Alberta Politics
The Supreme Court of Canada (Photo: David J. Climenhaga).

Supreme Court ruling tomorrow could leave Albertans on the hook for corporate toxic mess cleanup

Posted on January 30, 2019, 3:05 am
5 mins

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.

Parkland Institute researcher Emma Jackson (Photo: Parkland Institute).

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.”

11 Comments to: Supreme Court ruling tomorrow could leave Albertans on the hook for corporate toxic mess cleanup

  1. Jerrymacgp

    January 30th, 2019

    Classic neo-liberalism: privatize profits, but socialize risks. I for one am not optimistic that the SCOC will find in favour of protecting taxpayers over creditors; they will probably defer to Parliament and suggest that if we want our bankruptcy and insolvency laws to protect the public interest, instead of only the private interest of secured creditors, we need to rewrite them that way.

    Reply
  2. John

    January 30th, 2019

    I’ve tried to tell supporters of the tar sands this for years. Always met with replies that these energy companies have reverted the tailings and mine areas to pristine shape, that they will clean up after themselves etc.

    It’s not like they can look back for precedent….sigh.

    Reply
    • Sam Gunsch

      January 30th, 2019

      It *is* very frustrating to hear anyone repeat the tarsands corporations BS about the great recovery job they are doing.

      Millions spent on tarsands industry propaganda has succeeded in convincing a majority of citizens that tailings ponds are being recovered… nothing could be further from the truth… see the data Pembina Institute compiled here:

      excerpt: ‘Fifty years of oilsands equals only 0.1% of land reclaimed’

      https://www.pembina.org/blog/fifty-years-of-oilsands-equals-only-0-1-of-land-reclaimed

      https://www.pembina.org/blog/tailings-ponds-worst-yet-come

      The data show that the ‘Dirty’ oil campaign that is so hated is actually dead on the money.

      AB’s Auditor General has warned twice that AB’s don’t have enough security from the corporations to fund clean-up.

      And last year of course the AER tried to walk back the data/estimates in a leaked internal report showing cumulative tarsands/abandoned well liabilities were multiples higher than previously reported by AER:

      https://www.nationalobserver.com/2018/11/01/news/alberta-regulator-privately-estimates-oilpatchs-financial-liabilities-are-hundreds

      The citizens can thank AB governments for decades of pro-business conservative politicians and executives… corporatism. The PCs and AB corporations governing for their group’s best interests.

      Kind of the norm however for so-called Western democracies, just extreme outcomes here in AB.

      Reply
  3. ronmac

    January 30th, 2019

    Where is the Canadian Taxpayes Federation in all this? Do they have a position? Its membership, claimed to be in the thousands, should be flooding the streets of Calgary.

    Reply
    • Bob Raynard

      January 30th, 2019

      I agree, Ronmac. If the CTF is truly concerned about ordinary taxpayers they should be flooding the streets of Calgary. I wonder if the small businesses proudly displaying their CTF stickers feel the same way.

      Reply
  4. Roberta

    January 30th, 2019

    Hi David,

    Question: Most of the big corporations extracting in the oil sands are subsidiaries of larger corporations. Sometimes, they are subsidiaries of subsidiaries. Do you know how it works when a subsidiary goes bankrupt? What is the responsibility of the parent corp?

    Reply
    • David Climenhaga

      January 30th, 2019

      Roberta: I am not an expert in corporate law, but I believe that as a general starting point it is fair to say that the whole point of limited liability corporations is to protect the owners, who reap the profits, from the consequences of corporate failures. Bankruptcy law, of course, has been written to benefit the corporate sector and not to benefit ordinary people. I agree with many of the comments here that the people of Alberta and indeed of all of Canada will have to bear the costs of the situation that will inevitably happen in Alberta as the world transitions away from fossil fuels. DJC

      Reply
  5. Political Ranger

    January 30th, 2019

    T’was always thus!
    I agree with Jerry above. If citizens want their corporations to be responsible and accountable they have to get their legislators to write the laws that way. If we want the polluter to pay then we have to have the legislation. Today, we don’t.
    There is nothing wrong with bankers assessing risk accurately and pricing loans accordingly.
    There is nothing wrong with a government holding a fully paid up bond or any other debt instrument until an industrial natural resource project is satisfactorily completed.

    Reply
  6. Kyle Davidson

    January 30th, 2019

    It’s not a matter of could…

    The public will be paying for this… it will cost more than the taxes and royalties the tarsands produce.

    It will be a net loss. Scientists and economists that are ignored have known this for a long time.

    Maybe in the future do something different and listen to scientists. Ha!

    At least Albertans have tons of savings because they didn’t spend their money like a coked out drunken roughneck on payday right?

    Reply
  7. Chaz

    January 30th, 2019

    RONMAC; CTF is in bed with the industry

    Reply
  8. Political Ranger

    January 31st, 2019

    Well, the decision is out this morning … and it’s favourable, at least to citizens. Petro-corps will now begin the crocodile tears campaign about how it’s just too expensive to become a petro-millionaire. boo-hoo!
    The solution is fairly simple (nothing is actually ‘simple’ in the natural resource extraction business) and proven. It’s called concurrency. If the company wants to move on to it’s next project, be it a well, a pipeline, a mine or a timber permit, then it has to demonstrate that it has performed all the legally required actions on it’s last project. Or at least substantially so.
    This belief that “clean-up” is an activity that is years, decades or even centuries off into the future is like most beliefs, pure road-apples. If the proponent is serious about the clean-up and shut-down procedures then they would be preparing for that while men and equipment are already there for profitable, productive purposes, while access is available and while serious, qualified people are on the payroll to manage and oversee these activities.
    It means that clean-up costs are not some guess or estimate or accounting fantasy. It means that projects are accurately priced and costed on an on-going basis, concurrent with operations. It means that operations are not as profitable.
    And all that means that the owners, us, the citizens, are not robbed by yet another band of thieving and lying corporate shareholders.

    Reply

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