Keely Cameron comments in Lexpert’s special edition on Insolvency and Restructuring on how five years after the Supreme Court of Canada’s landmark decision in the Redwater case lenders, debtors and creditors are still grappling with the fallout.

Keely represented the Alberta Energy Regulator (AER) in the case (Orphan Well Association v Grant Thornton Ltd.).

Keely says the SCC decision has created “challenges for winding off energy companies when a company is struggling” unless “they have that certainty that they have a buyer for everything.”

She adds that the Redwater case has also made it harder for oil and gas companies to borrow money. The task has generally “become more difficult, especially if you’re looking for longer-term financing. Short-term financing is still somewhat available but potentially more expensive given the heightened risk to lenders.”

While lenders have always considered regulatory compliance, Keely says many are focusing more on the issue post-Redwater.

Keely says the AER’s reluctance to approve piecemeal sales in insolvency proceedings has impacted the insolvency process for oil & gas companies of various sizes. In cases where stakeholders are unsure that a sales process run during an insolvency will result in the sale of all assets, “there’s less of a willingness to even commence a formal [insolvency] filing.”

“Otherwise, they’re just incurring further costs and losses with no chance of recovery,” she says. “In Alberta, for example, we’ve seen a growing number of insolvencies which end up being commenced by the…Orphan Well Association” rather than by creditors.