b'Will Orphan Wells Lead to Orphan IndustriesBeyond Alberta andBeyond Oil and Gas? Some practical commentary and takeaways for insolvency professionalsBy Jeremy Nemers, Aird & Berlis LLP1M uch has been spilled (ink thatand unfunded environmentalA key Redwater takeaway, therefore, is isno pun intended!) aboutremediation obligations thatthat the facts and law were interpreted the Supreme Court of CanadasRedwater is intended to remediate. generouslyif not awkwardlyby this decision in Redwater,2 as a result of whichSo what are Redwater-like businesses, whatcountrys highest court to trigger the certain environmental remediation changes are being made to how potentialremediation outcome. As a result, even obligations of a bankrupt oil and gasRedwater-like mandates are beingthough Redwater as a legal precedent is company in Alberta must be satisfiedapproached and what will be the Redwatertechnically limited to its specific facts, one before creditor claims (including securedlegacy? While too early to answer theseof the ironic precedential messages is not creditor claims and those of the licensedquestions with any degree of certainty,to get too caught-up on the specific facts.insolvency trustee). here are a few practical takeaways 3 : Accordingly, notwithstanding the While optimists may interpret Redwater1. THERE IS A NEW REDWATERtechnical ability for future cases to be as a step in the right direction to bolsterWATERFALL, AND IT IS NOTdistinguished on their different facts (i.e., much needed environmental protectionsLIMITED TO ALBERTA OILa different legislative or regulatory regimewhich, in this case, include pluggingAND GAS PLAYSwith potentially different remediation and capping oil wells to prevent leaks,One of the controversial findings inrequirements or objectives, or even dismantling surface structures andRedwater is that the Alberta Energydifferent business industries outside oil restoring the surface to its originalRegulator (the Regulator) was not aand gas altogether), it is going to be conditionnone of this is possiblecreditor in the case because it was actingchallenging for Judges of first instance without access to funding. Scepticsin the public interest by imposing theand appeal to ignore the Supreme Courts therefore have cause to wonder whether:environmental obligations and did notimplicit thematic message that the facts(i)financial institutions will continuestand to gain financially from theirand law yield to the Redwater outcome. to extend credit to companies withperformance. Many commentatorsPractically, with the view of hoping for the significant Redwater-like obligations(including the dissent in Redwater)best but planning for the worst, secured (or the potential for significantview this as an awkward narrowing ofcreditors and insolvency professionals Redwater-like obligations); the term creditor that was a necessaryshould consider analyzing any Canadian(ii)licensed insolvency trustees, facedprecondition to concluding that the environmental obligations must be with uncertain protection for theirremedied before satisfying creditors fees and disbursements, will be(failing which the Supreme Court would prepared to assume Redwater-likehave been in the untenable position of mandates (or even be approachedpreferring the Regulator as an unsecured1 The author would like to thank Sanjeev Mitra andby creditors, facing an increasedcreditor in priority to secured creditors).Jonathan Yantzi, both also of Aird & Berlis LLP, likelihood of zero recoveriesfor their contributions to this article.The finding that the Regulator was not a2themselves); and Orphan Well Association v. Grant Thornton Ltd., creditor appears to have even come as a2019 SCC 5 [Redwater].3 (iii)the end result will be a doublelucky break to the Regulator itself, whichSubject always to the impractical disclaimer that nothing in this article is intended to constitute, or failure of both Redwater-likeconceded in both the courts below that itdoes constitute, legal advice or forward-looking businesses and the associatedwas, in fact, a creditor.statements or projections18 Rebuilding SuccessFall/Winter 2019'