to walk away.
Redwater Energy was a small company with more than 100 inactive wells and $5 million in debts to Alberta Treasury Branches (ATB Financial), a provincial Crown corporation.
ATB expressed confidence that its loans to Redwater Energy would be repaid in full – despite lower commodity prices and despite being fully aware of the company’s reclamation liabilities.
Suddenly, one week after the surprise election of the provincial New Democratic Party, however, ATB forced Redwater into receivership. And one week after ATB CEO Dave Mowat was appointed chair of the new government’s promised royalty review, the regulator was informed that Redwater’s inactive wells were going to be left for someone else to clean up.
ATB intended to sell the company’s active wells to pay itself back the millions it lent Redwater in 2013 and was relying on a clause inserted into federal bankruptcy law in 1997 to counter provincial regulators’ insistence that it was responsible for all of Redwater’s wells, not just the profitable ones.

Redwater Energy court ruling lets company off the hook for well cleanup

In the midst of the royalty review in October 2015, ATB applied for the appointment of a trustee to liquidate Redwater’s active wells while it defied the regulator’s abandonment and closure orders for the inactive wells.
The 2016 Redwater Energy case was a virtual replay of the 1991 Northern Badger case – except the outcomes were polar opposites. Where it was earlier recognized that environmental cleanup had a super-priority over lenders and that companies were jointly and severally liable for environmental obligations, in 2016, Alberta’s chief justice ruled that banks came first and Redwater could not be forced to clean up its mess.
The Redwater decision was the culmination of two decades of the industry downloading its risk, and of legislators effectively rendering polluters and their bankers immune from the environmental consequences of their profit.
The key difference between the 1991 and 2016 court cases was that the federal Bankruptcy and Insolvency Act (BIA) had been amended in 1997.
“The most important substantive change,” wrote environmental legal scholar Dianne Saxe, “is that trustees (including receivers) have the qualified right to abandon contaminated property. When that property has been abandoned, the trustee cannot be required to comply with any remedial order relating to that property.”
Saxe noted the 1997 BIA amendments failed to distinguish the need to prevent irreparable future harm in cases like Northern Badger from other environmental requirements lacking special reason to trump other monetary claims in a bankruptcy. Presciently, she lamented: “This is most unfortunate, and will lead to unnecessary hardship, injustice and waste.”
“In an ideal system,” Saxe added, “bankruptcy priorities would reflect a functional analysis: urgent claims to prevent future harm to significant public interests would take priority over mere monetary claims… This is not, however, the approach taken in the [1997] Bankruptcy and Insolvency Act provisions.”

“Flies in the face of any conception of the polluter-pays principle”

The impact of the amendments “provides an incentive to failing companies to dishonor environmental orders,” lawyer Alexander Clarkson wrote in the University of Toronto Faculty of Law Review.
Clarkson, along with Nicholas Chaput, are among the very few specialists to have studied the environmental super-priority in depth.
Resource extraction industries often rely heavily on debt financing, “Therefore, when commodity prices fall, the solvency of the company falls dramatically and the company is quickly unable to comply with [environmental] orders,” Clarkson wrote. The secured lenders could obtain a receivership order and remove whatever the remaining value that could have gone to environmental cleanup.
Which brings us back to Redwater Energy and the government-owned ATB. The 2016 decision by Alberta’s chief justice “flies in the face of any conception of the polluter-pays principle,” says Nigel Bankes, University of Calgary Chair of Natural Resource Law.
“Any effort to restore the pre-eminence of the polluter pays principle will require statutory amendments [and] changes in regulatory practice. The most obvious candidate for amendment is the BIA itself but this may well prove to be an immovable object given the desire to protect the interests of secured creditors.”
Alberta needs a super-priority to prevent producers from escaping liability through bankruptcy, but the changes can only come federally. Because the Redwater decision has national implications, all Canadians need that super-priority to hold all polluters accountable for cleaning up mines and pulp mills in bankruptcy. Without it, polluters will simply walk away with their pockets stuffed full of money, leaving taxpayers burdened with the cost of cleanup.
Editor's note: This article was updated at 8:52 p.m. PT due to an editing error to correct that the late Ralph Klein was sworn in as premier of Alberta in December 1992, more than a year after the ruling in the Northern Badger case.

Investigative journalism has never been more important. Will you help?



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