Category: Bankruptcy and Insolvency Page 4 of 6

By: Heather Lilles

PDF Version: Upholding the Lexin Equipment Order – The AER Wins the Battle, But Most Likely Will Lose the War

Case Commented On: Interim Order and Order Re Equipment (ABQB), Alberta Energy Regulator (applicant) and Lexin Resources Ltd. (respondent), Court File Number 1701-02272 and Alberta Energy Regulator v Lexin Resources Ltd., 2017 ABQB 219 (CanLII)

Lexin Resources may only be a junior oil and gas company, but recent extensive coverage by local news agencies (see here for example) has caused the name of the small oil and gas producer to become as familiar as its larger counterparts, or – perhaps – as infamous as Redwater Energy Corporation. Redwater, another junior in the Canadian industry, became notorious last October when Chief Justice Neil Wittmann of the Court of Queen’s Bench allowed the Receiver of Redwater to disclaim unproductive oil and gas assets even where those assets were subject to abandonment orders from the Alberta Energy Regulator (AER). See the post of Professor Bankes on the Redwater decision here.

Like Redwater Energy, Lexin has been petitioned into bankruptcy under the Bankruptcy and Insolvency Act, RSC 1985, c B-3. In Lexin’s case, a Receiver was appointed on the application of the Alberta Energy Regulator – an unprecedented step for the Regulator. This post addresses two of the recent court actions involving Lexin Resources and the AER: the Interim Order Re Equipment which was issued by the Court of Queen’s Bench on February 14, 2017 (the “Interim Order”) and the recent decision in Alberta Energy Regulator v Lexin Resources Ltd., 2017 ABQB 219 (CanLII) (the “Lexin Decision”). This post does not directly discuss Lexin’s bankruptcy or what effect the Court of Appeal’s decision in Redwater (not yet released) could have on Lexin’s bankruptcy and its AER licensed assets.

Change of Operator: Norcen v Oakwood of no Application in the Case of a Bankruptcy

By Nigel Bankes

On July 7, 2016

In Bankruptcy and Insolvency, Oil & Gas

By: Nigel Bankes

PDF Version: Change of Operator: Norcen v Oakwood of no Application in the Case of a Bankruptcy

Case Commented On: Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363 (CanLII)

This case involves the 2007 version of the CAPL Operating Agreement as well as a construction, ownership and operation agreement for a battery (COO Agreement). In his judgment Justice Alan Macleod enforced the immediate replacement provisions of the operating agreement in favour of a co-owner (Eagle Energy Inc.) and against the purchaser of the assets (Forent Energy Ltd.) from the receiver\manager appointed under under s 243 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3.

The Power of a Trustee in Bankruptcy to Disclaim Unproductive Oil and Gas Properties and the Implications for the AER’s Liability Management Program

By Nigel Bankes

On June 17, 2016

In Bankruptcy and Insolvency, Constitutional, Oil & Gas

By: Nigel Bankes

PDF Version: The Power of a Trustee in Bankruptcy to Disclaim Unproductive Oil and Gas Properties and the Implications for the AER’s Liability Management Program

Case commented on: Redwater Energy Corporation (Re), 2016 ABQB 278 (CanLII)

In a much anticipated decision Chief Justice Neil Wittmann has concluded that there is an operational conflict between the abandonment and reclamation provisions of the province’s Oil and Gas Conservation Act, RSA 2000, c O-6 (OGCA) and Pipeline Act, RSA 2000, c P-15 and the federal Bankruptcy and Insolvency Act, RSC 1985, c B-3 (BIA). Thus, a trustee in bankruptcy is free to pick and choose from amongst the assets in the estate of the bankrupt by disclaiming unproductive oil and gas assets even where (and especially so) those assets are subject to abandonment orders from Alberta’s oil and gas energy regulator, the Alberta Energy Regulator (AER). As a result, the value of the bankrupt’s productive assets is preserved for the benefit of secured creditors. AER abandonment orders do not bind a trustee with respect to the disclaimed properties and do not constitute costs of administration of the bankrupt’s estate. Since the trustee has no responsibility for disclaimed assets, the trustee should be in a position to transfer non-disclaimed producing assets to a third party purchaser without objection from the AER on the basis of any deterioration in the liability rating associated with the unsold non-producing assets. If either the AER or the Orphan Well Association (OWA) carries out the abandonment of the disclaimed assets such costs may constitute a provable claim in bankruptcy but, as a general creditor, the AER/OWA would likely only recover cents on the dollar.

The practical effect of this decision is that the AER’s authority to enforce abandonment orders at the cost of the licensee is unenforceable at precisely the time when the AER most needs to be able to exercise that power i.e. when the licensee is insolvent.

Clarion Call for Consistent Statute Interpretation

By Cliff Shaw, Q.C.

On October 8, 2013

In Bankruptcy and Insolvency

PDF Version: Clarion Call for Consistent Statute Interpretation

Case commented on: Piikani Energy Corporation (Re), 2013 ABCA 293, rev’g 2012 ABQB 187

This Alberta Court of Appeal decision (per Justices Frans Slatter, Patricia Rowbotham, and Barbara Lea Veldhuis) came to my attention as a preferences case under section 95 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (“BIA”). The weightiness of the analysis reversing Justice R.A. Graesser’s conclusion of a “non-arm’s length” relationship between the debtor corporation Piikani Energy Corporation and the two payees 607385 Alberta Ltd. (“607”) and Dale McMullen made the insolvency and preferences issues irrelevant.

Indalex: Priority of Provincial Deemed Trusts in a CCAA Restructuring

By Jassmine Girgis

On March 6, 2013

In Bankruptcy and Insolvency, Supreme Court of Canada

PDF version: Indalex: Priority of Provincial Deemed Trusts in a CCAA Restructuring

Case considered: Sun Indalex Finance, LLC et al v United Steelworkers et al, 2013 SCC 6.

Introduction

On February 1, 2013, Supreme Court of Canada (“SCC” or “Court”) released its much awaited decision, Sun Indalex Finance, LLC et al. v United Steelworkers et al. The case involved a company, Indalex, that was pursuing restructuri ng proceedings under the Companies’ Creditors Arrangement Act, RSC 1985, c C-36 (“CCAA”). Prior to its restructuring, Indalex had been failing to meet its employer contribution obligations to the company’s pension plan and when the pension plan was wound up, there was a deficiency in the funds.