In May 2016, the Court of Queen’s Bench of Alberta decided against the AER and the Orphan Well Association (OWA) in a case that has had widespread implications on our energy industry.
The Redwater decision, as it’s come to be known, allowed the receiver that was managing the insolvent company’s affairs to walk away from oil and gas wells, pipelines, and facilities that were no longer productive. This despite Alberta legislation that forbids leaving a mess behind for others to clean up.
According to the AER, the decision hinders Alberta’s constitutional right to properly regulate its own resources. It also affects all industries and regulators in all provinces.
After losing in the Alberta Court of Appeal in a 2-1 decision, the AER and the OWA continued their fight at the Supreme Court of Canada in February 2018. Leading the charge for the AER were lawyers Patricia Johnston and Keely Cameron. Keely described for us just how important the day was both for her and for Albertans.
What was the Supreme Court experience like for you?
KC: The Supreme Court of Canada experience was incredible. The building was amazing. I had an opportunity to be in front of brilliant judges. It was a once-in-a-lifetime experience.
I was extremely nervous preparing for the hearing and leading up to the day before. The day of the hearing I was actually really excited. It was such an incredible opportunity and it was great to get some finality on the matter because it’s been going on for so long. But I wanted to ensure I was doing a good job as this was our one big chance to share our story with the public and our final chance to explain our position to the court.
So what is the AER’s story regarding the Redwater issue?
KC: The Redwater file started with having a receiver wanting to be able to sell only the good assets and being permitted to renounce the bad assets in order to avoid the AER’s liability management requirements under legislation. This file was extremely important to us, not only to ensure we can actually enforce our requirements, but to also ensure that sites aren’t being left for the Orphan Well Association or the public to ultimately bear the costs to clean up.
Why should this issue matter to Albertans?
KC: This file goes to the core of the Alberta Energy Regulator’s role in ensuring that development occurs in a manner that is responsible and protects both the environment and the public. Part of the issue with the decision is that it potentially breaks the foundational promise upon which licences are granted in the first place. It’s a promise to ensure that at the end of the day, when the sites are no longer required for production, they’ll ultimately be cleaned up and returned to the landowners or the public for use.
This issue is so important to Albertans, why does it matter to you personally?
KC: Personally, for me, having a young daughter and being a second generation Calgarian let alone Albertan, this matter is important not only for this generation but for future generations to ensure that the public doesn’t end up bearing the cost to clean up energy development activities. Especially when we have rules in place that are there to ensure that companies comply with those rules.
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I've been in the Alberta oil and gas industry for more than 20 years and have seen the neglect of old leases firsthand. There is a real problem in the buying and selling of these old properties which I feel needs to be addressed if any real progress is to be made in dealing with these old sites. The problem I have seen is that when a company sells a viable producing asset to a potential buyer they almost always lump in these old shut in liability sites to get rid of them and pass the problem off to the new buyer. The new buyer in turn does the absolute minimum with these old sites to stay in compliance while planning a sale of their own to rid themselves of the liabilities and pass the problem on to the next buyer. This is how these old sites linger in the system and never seem to go away eventually ending up on the OWA list.
For the AER to send essentially a junior lawyer, that has no experience, other than working at the AER, to represent an issue worth well over $30 billion dollars to the taxpayers of Alberta, demonstrates exactly how the AER operates with no public interest mandate and owe no duty of care to Albertans. This case, before the SCC, has the potential to impact public liabilities for all resource operations, and only the most experienced and senior AER counsel should have been representing the interests of Alberta.
Of course, it never should have come to this and the AER alone, is to blame. In over 75 years of regulation, the AER (and all previous namesakes) have failed to implement any directives or regulations that pertain to appropriate timelines for remediation and reclamation of inactive or suspended well sites. Additionally, the LLR is ineffective and the AER rubber stamps every transfer of licenses, even when the buyer is unsuitable. For instance, the Sequoia transfers and subsequent insolvency. Since under REDA, the AER can not be held legally liable for any of their regulatory actions or inactions, they can remain wilfully negligent regarding the responsible management and directing the timely closure of over 84,000 inactive well sites in the province, or the transfer of licenses to ineligible, barley solvent operators.
Finally, it stands to mention, it was our provincial bank, ATB, that started this fiscal hot potato with unproductive assets. ATB's poor lending choices, to which there still exists billions of unpaid debt, will end up being the burden of the public, which is entirely unacceptable. Every Albertan should divest from ATB, until they alter their policies to accept all liabilities, to which they agreed to finance.