Upholding the polluter-pays principle when bankrupt companies leave oil and gas wells behind

In 2018, Ecojustice intervened in a Supreme Court of Canada hearing on who should be responsible for cleaning up abandoned oil and gas wells after a company has gone bankrupt.

The case centred on Redwater Energy, an Alberta oil and gas company that went belly-up in 2015.

When Redwater went bankrupt, it left behind abandoned oil and gas wells that needed to be cleaned up and decommissioned. However, Redwater’s bankruptcy trustee wanted to prioritize paying back creditors and ignore the problem of the abandoned wells.

The Alberta Energy Regulator and Orphan Well Association filed a case in the Supreme Court of Canada, challenging a lower court ruling that determined Redwater’s trustee  was  free to pick and choose from among the company’s assets and could  ignore an Alberta Energy Regulator order to decommission the unproductive oil and gas wells.

Ecojustice intervened in the case and argued that bankrupt energy companies should not be permitted to walk away from unprofitable oil and gas wells without cleaning them up first.

The Supreme Court issued its decision in January 2019.

In a win for the environment, landowners, regulators and the public, the court determined that, when a company goes bankrupt and leaves abandoned oil and gas wells behind, trustees must put the environment first.

Unfortunately, the fact remains that, by the time oil and gas companies go bankrupt, they are often worth little to nothing. This means that even if the court says bankruptcy trustees must make cleaning up orphaned well sites a priority, there might not be enough money left over to cover those costs.

That’s why, while Ecojustice celebrates this victory, we continue to call on the province of Alberta to introduce laws that would require companies to make a security deposit to cover the potential costs of abandoning oil and gas wells — before they start drilling.

Why did Ecojustice get involved?

Making sure polluters pay for the messes they make is a key pillar of Ecojustice’s fight to secure clean air, water and a healthy environment for all.

That’s why Ecojustice applied to intervene in this case under its own name.

For almost a decade, Ecojustice has worked towards better regulation of Alberta’s abandoned wells problem. In this time, we’ve seen how the issues impacts landowners like Tony and Lorraine Bruder, Alberta cattle ranchers who we worked with to pressure the Alberta Energy Regulator (AER) to take action on abandoned sour gas wells on their land.

The Bruders’ case is only one example of a much broader and systemic problem that has led to more than 89,000 inactive oil and gas wells across Alberta. So when the opportunity came up to intervene under Ecojustice’s own name and help set a nation-wide precedent, we knew we had to take on the Redwater case.

What does this victory mean?

In Alberta alone, there are more than 89,000 inactive oil and gas wells that have yet to be properly cleaned up and de-commissioned. Almost 29,000 of those wells have been inactive for more than 10 years.

The longer these abandoned wells are left to sit, the greater the risk of environmental contamination and harm to the Albertans who own the land where the wells are located.

Photo of a gas well by Richard Peat, via Flickr. Image obtained under Creative Commons.

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Victory

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