The Supreme Court of Canada claims that the provincial right to enforce environmental cleansing rules is higher than that of creditors when the polluter is bankrupt.
In a 5-2 decision published on Thursday, the Supreme Court of Canada stated that the provisions of the Province of Alberta, which forced oil and gas companies to clean their wells, are in the public interest and do not conflict with the right of banks to collect debts in bankruptcy.
The judgment annuls two lower court decisions by which ATB Financial Corp's interest in recovering the damaged loan in the case of the bankrupt energy producer Redwater Energy Corp before the Alberta Energy Regulator's ability to clean up, as stipulated in the province.
Investigation: Putting the Oil Patch: Inside a Threatening Financial and Environmental Crisis
Calgary-based Redwater filed for bankruptcy in 2015, and the recipient who had been appointed to liquidate its assets had tried to sell only the most profitable oil wells and waived the rest, leaving responsibility for cleaning to the wider industry.
The EAR argued that fears that several energy companies would seek to reduce profitable operations through corporate restructuring and pressure on the industry and the province that fought to fund tens of thousands of aging oil and gas wells. The Supreme Court agreed.
"Bankruptcy is not a license to ignore the rules, and the insolvency practitioners are bound and must comply with current provincial laws during bankruptcy," the majority said in their decision.
A Case Known As Orphan Well Association, et al. v. Grant Thornton Limited, et al., Interfered with the country's largest oil companies, environmentalists, landowner groups and prosecutors throughout Canada.
After several corporate bankruptcies, the number of failed oil and gas wells in Albert has increased in recent years. Prime Minister Rachel Notley's NAP government has offered $ 235 million in loans to speed up the cleaning of outstanding wells.
The EAR had warned of a further burden on the system if its appeal failed. However, there is concern that Thursday's decision may make it harder for smaller resource companies to lend to major banks.
The financial analysts of RBC Dominion Securities stated in a study note that the court judgment was aimed at increasing the overall control of banks in relation to environmental obligations.
However, environmentalists and farmers support the decision as a victory for landowners, taxpayers and the environment.
"The Court has restored the long-standing legal principle of pollutants," said Keith Wilson, a lawyer at Edmonton, who represents landowners in disputes with energy companies.
"It has dismissed lower court rulings that allowed oil companies to make profits and go away from environmental commitments."