b'ORPHAN WELLSgame plan therefore envisioned the court- insolvency process in lieu of a securedseeks to bolster may very well prove to appointed officer only taking possessioncreditor (the ability to do so being inbe workable (and worthwhile) for new and control of the profitable assets,question given the Redwater conclusionfinancings and new market entrants. At conducting a marketing and sale processthat such regulator is not a creditor), thethe right price (which remains the magical in respect of same and then distributinglicensed insolvency trustee approachedquestion), there is surely a potential the net proceeds (after professional fees,with the potential mandate must conductinsurance or bonding market that can be disbursements and other limited its own cost-benefit analysis. In lightsolicited at the time of originating loans to priority amounts) to the applicantof the Redwater outcome, it is highlyhedge against the financial risks createdsecured creditor. questionable whether a licensed insolvencyby Redwater.trustee would agree to an appointmentBut while that may all be fine and good over an estate with material environmentalfor new financings and new market If the environmentalliabilities absent a full indemnity forentrants going forward (with emphasis on the trustees fees and disbursements andmay all be fine and good), how are debtors sniffing results arethose of its legal counsel. It is equallyand secured creditors with existing secured questionable whether anyone wouldindebtedness and existing environmental favourable, the scopebe prepared to provide such indemnity given the economics at play (including,remediation liabilities supposed to react of the mandate can bemost notably, a presumed lack of interestin response to Redwater having changed by purchasers for assets with collectivethe rules in the middle of the game? If the enlarged; if not, remediation obligations that far exceedsniff tests referred to above do not yield a pleasant odour, the below citation from there is always thetheir value, particularly if any valuablethe Redwater dissent may prove toassets cannot in practice be separated fromring true:practical option to take nothe valueless mass).[I]f the estates entire realizable valuefurther steps and to walkAll indications would therefore appearmust go toward its environmental to point to the increased use of pre- liabilities, leaving nothing behind to away, thereby appointment or limited appointmentcover administrative costs, insolvency sniff tests. Before a stakeholder isprofessionals will have nothing locking-in accrued lossesprepared to fund a substantive process,to gainand much to loseby and before insolvency professionals arestepping in to serve as receivers and as sunk costs withoutprepared to assume a substantive mandate,trustees, irrespective of whether they they both need to be comfortable (in also throwing goodaccordance with their own appetitesare protected from personal liability. for risk) that the financial risk of suchDebtors and creditors alike, knowing money after bad. that this is the case, will have no reason undertaking is worth its potential reward.to even petition for bankruptcy. The While stakeholders and insolvencyresult is that none of a bankrupt estates professionals may attempt to conductassets will be soldnot even an oil The background strategy in Redwatertheir own investigations pre-appointment,companys valuable wellsand the was all premised on the prevailing viewthere may be insufficient visibility into thenumber of orphaned propertiesat the time that the Regulator was antrue extent of the debtors environmentalwill increase.4unsecured creditor and, as such, wouldremediation liabilities absent an initial violate Canadas federal insolvency regimelimited eyes and ears receivershiponeExtrapolating on the above if it were to block the transfer of thein which the licensed insolvency trusteeprognostication (which could easily also necessary licenses to the purchaser becauseis given no power to take possession orapply to receiverships and other types of unsatisfied environmental liabilitiescontrol of assets, but is given access to theof formal insolvency proceedings), if in respect of the debtors other assets.assets and the ability to investigate andRedwater is indeed interpreted beyond But in a post-Redwater world, wherereport. If the environmental sniffingthe narrow scope of Alberta oil and gas the Regulator (or one like it) holds theresults are favourable, the scope of theplays, the number of orphaned companies upper hand in a class separate and apartmandate can be enlarged; if not, thereand orphaned industries risks increasing from even the most senior creditors, whatis always the practical option to take noon a much broader scale, and there may financial incentive is there for a securedfurther steps and to walk away, therebybe very little practical incentive (or tools) creditor to fund a process that is poisedlocking-in accrued losses as sunk costsfor secured creditors and insolvency not to generate any realizations back to itwithout also throwing good money professionals to do anything about it. RS(or at all)? after bad.Even if a secured creditor is prepared to3. IT IS NOT ALLroll the dice when the odds are stackedBAD NEWS, BUT against it, or even if the Regulator (orWhile the jury is still out, the4one like it) is prepared to commence theenvironmental protections that RedwaterIbid, at para 221.20 Rebuilding SuccessFall/Winter 2019'