The Supreme Court of Canada will announce its ruling tomorrow morning in a case that could leave taxpayers on the hook for a toxic mess left by a bankrupt oil company – and by extension a whole raft of corporate polluters, not just in the oil industry.
If the Supreme Court agrees with a 2016 ruling of the Alberta Court of Queen’s Bench, upheld later that year by the Alberta Court of Appeal, that the rights of creditors under federal legislation take precedence over the right of provinces to force corporations to pay to clean up their own pollution, the implication for Alberta taxpayers is potentially extremely serious.
In effect, the courts ruled that banks come first and polluters can’t be forced to clean up their messes if they go broke. And while the appeal of the earlier decisions brought by the Alberta Energy Regulator and the Orphan Well Association involves just one company, Redwater Energy Corp., it has the potential to start dominoes falling across the country.
Back in the fall of 2017, before the case had advanced to the Supreme Court but was expected to because of the far-reaching implications for governments and taxpayers, researcher Emma Jackson of the Edmonton-based Parkland Institute wrote an excellent summary of the case and its potential to create “a legal climate in which pulp and paper companies, mining corporations, and oil and gas firms of all sizes can write-off projects, pay off lenders and corporate executives, and dump their enormous environmental liabilities onto everyday citizens.”
That’s you and me, folks, so we should be paying attention to this one, just as the oil and gas sector, bankers, industry regulators, and provincial governments certainly are.
“In the absence of strong industry accountability measures, the trend in Alberta has been for environmental liabilities to be passed down to smaller and smaller firms, resulting in companies like Redwater being left responsible for abandonment and reclamation efforts they can’t afford,” Ms. Jackson wrote in 2017.
When Redwater went bankrupt in 2015, Alberta Treasury Branches sought to recover its loans. A receiver was appointed, and it argued it should be able to sell Redwater’s best assets while passing off the rest to the industry funded Orphan Wells Association.
An article by Regan Boychuk in the National Observer in April 2017 described how rules set up during the years Ralph Klein was premier of Alberta allow oil companies to pass around environmental liabilities as if they were hot potatoes, providing an opportunity for the industry to dodge environmental responsibility.
Given the potential costs, no matter who ends up paying them, the case will probably have an impact on Alberta politics one way or another.
If the Supreme Court enshrines the principle that the environment must come first, a mighty roar or protest is bound to be heard from the industry and businesses about activist judges, “needless” regulations and higher borrowing costs as bankers put the cost of risk into their loans.
If it sides with the Alberta courts, some costs for corporations will rise anyway, as the Energy Regulator will have to up its levies on oil companies to pay for future cleanups. This will prompt more moaning.
But more seriously, as Ms. Jackson wrote, it will result in more pollution cleanup costs being dumped onto the public. Such a ruling would “send a clear signal to natural resource companies’ creditors that bankrolling fossil fuel infrastructure, mining projects, and pulp and paper mills without accounting for cleanup costs is not only acceptable, but encouraged in a legal climate where the public – not the polluter – pays.”