Majority of the Court of Appeal Confirms Chief Justice Wittmann’s Redwater Decision

By: Nigel Bankes

PDF Version: Majority of the Court of Appeal Confirms Chief Justice Wittmann’s Redwater Decision

Case Commented On: Orphan Well Association v Grant Thornton Limited, 2017 ABCA 124 (CanLII)

The background to this case is discussed in my post on Chief Justice Wittmann’s decision here. That post summarized that decision and its effect as follows:

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. Furthermore, one of the AER’s principal mechanisms to ensure that a licensee has assets on hand to cover its liabilities (its authority to withhold consent to the transfer of assets which result in the deterioration of a licensee’s ability to discharge its obligations) is no longer available. Thus, the entire provincial scheme for protecting Albertans from the abandonment costs in relation to non-productive wells is seriously compromised, and, as a result, in the case of a bankrupt licensee the costs of abandonment will necessarily be assumed by the Orphan Well Fund or the province. If the costs are assumed by the Fund this means that the industry as a whole bears the burden; if the costs are assumed by the province (perhaps by a cash infusion into the Fund) this means that all Alberta taxpayers bear the burden of discharging these abandonment and reclamation obligations. While this result flies in the face of any conception of the polluter pays principle it is, according to Chief Justice Wittmann, the necessary result of the interpretation of the relevant statutes and the application of the constitutional doctrine of paramountcy.

Two appeals were launched, one by the OWA and one by the AER. Four intervenors lined up in support of the appellants: Alberta, Saskatchewan, British Columbia, and the Canadian Association of Petroleum Producers (CAPP). Supporting the respondents was the Canadian Association of Insolvency and Restructuring Professionals. In reserved reasons the majority (per Justice Slatter with Justice Schutz concurring) dismissed the appeals. Justice Sheilah Martin dissented. Continue reading →

Vexatious Litigants: An Interpretation of Section 40 of the Federal Courts Act

By: Jonnette Watson Hamilton

PDF Version: Vexatious Litigants: An Interpretation of Section 40 of the Federal Courts Act

Case Commented On: Canada v Olumide, 2017 FCA 42 (CanLII)

In this March 2017 decision, Justice David Stratas encouraged Federal Court of Appeal litigants who find themselves up against litigants engaged in vexatious proceedings to apply more quickly and with less evidence for vexatious litigant orders under section 40 of the Federal Courts Act, RSC 1985, c F-7. Believing that uncertainty over what is required by section 40 to bring such an application has been holding these parties back, this decision is intended to take away that uncertainty. Because that was the focus of the judgment, it will be the focus of this post. However, there are some rhetorical flourishes in the judgment that are worth mentioning. In describing his understanding of the purpose of section 40, Justice Stratas relies on a metaphor analogizing courts to scarce natural resources, as well as the moralizing language of desert. Continue reading →

Do Comparisons Between Tobacco and Climate Change Liability Withstand Scrutiny?

By: Martin Olszynski, Sharon Mascher, and Meinhard Doelle

PDF Version: Do Comparisons Between Tobacco and Climate Change Liability Withstand Scrutiny?

Research Commented On: “From Smokes to Smokestacks: Lessons from Tobacco for the Future of Climate Change Liability” (2017) Geo Envtl L Rev (forthcoming)

A few years ago, the Canadian Press reported that environmental groups were “taking inspiration from the legal fight against tobacco to fire warning shots at major energy companies over their alleged role in funding climate change denial and blocking climate-friendly legislation.” The next day, an editorial in the Calgary Herald suggested that “the comparison doesn’t stand up to even cursory examination. One is a product that is always hazardous to human health when consumed, the other is a staple of the modern world.” Setting aside for a moment the fact that tobacco wasn’t always understood as hazardous to human health (back in the 1950s, almost one in every two Americans smoked, and cigarettes were ubiquitous in homes, places of work, universities, restaurants and bars), the past few years have seen an increasing number of comparisons made between the fossil-fuel industry’s potential liability for climate change and “Big Tobacco’s” liability for tobacco-related disease. Very few of these comparisons, however, have considered the legally relevant similarities and differences between these two contexts in detail. In our most recent paper, recently accepted for publication in the Georgetown Environmental Law Review, we set out to do just that.

Continue reading →

Smoke and Mirrors? With Marihuana Legalization, Parliament Proposes to Drastically Expand Police Power

By: Dylan Finlay

PDF Version: Smoke and Mirrors? With Marihuana Legalization, Parliament Proposes to Drastically Expand Police Power

Legislation Commented On: Bill C-46, An Act to amend the Criminal Code (offences relating to conveyances) and to make consequential amendments to other Acts, 1st Session, 42nd Parliament, 2017

Parliament is toting marihuana legalization as a necessary public safety measure. With this sentiment, Parliament is revisiting not only drug-impaired driving laws, but also alcohol-impaired driving laws. Part 2 of Bill C-46 would, if passed, allow police officers to demand that a driver provide breath samples without any suspicion that the individual had been drinking. The relevant section is reproduced below:

Mandatory alcohol screening

320.27 (2) If a peace officer has in his or her possession an approved screening device, the peace officer may, in the course of the lawful exercise of powers under an Act of Parliament or an Act of a provincial legislature or arising at common law, by demand, require the person who is operating a motor vehicle to immediately provide the samples of breath that, in the peace officer’s opinion, are necessary to enable a proper analysis to be made by means of that device and to accompany the peace officer for that purpose.

Parliament seeks the moral high ground in selling its proposed legislation to both the public and the judiciary. To the public, the Liberals hope to sway voters who find a ‘tough-on-crime’ agenda attractive – the same segment of the population that supports stiff mandatory minimum jail sentences. To be fair, as far as politics go, this strategy is sound; the segment of the population that supports legalization of marihuana because prohibition never made much sense to begin with will likely support the Bill no matter its complexities.

The judiciary will be harder to convince. Mandatory alcohol screening (as it is proposed by Bill C-46) violates ss 7 (the right to life, liberty and security of the person), 8 (the right against unreasonable search and seizure), 9 (the right not to be arbitrarily detained), and 10 (b) (the right to counsel on arrest or detention) of the Canadian Charter of the Rights and Freedoms (the Charter). Parliament must cast mandatory alcohol screening as a reasonable limit prescribed by law and demonstrably justified in a free and democratic society to ‘save’ it under s 1 of the Charter.

The groundwork is being laid for such an argument. On CBC’s ‘The House,’ Justice Minister Wilson-Raybould stated: “I am confident [mandatory alcohol screening] will survive a constitutional challenge. It can be justified in terms of public safety, and safety on the roads, and preventing death” (April 13, 2017).

I do not share the Justice Minister’s confidence. Mandatory alcohol screening (as it is proposed) is a flagrant affront to Charter-values and Charter jurisprudence. The Supreme Court should not find such a law constitutional.

A constitutional battle lies ahead. This post will provide a summary of police procedure and the law as it relates to alcohol screening, present arguments for and against mandatory screening’s constitutionality, and ultimately conclude that mandatory alcohol screening is unconstitutional. For the purposes of this post, the focus will be on s 10(b) of the Charter, as this is the focus of the prevailing case law on alcohol screening generally. Continue reading →

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

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. Continue reading →